Post on 28-Jun-2020
CITICS 2017 Financial Performance Presentation
March, 23rd 2018
1 Chinese Securities Industry Overview
2 CITICS Financial Performance
3 CITICS Business Highlights
3
Content
1 Chinese Securities Industry Overview
1,026
1,174
9391,026
200255.3
500.6
844.6
0
200
400
600
800
1,000
1,200
1,400
2014 2015 2016 2017 2014 2015 2016 2017
4
2017 Chinese Major Stock/Bond Indices Average Daily Turnover in Equity Market1 2
Stock Indices
Shanghai Composite Index +6.56%
Shanghai & Shenzhen 300 Index +21.78%
New OTC Market-making Index -10.65%
GEM Composite Index -15.32%
Hang Seng Index +35.99%
Bond index
China Bond Wealth Index -0.59%
2014 Average 309.8 Bn
2015 Average 1,076.5 Bn
2016 Average 533.7 Bn
Interest rate hikes with wider spread 3 Margin Finance and Stock Repo all up4
RMB Billion
2017 Average470 Bn, ↓12%
Overview of Chinese Capital Market in 2017
Margin Finance ↑9.3% Stock Repo ↑69%
2.0000
3.0000
4.0000
5.0000
6.0000
3-month SHIBOR:(+163BP)
10-year Treasury:(+78BP)
5-year AAA Corporate:(+143BP)
Source:Wind,SAC,Internal Data
RMB Billion
5
0.9
1.7 2.1
0
1
2
3
2014 2015 2016 2017
6.7 8.4 9.2 11.6
0
10
20
2014 End 2015 End 2016 End 2017 End
Source:Wind, SAC, AMAC
AUM of Securities Industry AUM of Fund Industry3 4
8.0 11.9
17.4 17.3
05
101520
2014 End 2015 End 2016 End 2017 End
RMB Trillion RMB Trillion
Equity Financing Size1 Debt Financing Size2
6.2
11.5 14.9
0
5
10
15
2014 2015 2016 2017
RMB Trillion RMB Trillion
1.8 11.9
Overview of Chinese Capital Market in 2017
Equity Financing ↓15%
IPO ↑33%
SEO ↓19%
Debt Financing ↓20%
Corporate Bond ↓60%
↓1% ↑26%
6
Total Assets Total Liabilities1 2
RMB TrillionRMB Trillion
1.1 1.6 2.9 4.4 4.3 5.1 0.6 0.5 1.2
2.1 1.4 1.1
0
2
4
6
8
10
2012 2013 2014 2015 2016 2017
Own Assets Client Assets
0.6 1.0 2.0 2.9 2.7 3.20.6 0.5 1.2 2.1 1.4 1.1
0
2
4
6
8
10
2012 2013 2014 2015 2016 2017
Own Liabilities Client Assets
4.34.1
1.2
6.45.0
2.11.7 3.21.5
Net Assets3 Leverage Ratio4
RMB Trillion
0.50 0.52 0.92
1.50 1.64 1.85
0
1
2
2012 2013 2014 2015 2016 2017
1.6 2.1 3.2 3.0 2.7 2.8
2.5 2.8 4.4 4.4
3.5 3.3
0
5
10
2012 2013 2014 2015 2016 2017
Adjusted Leverage Total Leverage
Multiples
5.84.1
Source: Internal, SAC
6.1
Industry Assets: Own Assets up, Leverage stable
7
Operating Income
ROE
Net Income1
3
2
Profit Margin4
130 159 260
575
328 311
0
200
400
600
800
2012 2013 2014 2015 2016 2017
RMB Billion
33 44 97
245
123 113
050
100150200250300
2012 2013 2014 2015 2016 2017
RMB Billion
4.9% 6.1%11.8%
19.9%
8.1% 6.5%
0%
20%
40%
2012 2013 2014 2015 2016 2017
25% 28%37%
43%38% 36%
0%
20%
40%
60%
2012 2013 2014 2015 2016 2017
↓5% ↓8%
Source: SAC, Internal
Industry Profitability:Economics of Scale Continue Fading
8
Content
2 CITICS Financial Performance
9
11.7 16.1 29.2
56.0
38.0 43.3
0
25
50
75
100
2012 2013 2014 2015 2016 2017
4.90%6.02%
12.18%
16.64%
7.36% 7.82%
0%
25%
2012 2013 2014 2015 2016 2017
Operating Income1 Net Income2
ROE3 Profit Margin(1)4
RMB Billion RMB Billion
4.2 5.2 11.3
19.8
10.4 11.4
0
10
20
30
40
50
2012 2013 2014 2015 2016 2017
36% 32% 39% 37%31% 33%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017
↑10%
↑0.46 percentage
points
↑14%
1. Financial Indicators (1/2)
Note 1:Profit margin was calculated without income from Commodities after 2015
10
480
616 597 626
379
474 452 472
-
100
200
300
400
500
600
700
2014 End 2015 End 2016 End 2017 End
Total Assets Total Liabilities
4.7
4.34.1 4.1
3.7
3.3 3.23.4
2.5
3.0
3.5
4.0
4.5
5.0
2014 2015 2016 2017
Total Leverage Adjusted Leverage
Assets and LiabilitiesRMB Billion
Net Assets Leverage Ratio
99.1
139.1 142.7 149.8
0
50
100
150
200
2014 2015 2016 2017
RMB Billion
1
2 3
101.8 150.5 134.4 99.9
1. Financial Indicators (2/2)
Redlines items are Security Deposit
Sources: Annual Report
Multiples
35%
16%19%
5%
11%
15%
28%
13%16%
4%
12%
27%
0%5%
10%15%20%25%30%35%40%
Brokerage InvestmentBank
AssetManagement
Other Financing Investment
Revenue Mix
2016 2017
11.8
5.46.4
1.6
3.65.2
10.0
4.45.7
1.3
4.3
9.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Brokerage InvestmentBanking
AssetManagement
Other Financing Investment
Revenue Movement
2016 2017
8.8
13.7
0
5
10
15
2016 2017
11
25.1 21.5
0
15
30
2016 2017
26%
39%
74%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2016 2017
Fee-basedBusiness
Capital-basedBusiness
↑56%
↓14%RMB Billion
RMB Billion
2. Revenue Mix—Fee-based income down 14%, Capital-based up 56%
Source: Internal data
Fee-based
RMB Billion
Note: Income from Commodities is removed
Fee-based Capital-based(Net)
Note: financing cost is reduced from income of Financing and Investment
Capital-based(Net)
12
3. Cost Analysis
Sources: Annual Report
Cost-to-Income Ratio1
Compensation-to-Income Ratio2
In A-share report, our cost-
to-income ratio was 39% as
of the end of 2017, down by
6 percentage points y-o-y
In A-share report, our
compensation ratio was 28%
as of the end of 2017, down
by 2 percentage points y-o-y
63% 64%72% 73%
47%36% 45% 39%
0%
50%
100%
2014 2015 2016 2017H-share Report A-share Report
24% 20% 23% 21%32% 26% 30% 28%
0%
50%
100%
2014 2015 2016 2017H-share Report A-share Report
Note: 1. In H-share report, operating expenses include expenses of commission, fees and interest which are not included in A-share report2. In H-share report, operating income is gross income, while in A-share report, operating income is net of expenses of commission, fees and interest.
4. Domestic Competition Landscape: Lead in Revenue and Profit
2016年前9月八大券商营业收入比较(亿元)
2017 Top Five Total Assets 2016年9月末八大券商归属净资产比较(亿元)
2017 Top Five ROE 2017 Top Five Leverage Ratio
2017 Top Five Revenue 2017 Top Five Profit
2017 Top Five Net Assets
10.75 10.55 9.05
7.82
7.57
0.00
5.00
10.00
15.00
Huatai Guangfa Guojun CITICS Haitong
625.6 534.8
431.6 392.1 355.3
0
200
400
600
800
CITICS Haitong Guojun Huatai Guangfa
3.52 3.46
3.43
3.382.60
0
1
2
3
4
Huatai Haitong CITICS Guangfa Guotai
43.3
28.2 23.8 21.5 21.1
0
10
20
30
40
50
CITICS Haitong Guojun Guangfa Huatai
Source:Annual Report, Performance Announcement
1 2
3 4
5 6
13Note: Leverage ratio is estimated data
RMB Billion RMB Billion
149.8123.1 117.5
87.6 84.9
0
50
100
150
200
CITICS Guojun Haitong Huatai Guangfa
RMB Billion RMB Billion
11.49.9 9.4 8.6 8.6
0
5
10
15
CITICS Guojun Huatai Haitong Guangfa
294.0
209.7
5.243.3
0
200
400
2006 2017
Revenue
GS CITICS
317
537
12.3
149.8
0
200
400
600
2006 2017
Net Assets
GS CITICS
6,545 5,992
63.6 625.6
0
4000
8000
2006 2017
Total Assets
GS CITICS
Source: SAC,WIND,Annual Report
Benchmarking in Total Assets and Net Assets Benchmarking in Revenue and Profit1 2
GS’ revenue was 56 times of CITICS’ in 2006, the gap is narrowed to
4.8 in 2017; Profit gap was 31 times in 2006, now is 4.6
Business Layout3 Overseas Business4
RMB Billion
GS’ total assets was 103 times of CITICS’ in 2006, the gap is narrowed
to 9.6 in 2017; Net assets gap was 26 times in 2006, now is 3.6
RMB Billion
• Market-making is still small. Capital-based business will be the focus in the future.
• Exchange, commodities, credit derivatives and structured products are still far behind
Overseas business starts from zero and continues to grow
After acquisition of CLSA, the client base and overseas distribution channel have been expanded to 17 regions and countries and 20 branches globally
Synergy has been recognized in areas such as investment banking, brokerage, research etc.
Overseas income grows rapidly CLSA’s income accounts for 15% of total income in 2017
Product-centric Client-centric
Equity
Business
Equity/Debt
Diversified
Volatile to
Market
Less
Volatile
Homogenous
CompetitionDifferentiation
Establish GS-like business model
Cover most product types
Diversify income sources
Improve risk resilience
• GS overseas income accounts for 41% of its total income, which is still far ahead of CITICS
• Regional distribution of overseas revenue is centralized and shall be spread out
Capital-based business
5. Overseas Benchmarking: Narrow the gap with Goldman Sachs
73.452.9
2.4 11.40
50
100
150
2006 2017
Profit
GS CITICS
14
15
Content
3 CITICS Business Highlights
A-share Asset Restructuring
No.1 in Equity Underwriting No. 1 in Debt Underwriting
Rank Underwriter Amount (RMB Bn) Market Share
1 CITICS 220.98 12.29%
2 CICC 211.50 11.76%
3 China Securities 192.47 10.71%
4 Guotai Junan 143.66 7.99%
5 Huatai 113.74 6.33%
1 2
4
16Source:Bloomberg, Wind, Internal
Rank Underwriter Amount (RMB Bn) Market Share
1 CITICS 511.63 4.29%
2 China Securities 387.66 3.25%
3 China Merchant 356.08 2.98%
4 Tebon Securities 267.24 2.24%
5 Guotai Junan 259.75 2.18%
No.1 in IPO Underwriting3
Rank Advisor Asset Size (RMB Bn) Market Share
1 CITICS 139.8 16.21%
2 ChinaSecurities 110.1 12.78%
3 CICC 92.2 10.69%
4 Huatai 63.7 7.39%
5 Guotai Juan 57.3 6.65%
Rank Underwriter Amount (RMB Bn)
Market Share
1 CITICS 20.6 9.42%
2 Guangfa 17.0 7.75%
3 ChinaSecurities 14.42 6.59%
4 Guosen 14.41 6.58%
5 Haitong 12.5 5.69%
China-related M&A5
Rank Advisor Market Share
1 CICC 17.28%
2 Morgan Stanley 8.97%
3 Goldman Sachs 8.21%
4 CITI 7.56%
5 CITICS 7.28%
1. Investment Banking:Maintain the Leading Position
17
No.2 in Turnover: In 2017, Our Stock/Fund Turnover was
RMB 13.05 Trillion with a market share of 5.69%, ranking No.
2 in industry; Revenue from commission accounts for 5.39%
of all, also ranking No.2 in industry
Asset under Custody continue to grow: In 2017, AUC
reached RMB 5 Trillion, an 18% y-o-y growth
Abundant Client resources:In 2017, number of QFII clients
reached 138 and RQFII reaches 52
Stable Market Share1
Descending Commission Rate2
Wealth Manage
ment44%
Sales & Trading
32%
Investment
Banking15%
Asset Manage
ment7%
Other2%
Account Manage
ment Fee56%
Interest24%
Commission
10%
IB3%
Trading5%
Other2%
Morgan Stanley Revenue Mix in 20173
Revenue Mix Wealth Management Revenue Mix
Wealth Management Objectives4
2. Brokerage:Transforming to Wealth Management
Differentiation and value creation
Higher fee
The quality and the capabilities of team become the main driver of profit making
Client representatives customize wealth management plans based on client’s risk preference
Use AI technology to aid asset allocation
Provide one-stop shopping services to realize asset class allocation
Extended financial services:heritage、tax planning、family trust etc.
Financial Services: investment, lending, saving, account management etc.
Source: Internal Data
7.88 7.966.91
5.124.04 3.58
6.8 6.545.27
4.07 3.75 3.39
0
2
4
6
8
10
2012 2013 2014 2015 2016 2017 Future
Industry CITICS
?
‱
3.2 4.0 3.9
3.2
0
5
2014 2015 2016 2017
18
755 1,071 1,921 1,667
0
1,500
3,000
2014 End 2015 End 2016 End 2017 End
178 412
610 589
0
400
800
2014 End 2015 End 2016 End 2017 End
458
864 1,006 1,020
0
600
1,200
2014 End 2015 End 2016 End 2017 End
3. Asset management: Lead in AUM
Asset Management Fee
AUM by China AMCTotal AUM and Active AUM2 3
1st in Total AUM
1st in Active AUM
RMB Billion RMB Billion
RMB Billion
AM Fee by China AMC4
0.8
1.8 2.1 2.0
0
2
4
2014 2015 2016 2017
RMB Billion
Source: Internal Data
Business Advantage1
► Fully licensed:CITICS Asset Management is fully licensed to manage corporate annuity, Social Security Fund domestic investment, insurance fund etc.
► CITICS:By 2017, Total AUM reached RMB 1.67 Trillion with market share of 10.1%; Active AUM reached RMB 589 billion; Both are ranked No.1 in industry
► China AMC:By 2017, AUM of Institutional Business reached RMB 471 billion, among 1st tier in industry
5
47
15
(10)
(25)(30)(20)(10)
0102030405060
Financing Option Delta Liquidity Fixed-income
138.0
75.4
118.7
75.2
4.37%3.59%
4.66%
2.72%
0%
3%
5%
0
30
60
90
120
150
180
Debt Instrument Interbank Repo2017 2016
19
4.1 Capital-based Business: Optimized StructureOptimized Asset Allocation
Improved ROA
2
4
RMB Billion
2017 Capital-based Income1
RMB Billion 2017 2016 Δ %
Total Income 13.72 8.82 4.90 56%
Interest Income 8.32 6.95 1.37 20%
Investment Income 13.32 8.62 4.70 55%
Financing Cost -7.87 -6.86 -1.01 15%
Exchange gain/loss -0.05 0.12 -0.17 -143%
Optimized Liabilities3
4.27%
6.05%5.69%
9.60%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
ROA ROAC
2016 2017RMB Billion
Source: Internal Data
Less allocation to fixed-income business
More allocation to financing business
Debt financing cost reduced
↓
↑
4.2 Fixed-IncomeBusiness Layout
20
Sales Trading
New Business
China Bond Connect
Market-making
Market-making license
Cover over 100 foreign investors
17 Billions Turnover; No. 1 in
industry
Hold leading positions in
many trading markets, e.g.
Interbank market, debt
market, money market,
derivatives market etc.
Won the Excellent Award by
the Shanghai Stock Exchange
as bond dealer, bond investor
and product innovator.
Risk Management
Established risk management system for market risk, credit risk and operation risk
Liquidity Support
Daily financing amount of 39bn
Credit Research team build-up
Recruit talents
Smooth the dialog among research, trading and risk management
Strengthen enterprise credit field research
Source: Internal Data
ABS
Integrate research and investment;
Full coverage of industrial chain;
Properly manage business and risk.
Cross-Border TRS
First securities company to engage fixed-income cross-border TRS
Complete 6 contracts in total
FX Application
Regulatory communication;
Platform build-up;
Streamline FX business needs
Model design.
4.72% 5.62%4.23%
0%
6%
2015 2016 2017
No. 1 Interest Rate Bond Sales (Market Share)
522.1
441.4 469.6
400
500
600
2015 2016 2017
No.1 in Debenture Bond Sales (Amount)
RMB Billion
-3.40%
1.50%
4.30%
-4%
-2%
0%
2%
4%
6%
China Bond Index Average Bond FundReturn
CITICS Trading
2.2
17.1
0
10
20
2016 2017
5.1 4.0
0
5
10
2016 2017
4.3 Equity Derivatives
21
Stock-pledged Repo Option Delta TRS Market-making
39.4
78.0
0
50
100
2016 2017
RMB Billion+98%
RMB Billion
10.0 6.4
0
6
12
2016 2017
-36%RMB Billion RMB Billion
-21%
Source: Internal Data
4 5 6 7
6.8 times
Customer Needs
Instruments & Products
OTC Derivatives Equity Financing Market-Making1 2 3
• Serve financial institutions, hedge fund, enterprise, HNWI and retail clients.
• Offer client risk management solutions, wealth management, global asset allocation and enterprise capital operation.
• Serve shareholders, senior executives and ESOP(Employee Stock Ownership Program).
• Offer clients existing equity solutions and financing instruments
• Offer market-making services for exchange fund products and options.
• Offer liquidity market-making and arbitrage strategies for cross-market, cross-assets and cross-products activities.
Structured Products
OTC Option Flow Trading
Corporate Risk Management Solution
Equity Collateralized Financing
Equity Incentive Financing
Mezzanine/Cross-border Financing
Exchange option contract market-making
ETF/Money Market Market-Making
Other Market-Making Strategies
OTC derivative trading amount over100bn
The market share of Stock-pledged financing was 9.2%
ranking 1st
Core market-maker of 50ETFranking 1st.
22
4.4 Financing Business2017 Top Five in Margin Finance Balance 2017 Top Five in Stock Repo Balance
Descending Margin Fee Rate
8.46% 8.30% 8.15%7.69%
8.22%
7.56%
6.89%
5.42%
5.00%
6.00%
7.00%
8.00%
9.00%
2015 2016H1 2016 2017
Margin Finance Stock Repo
Interest Income Continue Growing
1 2
3 4
71 64 59 57 56
6.91%6.25%
5.73% 5.56% 5.46%
0
40
80
120
CITICS Guojun Huatai Galaxy Guangfa
Balance Share
78 77 75
44 38
9.2% 9.1% 8.9%
5.3%4.5%
0.0%
6.0%
12.0%
0
20
40
60
80
100
120
CITICS Haitong Guojun Huatai Guosen
Balance Share
4.85
2.04
4.89
3.38
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Margin Finance Stock Pledged Repo
2016 2017
RMB Billion
RMB Billion RMB Billion
Source: Internal Data
5. GoldStone: Profit Continue Growing
23
1.3 3.2 3.8
0
5
2015 2016 2017
Goldstone Financial Performance from 2015-2017RMB Billion
Revenue
0.4 1.7 1.9
0
2
4
2015 2016 2017
RMB Billion
Profit
Source: Internal Data
Two subsidiaries reform Goldstone becomes the
platform of PE fund investment
CITICS Investment becomes the principal investment unit
Continue fund-raising and investing In 2017, goldstone established
multiple industry funds and the AUM in total reached RMB 60 billions
In 2017, CITICS investment completed 28 new investments with total amount of RMB 2.3 billions
Business strategy
In 2018, goldstone will accelerate investing pace and expand overseas investment
CITICS Investment will strive to keep the leading position in AUM, research and investment return in peers
Push for Business Transformation
0.14
0.54
0
0.4
0.8
2016 2017
Profit
4.445.11
0
3
6
2016 2017
Revenue
24
6. International ExpansionCITIC CLSA
Completed full integration Restructured US Business, optimized
overhead, improved financial return
2017 CITIC CLSA Business Highlights
Help CITICS to gain the best
Asia Investment Bank by IFR
Best Broker in Research and
Sales by Asia Money
Completed the conversion from HK GEM board to HK Main BoardKVB
International
Credit Rating
Improved
Moody’s maintained our Baa1 rating and changed the outlook from
negative to stable; S&P raised from BBB to BBB+ with stable outlook;
CITICS is the only Chinese securities company that has two BBB+ ratings
+15%+2.8times
RMB Billion RMB Billion
Source: Internal Data
6.16%
3.54% 3.61% 3.50%
0
1
2
3
4
0%
2%
4%
6%
8%
2014/12/31 2015/12/31 2016/12/30 2017/12/29
Stress Test Value
Stress Test Value/Net Capital
206 203
141
95
0
50
100
150
200
250
31/12/2014 31/12/2015 31/12/2016 31/12/2017
Interest VaR Equity VaR
Exchange VaR Commodities VaR
Overall Portfolio VaR
25
7. Comprehensive Risk Management Framework
Source: Internal Data
VaR4
Market Risk
RMB Million
Stress Test
Risk Exposure of Bond Investment (Onshore)1
Credit Risk
Management Framework
5
2 Control Procedures3
Operation Risk
RMB Billion
RMB Billion
0
20
40
60
80
100
2014 2015 2016 2017
Sovereign AAA AA A A-1 Other
50.6
70.8 76.5
Sovereign and AAA accounted for 62% of holding positions by 2017
35.6
Assets over Liability 2017 2016
Margin Finance 300% 277%Outright Repo 216% 228%Stock Pledged 246% 273%
To Prevent Risk via New Product Approval Procedure, review of workflow & design of control steps;
To Mitigate Risk via Incident Reporting, Mitigation Action Recommendation and Tracking
To Flag Potential Risk via day-to-day KRI Monitoring
To Promote Risk Awareness via trainings and case study
Credit Risk Management system
includes: Due Diligence, Internal Credit
Rating, Limit Setting & Monitoring
Note: VaR is calculated for parent company only and excludes holdings of restricted shares
Thank You!