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Public company info - BOC Hong Kong (Holdings) Ltd. , 02388.HK
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BOC Hong Kong (Holdings) Ltd., 02388.HK - Company Profile
Chairman Liu Liange
Share Issued (share) 10,573,000,000
Par Currency
Par Value 0.0
Industry Banks
Corporate Profile Business Summary: The principal activities of the Group are the provision of banking and related financial services. Performance for the year: In 2019, the Group’s profit grew to HK$34,074 million, up 4.3% year-on-year. As of 31 December 2019, the Group’s total assets increased by 2.4% from the end of 2018 to HK$3,026,056 million. Total deposits from customers and total advances to customers grew to HK$2,009,273 million and HK$1,395,883 million respectively, up 5.9% and 10.2% from the end of last year。Profit attributable to equity holders was HK$32,184 million, an increase of HK$114 million or 0.4% year-on-year. Business Review: In 2019, the Group remained committed to its strategy of building a top-class, full-service and internationalised regional bank. It actively responded to changes in the market environment and seized market opportunities to steadily push forward its business priorities, with its major financial indicators remaining at solid levels. Striving to be customer-centric at all times, it continued to develop the local market in Hong Kong and accelerated innovation-led transformation. The Group was actively involved in developing business opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area, and endeavoured to consolidate its leading market position for major businesses in the area by optimising its integrated business systems. It deepened the integration of its Southeast Asian entities and enhanced regional synergies and development quality. It expedited its digital and innovation-driven development and enhanced the application of fintech in its products and services. Moreover, the Group remained dedicated to cultivating its bank culture to ensure balanced and sustainable development. Personal Banking Personal banking achieved a profit before tax of HK$11,234 million in 2019, an increase of HK$973 million or 9.5% year-on-year. Net operating income rose, mainly driven by an increase in net interest income, which more than offset the impact from the increase in operating expenses and the net charge of impairment allowances. Net interest income increased by 16.8%, mainly driven by the growth in the average balance of deposits and loans along with an improvement in the deposit spread. The increase was, however, partially set off by the narrowing loan spread. Net fee and commission income increased by 2.6%, as insurance commission income increased in line with a higher business volume. However, commission income from securities brokerage and funds distribution decreased amid the weakened investor sentiment in the market, partially offsetting the above-mentioned income growth. Operating expenses were up 11.3%, mainly due to an increase in staff costs and depreciation of the right-of-use asset. The net charge of impairment allowances amounted to HK$351 million, an increase of HK$228 million year-on-year, mainly reflected the impact of loan growth and changes to the parameter values of the expected credit loss model to account for changes in macroeconomic outlook. Corporate Banking Corporate Banking achieved a profit before tax of HK$15,309 million, an increase of HK$883 million or 6.1% year-on-year. Net operating income rose, mainly driven by the increase in net interest income, which more than offset the impact from the increase in operating expenses and the net charge of impairment allowances. Net interest income increased by 12.7%, mainly attributable to the growth in the average balance of loans and deposits, coupled with improvement in the deposit spread. Net fee and commission income increased by 1.7%, with higher loan commissions, which was partially offset by decreases in commission income from bills and insurance. Net trading gain decreased by 3.4%, owing to a drop in currency exchange income from customer transactions. Operating expenses were up 6.7%, mainly due to an increase in staff costs and depreciation of the right-of-use asset. The net charge of impairment allowances amounted to HK$1,385 million, an increase of HK$601 million year-on-year, owing to impairment allowances being made in response to the downgrading of certain corporate advances. There was a lower base in the same period last year when there was an improvement in the internal rating of certain corporate advances, resulting in a reversal of impairment allowances. TREASURY Treasury recorded a profit before tax of HK$12,064 million, an increase of HK$511 million or 4.4% year-on-year. The growth was driven by an increase in net trading gain and net gain on other financial assets, which more than offset the decrease in net interest income. Net interest income decreased by 21.9%, which was mainly attributable to the rise in funding costs. Net trading gain grew by HK$2,358 million, mainly attributable to an increase in net gain from foreign currency swap contracts, which was partially offset by the mark-to-market changes of certain debt securities investments and interest rate instruments caused by market interest rate movements. Net gain on other financial assets increased by HK$750 million, as a higher net gain was recorded from the disposal of certain debt securities. Insurance In 2019, the Group’s insurance segment achieved a gross premium of HK$25,366 million, up 21.5% year-on-year. The standard new premium was HK$13,806 million, an increase of 49.4% year-on-year. The value of new business was HK$1,280 million, an increase of 10.2% year-on-year. Profit before tax was HK$701 million, down 25.2% year-on-year, which was mainly attributable to the increase in insurance reserve caused by the drop in market interest rates. This decrease was, however, partially offset by increased fair value gain on invested assets and higher net interest income. Fintech and Innovation Adhering to the concept of “technology-based and innovation-driven development”, the Group kept pace with fintech development trends and made increased investments to expedite its transformation into a digital bank. By applying innovative technology such as big data, artificial intelligence (“AI”), blockchain, biometric technology, open API and robotic process automation (“RPA”) in financial products, service processes, operations management and risk control, the Group was able to improve its service levels and continuously strengthen customer stickiness. In line with the HKMA’s preparations to bring Hong Kong into a new era of smart banking, the Group took the lead in launching an open API project in January 2019. At the same time, it promoted open API interfaces in accordance with the HKMA’s framework, allowing third party service providers to provide real-time banking information to clients using BOCHK’s open APIs. It continuously strengthened its biometric applications, with finger vein authentication coverage now extending to all of BOCHK’s automated teller machines in Hong Kong as well as BOCHK iService. In addition, the Group introduced the Global Transaction Banking Platform, providing corporate clients with all-in-one regional integrated online banking services. The Group has built a new generation of mobile banking services, utilising enhanced voice search and wealth management functions and integrated with big data technology and personalisation elements. It also constructed an intelligent customer service platform to support pioneering uses of mobile phones and the Group’s future business development. A blockchainbased system now covers approximately 85% of the Group’s property valuation transactions, and RPA technology has been gradually introduced to handle middle and back office operational procedures, which effectively improved operational efficiency and reduced operational risks. It also completed Jakarta Branch’s IT Applications On-shoring Project in Indonesia, the construction of a scaled-down overseas core banking system, the expansion of the production centre and the building of a new disaster recovery centre for Jakarta Branch. The Group is committed to continually reshaping and refining its business processes with a view to enhancing operational efficiency, improving customer experience and strengthening product innovation and service capabilities. It stepped up its efforts to promote innovative elements in its products, services and business models. With the formation of inter-departmental agile project teams, the Group was able to respond to market changes effectively, to undertake innovation-driven strategic research, and to deepen scenario-based applications of fintech, thereby enhancing its competitiveness. In addition, the Group is dedicated to fostering fintech talent. During the year, it hosted the BOCHK Hackathon 2019 and organised a series of workshops with the aim of encouraging young people to participate and promote innovation in Hong Kong’s banking industry and to integrate technological innovations, such as artificial intelligence, the internet of things, natural language processing, cloud applications and big data, in the banking industry The Group optimised coverage of its integrated collection platform, BoC Bill, by providing comprehensive payment and settlement solutions such as QR code (including UnionPay QR code and FPS scanning code), contactless and traditional credit card transactions to different types of enterprises in Hong Kong. Its coverage has been extended to a vast number of retail outlets in Hong Kong, with the aim of pioneering a new era in payment behavior and assisting SMEs to enhance their competitiveness. At the same time, the Group continuously upgraded the functionalities of BoC Pay, the first mobile application provided by a bank to focus on payment solutions. BoC Pay now supports non-BOCHK customers to open smart payment accounts, and offers real-time redemption of bonus points for payment as well as friend referrals. Focusing on meeting customers’ general livelihood needs, BoC Pay allows customers to scan and pay at a number of local merchants and to make daily payments through FPS in Hong Kong. It also supports UnionPay QR code payments to more than 15 million merchants in the Mainland, including more than 1 million merchants in the Greater Bay Area. During the year, both the total number of users and transaction volumes increased. In recognition of its innovative achievements in technology and IT development, BOCHK received the 2018 Shenzhen Fintech Innovation Award – Third Prize and 2018 Shenzhen Fintech Initiatives Award – Third Prize, jointly organised by the HKMA and Shenzhen Municipal Financial Regulatory Bureau; the FinTech (Banking, Insurance & Capital Market) Silver Award in the Hong Kong ICT Awards 2019, organised by the Office of the Government Chief Information Officer of the Hong Kong SAR Government and various trade and industry organisations in Hong Kong; the Awards of Excellence – FinTech Bank in the Financial Services Awards of Excellence 2019 organised by Hong Kong Economic Journal, and Excellent Brand of Greater Bay Area FinTech Services in the Hong Kong Leaders’ Choice 2019 organised by Metro Finance. Launching a virtual bank On 27 March 2019, Livi VB Limited (“Livi”), a joint venture company owned by BOC Hong Kong (Holdings) Limited (“the Company”), Jingdong Digits Technology Holding Co., Ltd. (“JD Digits”) and Jardine Matheson Group (“Jardines”), was granted a banking licence by the HKMA to conduct virtual banking business. The Company, JD Digits (through its subsidiary JD New Orbit Technology (Hong Kong) Limited) and Jardines (through its subsidiary JSH Virtual Ventures Holdings Limited) have made a total joint initial investment of HK$2.5 billion, with shareholdings of 44%, 36% and 20% respectively. The Group collaborated with JD Digits and Jardines to actively support preparations for Livi’s business commencement, making satisfactory progress. In the retail banking business, Livi will target local offline retail outlets to provide convenient banking, inclusive banking and smart banking services. In the SME business, it will introduce supply chain financing services to provide SME customers with convenient and efficient financing services. Prospects: The global economic outlook for 2020 remains uncertain, given it dependency on the future development of global trade tensions, the monetary policy stance of major central banks, and the impact of COVID-19. The International Monetary Fund forecasts that global economic growth will most likely dip below last year’s levels. The US economy is expected to shift to a slower pace of expansion as the economic boost from a previous round of tax cuts has now faded. The Mainland will be affected by the outbreak of COVID-19 in the near term, but the trend of keeping a good momentum of steady growth over a mid- to longer term does not change. Despite uncertainties in the global trade and market environment, the Southeast Asian regional economy is expected to grow steadily, supported by strong private consumption, infrastructure investment and ongoing foreign investment inflow to the region’s manufacturing sector. Hong Kong’s economic outlook is expected to be affected by China-US trade frictions, the increasingly accommodative monetary policies of major economies, and the downside risks facing the global economy. Hong Kong banking operations will be challenged by slowing economic growth, intensifying market competition and increasing downward pressure on net interest margin. Nevertheless, Hong Kong possesses unique advantages and will continue to play a vital role in the reform and opening-up of the new era in the Mainland. Major national strategies, including the steadily progressing development plan for the Guangdong-Hong Kong-Macao Greater Bay Area and the acceleration of mainland capital account liberalisation, will provide more development opportunities for the banking industry in Hong Kong. In addition, the HKMA’s seven measures to drive industry transformation towards a new era of smart banking, plus initiatives to promote green and sustainable finance, will create favourable conditions for the business development of Hong Kong banks. The HKSAR government’s 2019 Policy Address put forward more than 220 specific measures with a focus on addressing people’s livelihood issues, including land supply and housing policies, as well as arrangements for cooperation between Guangdong and Hong Kong and the nurturing of young talent in the technology sector. This will create a solid foundation for the long-term development of Hong Kong and provide long-term business opportunities for the banking industry. In view of the opportunities and challenges ahead, the Group remains committed to “Building a Top-class, Full-service and Internationalised Regional Bank” by actively responding to market changes, adhering to prudent risk management and actively developing core businesses, so as to achieve healthy and sustainable development in each of its businesses. In addition, the Group will build a sustainable culture that delivers greater value for all stakeholders and integrate that culture into each of its business segments. The Group will remain committed to developing the local market, cultivating agility in product innovation through digital transformation, adopting fintech solutions to enhance market responsiveness and building an innovative digital bank while always adhering to its customer-centric philosophy. At the same time, with the aim of expanding its customer base and comprehensively enhancing customer experience and satisfaction, the Group will integrate its banking services into corporate and personal customers’ ecosphere through the provision of scenario-based financial services, diversified services and featured services. In addition, the Group will capture opportunities arising from the Chinese government’s 16 new measures on the Guangdong-Hong Kong-Macao Greater Bay Area, with a focus on facilitating people’s needs for livelihood convenience and cross-border financial services and on assisting Hong Kong’s professionals to expand their businesses in the Greater Bay Area and increase the competitiveness of their products and services. The Group will also seize opportunities from the newlyenacted FTA between Hong Kong and ASEAN, the implementation of various ASEAN countries’ economic strategies and the imminent ratification of the RCEP, in order to accelerate the expansion of key products to its Southeast Asian entities, deepen the development of RMB-related business, and enhance the quality and efficiency of its regional development in a comprehensive manner. The outbreak of the COVID-19 since early January 2020 has taken a phased toll on the economy, and thus likely has impacted, to a certain extent, the Group’s asset quality and returns from certain businesses. The magnitude of the COVID-19 impact depends on the progress of prevention and containment of the epidemic, its duration and the implementation of related economic measures. The Group will continuously and closely monitor the developments of COVID-19, evaluate and proactively address its impact on the Group’s financial position and performance. As of the date of this report, such evaluation is still in progress.

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