Bank Overview

In 2019, situations at home and abroad as well as the macro-economy and financial systems were complicated with significantly increased risks and challenges. Despite the challenges, the domestic economy and society maintained sustainable and healthy growth under the strong leadership of the Party Central Committee, with General Secretary Xi Jinping as the core. Coupled with the significant milestone in reform and opening-up, these achievements took China a step closer to build a moderately well-off society in an all-round way. As for the financial sector, major progress was made in preventing and mitigating financial risks while the financial institutions continued to improve their service quality and efficiency for the real economy.

On the backdrop of increasing risks and challenges in the macro-economy and financial systems, rising operating difficulties and financial pressures of the non-state-owned enterprises (“NSOEs”) and small and micro enterprises, the adjustments to the operation strategies and business deployment of manufacturing enterprises due the uncertainties arising from Sino-US trade frictions, and the substantial price fluctuations of financial products in various financial markets in 2019, China Minsheng Bank continued its pursuit of reform and transformation to facilitate its development, comprehensively enhanced its operation and management, and recorded the best operating results in recent years, as reflected in the four major areas below:

Firstly, operation efficiency continued to improve. In 2019, the Group recorded net profit attributable to equity shareholders of the Company of RMB53.819 billion, representing an increase of 6.94% as compared with the corresponding period of the previous year. Operating income amounted to RMB177,745 million, representing an increase of 15.30% as compared with the corresponding period of the previous year. Net interest margin was 2.11%, representing an increase of 0.24 percentage points as compared with the corresponding period of the previous year. Cost-to-income ratio was 27.14%, representing a decrease of 3.44 percentage points as compared with corresponding period of the previous years. These operating results have been the best in recent years.

Secondly, rapid growth was made in strategic and key businesses. As at the end of 2019, Minsheng Bank extended a total of over RMB1.5 trillion loans to NSOEs, accounting for approximately 70% of total corporate loans and advances. Total retail loans amounted to RMB1,397,216 million, representing an increase of 14.72% as compared with the end of the previous year. Total amount of loans to small and micro enterprises was RMB444,560 million, representing an increase of 9.25% as compared with the end of the previous year. Total savings deposit was RMB706,354 million, representing an increase of RMB24.96% as compared with the end of the previous year. Savings deposits accounted for 19.76% of total deposits, representing an increase of 1.76 percentage points as compared with the end of the previous year.

Thirdly, asset quality was improved. As at the end of 2019, the Group recorded non-performing loans (“NPLs”) of RMB54,434 million, representing an increase of RMB568 million as compared with the end of the previous year. NPL ratio decreased by 0.20 percentage points to 1.56% as compared with the end of the previous year, bringing the continuous increase in NPL ratio in recent years to a halt. Allowance to NPLs was 155.50%, representing an increase of 21.45 percentage points as compared with the end of the previous year. Allowance to total loans was 2.43%, representing an increase of 0.07 percentage points as compared with the end of the previous year.

Fourthly, capital strength was significantly enhanced. Captialising on market opportunities and the adjustment period of policies in 2019, the Group successfully issued tier-two capital bonds of RMB40,000 million, undated capital bonds of RMB40,000 million and preference shares of RMB20,000 million to provide capital support for the sustainable development of its business.

With the satisfactory operating results, Minsheng Bank consolidated its reform and transformation to align with its strategic positioning of becoming “a bank for the NSOEs”, “a fintech-based bank” and “a bank of comprehensive services” in 2019. These strategic transformation efforts had significant contributions in the following major aspects:

- In terms of becoming “a bank for the NSOEs”, the number of strategic NSOE customers of the Company reached 650 as at the end of 2019, representing an increase of 83.62% as compared with the end of the previous year. Daily average deposits amounted to RMB359,855 million, representing an increase of 86.20% as compared with the previous year. Total loans amounted to RMB436,468 million, representing an increase of 113.00% as compared with the end of the previous year. The number of small business customers with loans balance was over 310,000. Total loans to small and micro enterprises was RMB444,560 million.

- In terms of becoming “a fintech-based bank”, the number of users on corporate online platforms of the Company reached 2,310,300 as at the end of 2019, representing an increase of 498,300, or 27.50%, as compared with the end of the previous year. The user of retail online platforms reached 70,411.8 thousand, representing an increase of 11,112 thousand, or 18.74%, as compared with the end of the previous year.

- In terms of its positioning of becoming “a bank of comprehensive services”, subsidiaries of the Company recorded operating income and net profit attributable to equity shareholders of the Company of RMB6,141 million and RMB1,331 million in 2019, respectively, representing increases of 9.45% and 100.75% as compared with the corresponding period of the previous year, respectively.

These achievements of Minsheng Bank in 2019 are the results of its continuous reform and transformation over the past five years. As mentioned five years ago, there would be larger risks and potential problems arising from the rapid growth of the Company as it had adopted an extensive development model for years. As such, the Board proposed to establish another version of Minsheng Bank five years ago to focus on its goals with specific targets, markets and customers based on its clear objectives, principles and expectations. From the management perspective, this version of Minsheng Bank is an integration of the front, middle and back offices by streamlining business system and staff management based on a customer-centric approach. Through this integration, operation procedures will be simplified, efficient, well-structured, controllable and complete. With optimised business operation, we will be able to satisfy the needs of customers.

Through the implementation of the “Phoenix Project” and reform and transformation over the past five years, as well as the continuous efforts of the Board and the management in instilling new concepts, carrying out promotion and supervision and introducing innovative measures, there was a significant change in the mind-sets and concepts of all employees from separate and extensive operation to coordinated and streamlined management. The initial extensive operation was gradually transformed into streamlined development in different business segments, such as strategic NSOE customers of corporate business, namelists of supply chain finance, small and medium-sized enterprises (“SMEs”) of the “Ying Huo Plan (螢火計劃)”, Small Business 3.0 of retail business, and agency services of financial market business. Most importantly, the Company has fostered a core team of talents during the reform, who are insightful, dare to reform, professionally skilled and innovative. This is the most significant achievement and support to our reform and transformation. Today, as proven by the success of Minsheng Bank, as long as there is a firm will to reform, there will be fruitful results in return.

2020 is the final year for China to completed the process of building a moderately well-off society in an all-round way, the final year of the 13th Five-Year Plan and the year for prevention and mitigation of financial risks. With the outbreak of COVID-19 epidemic and the increasing uncertainties in the external environment, banks will take on a more important role in supporting the real economy and will face greater pressure of reform and transformation. As stipulated in the Central Economic Work Conference held in December 2019, medium- to long-term financing of the manufacturing industry will be increased in order to mitigate the difficulties and high cost of NSOEs, medium, small and micro enterprises in financing. As being pointed out at the [National Banking and Insurance Regulatory Work Conference] (全國銀保監管工作會議) held in January 2020, financial services to NSOEs, especially those of the manufacturing industry, shall be strengthened with special support for the advanced manufacturing industry and industrial clusters. Mitigation efforts will be particularly made for promising enterprising under liquidity strain. According to the “Opinions on Creating Better Development Environment to Support the Reform and Development of NSOEs” (《關於營造更好發展環境支持民營企業改革發展的意見》) issued by the State Council in December 2019, mechanism of the financial institutions of the banking industry for serving the NSOEs shall be consolidated while credit support for major areas, such as the manufacturing industry, small and micro enterprises and the NSOEs, shall be strengthened.

As reflected from the decision-making and deployment of the central government, regulatory requirements and relevant policy documents, the potential of the financial services for NSOEs and small and micro enterprises in the banking industry is vast. The strategic positioning of Minsheng Bank to become “a bank for the NSOEs” is in line with the direction and positioning of national strategies and decision-making requirements. Minsheng Bank has been committed to providing financial services for NSOEs and small and micro enterprises over the years. Through continuous exploration in business models and service methods, Minsheng Bank has provided rich experiences and diversified tols for the banking industry to provide financial services for NSOEs and small and micro enterprises. Minsheng Bank will play a more active role in supporting the economic development of private sectors and the economic growth of China. It will also have a greater development potential in the future. 

In response to the outbreak of the COVID-19 epidemic in early 2020, Minsheng Bank promptly donated money and necessary items to fight against the epidemic. In addition, it immediately introduced measures to deal with the COVID-19 epidemic in accordance with the instructions and requirements of five authorities, including the PBOC in an aim to effectively maintain stable and efficient financial services, ensure financial supply and financing support for epidemic prevention and control and help all enterprises to overcome the difficulties and resume operation and production. 

In addition to providing financial support for epidemic prevention and control, Minsheng Bank will accelerate the implementation of six strategies in 2020: 

Firstly, the implementation of NSOE strategy will be accelerated. In regard to the strategic NSOEs, the namelist of strategic NSOEs will be further updated, a synergy mechanism will be adopted, the system-based account planning process will be standardised and widely promoted, so as to significantly enhance the coordination of risk management and business operations. In regard to the niche NSOEs, businesses alongside the industry chains will be further developed, innovation mechanism will be further supported by the digital factory, and the capabilities of branch-level marketing teams will be further improved. In regard to small and medium-sized NSOEs, a system of differentiated products and services will be established to build up competitiveness in asset businesses. 

Secondly, the retail business will be empowered by technology to achieve leaping development.. The asset business and wealth management under retail business will be further innovated. The vertical management project for retail business will be promoted. Private banking services for entrepreneurs will be enhanced by improving wealth management capabilities, strengthening big data-based marketing platform, and optimising wealth management product system. Integrated operation of all retail channels will be strengthened to enhance customers’ experience and channel effectiveness. The coordinated management of “big retail banking” (大零售）and the capabilities of headquarters for retail business will be improved. . 

Thirdly, the transformation of asset management business will be carried out. Asset management measures, including investment research, sales, asset acquisition, product innovation and outsourcing will be strengthened. The establishment of wealth management subsidiaries will be accelerated. Asset management capabilities will be further improved along with the development of wealth management business and subsidiaries, and will be supported by core talents, mechanisms and policies. A synergy mechanism between the wealth management subsidiaries and the Company will be established. Risk management procedures and policy systems will be set up to enhance risk management. 

Fourthly, the effectiveness of professional management of non-performing assets will be improved. The value of non-performing assets will be fairly determined with improved professional management of non-performing assets, while valuation results will be linked with performance evaluation and resources allocation. Vertical and standardised management over branches, as well as vertical management over collection and disposal activities of business units will be tightened. Moreover, professional talents will be introduced to continuously enhance the professional operation of all branches. 

Fifthly, fintech strategies and large-scale innovations will be implemented. Data governance will be consolidated to promote large-scale application of big data in key areas. Teams of data professionals will be built to further promote key data governance and enhance application results of data quality, marketing management and key business operations. Integration of IT and businesses and large-scale innovations will be promoted. Integration of internet finance and businesses will be completed to support the independent operation of direct banking. A fintech accelerator will be created for an open and efficient innovation platform. 

Sixthly, vitality regeneration and innovation of systems and mechanisms will be carried out. To improve innovation, effective and practical innovation incentive policies and training systems will be launched in a timely manner in line with risk compliance. Innovation resources will be well-allocated to facilitate innovation laboratories, incubators and responsive innovation measures, thus to build a positive mechanism which encourages, inspires and boosts innovation, and open a new door to the innovative development of the Company. . 

2020 will be an extraordinary and challenging year. General Secretary Xi Jinping pointed out that we will surely overcome this epidemic, maintain the satisfactory position of the economic and social development of China, and achieve the goals of building a moderately well-off society in all-round way and alleviating poverty. I believe that so long as we are fully commit to reform and transformation and unswervingly implement our six strategies despite the challenges ahead, the goals of the Scheme for Reform and Transformation and the Three-Year Development Plan of China Minsheng Bank (《中國民生銀行改革轉型暨三年發展規劃方案》) will be successfully achieved. These efforts will enable Minsheng Bank to become a benchmark bank with distinctive features, increased value and continuous innovation.