ANNUAL REPORT 2012 - Citi · 2016. 3. 3. · Citi has long been a leader in the provision of...

2012

Citibank (China) Co., Ltd.

ANNUAL REPORT

● SUMMARY OF FINANCIAL PERFORMANCE

● CHAIRMAN’S MESSAGE

● INSTITUTIONAL CLIENTS GROUP

● GLOBAL CONSUMER BANKING

● CORPORATE GOVERNANCE

● GIVING BACK TO THE COMMUNITY

● CELEBRATING 200 YEARS

● AWARDS AND RECOGNITION

● CITI’S MISSION & KEY PRINCIPLES

● BRANCH NETWORK

● AUDITORS’ REPORT

INDEX

1 2

Reached RMB152,334 million, increased by 20% from 2011

RMB62,951 million, increased by 12% over 2011 levels

RMB103,566 million, increased by 19% from 2011

Reached RMB4,630 million

RMB2,813 million, increased by 4% from last year, mainly due to an increase in staff

RMB1,373 million, up 9% from 2011 levels

16.99%, up from 14.09% from 2011 and well above the regulatory requirement

of 8%

Total Assets

Loans

Customer Deposits

Operating Income

Operating Expenses

Net Income

Capital Adequacy Ratio

1

SUMMARY OF FINANCIAL PERFORMANCE

CHAIRMAN’S MESSAGE

In 2012, we continued to work closely with small and

medium-sized (SME) enterprises in China. Citi has had a

dedicated team serving this segment locally since 2004,

giving us clear insights into their needs and an ability to

help these companies grow and succeed, both in China

and overseas.

As we enter our third century in 2013, our outlook is

bright. We take a long-term view of our business and

believe we have the right strategy to benefit our clients,

to serve China’s economy and to achieve our vision for

success in China in the years and decades to come.

Sincerely,

Andrew Au

Chairman, Citibank (China) Co., Ltd.

Citi had a momentous year in 2012 as we celebrated

our 200th anniversary, a milestone few institutions ever

reach. The year-long celebrations took place on every

continent and in virtually every country, highlighted by

our Global Community Day on June 16, the anniversary

of our founding. Citi China was no exception and we have

good reasons to celebrate.

The state of our firm remains very strong. Our strategy

is well aligned with three dominant, long-term secular

trends: globalization, urbanization and digitization.

In China, Citibank (China) Co., Ltd. showed a healthy

financial performance during 2012. Our total assets

reached RMB152,334 million, an increase of 20% over

2011. Our net income also grew 9% from 2011 and

reached RMB1,373 million. Customers have shown

their confidence in us with increased deposits of 19%

year-on-year to reach RMB103,566 million. We are

financially robust, with excellent capital strength. As

of the end of 2012, our capital adequacy ratio was

16.99%, up from 14.09% from 2011 and well above

the regulatory requirement of 8%.

One of the most exciting developments was the launch

of our credit card business in China, a first for any global

bank, which has given us a new, competitive edge and

fulfilled an important element in our plans to be the

leading international bank in China. Our consumer

banking business is set for continued success on the

back of a demonstrated track record of innovation and

service, a widening product set and a renowned brand

in China.

We are a leading provider of services to financial

institutions and corporate clients including multinational

companies, state-owned enterprises and privately-

owned companies. Supporting large Chinese companies

to expand and operate internationally is a key component

of our strategy, and we have been able to build a

competitive offering in this space based on our global

network and our strength in capital market offerings and

transaction services.

Citi has long been a leader in the provision of services

to multinational companies operating in China. In 2012,

our Global Subsidiaries Group continued to capitalize

on Citi’s global network and broad service offerings

to support our client’s growth in China. We have seen

significant increase in foreign exchange volumes,

transactional volumes and our client set has continued

to diversify and expand.

The team also continued to focus on holistic client

advisory combined with strong execution. We helped our

clients raise significant funds from the capital markets,

including several innovative structures in cross border

financing flows.

Our thought leadership was highlighted in a number of

industry-focused forums, including the Automotive and

Industrial Seminar, which brought together investment

banking and corporate banking views and offered a

strategic view of banking ideas and market views.

3 4

INSTITUTIONAL CLIENTS GROUP

2012 has seen a record level of Chinese companies

going abroad and pursuing overseas opportunities. Citi

is proudly involved in many of these trend-defining,

franchise transactions for our clients.

Our “China Desk” initiative continued to serve our

Chinese clients who have an ever-increasing global

presence. In 2012, we held China Day events in Brazil,

Kenya, Nigeria, Algeria, Hong Kong, Turkey, and Moscow.

Likewise, China Desk colleagues returned home for the

signature China Desk Network Day in Chengdu, which

left our Chinese corporate clients much impressed by

Citi’s unique global network and capabilities.

Our achievement has also been well recognized by third-

party organizations, including “Best Deal” and “Service

Quality” awards by FinanceAsia, Greenwich Associates,

etc. The China Development Bank RMB2.5bn CNH bond

was also awarded “Best Deal in China” by the Asset

magazine.

Citi Corporate and Investment Banking

2012 witnessed another strong year for the China

Markets team, with strong momentum observed across

all business lines. Coupled with its unparalleled offering

of products and services, highly complimentary client

feedback and strong talent pipeline, Citi Markets team

has once again defended its leading position in China’s

financial markets.

In 2012, Citi’s Markets team in China was approved to

take part in the Primary Dealership for the People’s Bank

of China’s (PBOC) Open Market Operations. This was an

important milestone that enabled Citi to work closely

with the PBOC as it implements its monetary policy

decisions.

Our collaboration with regulators also included working

with the National Association of Financial Market

Institutional Investors to develop the China credit

derivatives market, which saw the Markets team execute

Citi’s first Credit Risk Mitigation Swap in China. The

team also launched the CNY FX option trades in China,

following the introduction of new rules by the State

Administration of Foreign Exchange (SAFE) allowing

the trading of FX options between banks, institutions

and corporations, marking an important step in the

deepening of China’s FX derivatives market.

We also stepped up our efforts in collaboration with other

banks and non-bank financial institutions, including

mutual funds, securities firms, insurance companies,

pension funds and sovereign funds, offering a wide

range of products catering to their needs.

In 2012, an Asiamoney poll named Citi as the Best

Overall FX Service provider for Corporates and Financial

Institutions in China. In an Euromoney survey, Citi was

ranked #1 for Asia corporations, China corporations &

China financial corporations in both the ‘All Products’ &

‘FX Spot/Forward’ categories.

Citi Global Subsidiaries Group

Citi Markets

Citi Transaction Services has been well recognized for its

leading position in providing pioneering and innovative

solutions that help clients achieve greater efficiency in

global fund usage and allocation. Notable examples include:

The first global bank to issue commercial cards

in China and the first to launch the CUP standard

commercial card in the country.

The pilot bank for cross-border initiatives of People’s

Bank of China (PBOC) and State Administration of

Foreign Exchange (SAFE).

The first foreign bank to offer electronic payment

solutions for both tax and tariff settlement.

Completed the first ETF type QFII custodian

transaction in the country.

5

INSTITUTIONAL CLIENTS GROUP

In 2012, Citi China’s Financial Institutions Group

continued to play an active role as a trusted financial

advisor to Chinese financial institutions in the face of

continued changing dynamics in the global economy.

A steady stream of transaction business and a fast-

growing capital market services contributed to significant

revenue growth last year.

During the year, the team also worked tirelessly with

banking regulators to introduce several best practices.

As an example, it helped China Banking Regulatory

Commission (CBRC) with its new Basel III qualified capital

instruments study and new guidelines set-up.

Citi Transaction Services Financial Institutions Group

6

Citi Commercial Bank

Throughout the year, over 50 events and seminars

were held for existing and prospective clients, which

significantly boosted CCB’s reputation in promoting the

sustainable development of the SME sector.

in wealth management, we have also expanded our

distribution of unsecured personal loans and scaled up

our mortgage sales force.

We significantly stepped up our efforts in building our

brand in Shanghai, Beijing and Guangzhou during the

year with our “Blue Wave” Campaign resulting in record

high brand awareness and brand preference scores.

We also invested significantly in technology which

enabled our consumer branches and products in China

to better serve our customers.

2012 was a history-making year for our consumer

banking business. Our retail network continued to

expand with six new outlets added during the year. In

addition, our sales force for Unsecure Personal Loans

extended to Shenzhen and Chongqing, offering more

comprehensive products to local customers.

On September 19th, we launched our credit card

business, making Citi the first global bank to issue own-

brand credit cards in China. The sole-branded credit

cards brings Citi’s world experience and expertise

in cards to serve Chinese customers’ spending and

lifestyle needs.

The new set of Citi sole-branded credit cards have five

cards and include two categories: Premier Miles and

Rewards that offer a range of benefits and cater to

consumers’ different spending needs and preferences.

The Citi credit cards are now available across the thirteen

cities in China that Citi operates in. The new Citi China

UnionPay, Visa and MasterCard credit cards include both

Renminbi and US dollar denominated options and can be

used at merchant outlets across China and around the

world. In addition, cardholders can participate in the

largest global cards privilege program, Citibank World

Privileges, for VIP discounts and benefits.

The new Citi credit cards also provide a number of

important safeguards to give customers 24 hour

assistance, including purchase, home and travel

protection, home and roadside assistance, as well as

travel accident insurance.

Another important milestone was unlocking the wealth

of booming retail customers through the opening of

our new flagship consumer branch and the first Citigold

Private Client Center on Shanghai’s Nanjing Road in

August. The Smart-Banking branch has an area of 1,231

square meters and spans two floors. Customers can

enjoy a full range of services including savings, deposits,

investments (including Premium Accounts, Structured

Investment Accounts and QDII products), insurance,

ATM/debit cards, as well as credit card, mortgage and

unsecured loans. It also features a Citigold Private Client

Center, the first of its kind in China. Citigold Private

Client (“CPC”) is a proposition designed to meet the

needs of high net worth individuals with a minimum

balance requirement of RMB 8 million (or equivalent) and

above. CPC provides an exclusive and personalized client

servicing model that covers a comprehensive range of

personal wealth and business banking requirements.

In 2012, our pursuit of growth, innovation and service

excellence continued. We unveiled new products in

order to meet the expanding customer base in China.

Our diversified deposit products provide customers

with options to enjoy higher interest rates and greater

liquidity. In 2012, our deposit business grew solidly with

a rate as high as 18% over the previous year.

Our debit card business continued to focus on building

a sound e-platform, facilitating card applications

through internet banking, ATMs and POS terminals,

and promoting a China UnionPay platform-based ePay

system.

We offer the largest number of QDII products in mutual

fund, bond and structured investment products. While

we continued to strengthen our product leadership

7 8

2012 was also a fruitful year for Citi Commercial Bank

(CCB) with robust growth seen in total revenue, onshore

End of Period (EOP) deposits and numbers of clients

gained.

Our teams leveraged the One Citi platform to create

business opportunities and enhance customer experience.

Externally, it also utilized resources through collaboration

with private equity/venture capital firms, law firms and

auditing firms to expand the channel spectrum and drive

further business development.

Commercial Bank also strives to provide value added

services through product innovation. We provide

market-leading e-banking services such as mobile

banking, which enable customers to access Citi’s mobile

banking system and authorize payments on the go.

We initiated a product champion practice in order to

drive business from core products including American

Depositary Receipt (ADR), Export Agency Financing,

Syndication Loan, Bond/ Debt Capital Markets (DCM)

and Commodity Financing.

GLOBAL CONSUMER BANKING

9 10

As we operate our business in China, Citi acts in the best

interests of all of our stakeholders, maintains the highest

ethical standards and ensures full compliance with the

laws and regulations that govern our company. As of the end of December 2012, we have two

independent Directors. Mr. Danny Liu is the voting

member of all three professional committees under

the CCCL Board and also chairs the Internal Audit

Committee. Mr. Zhe Sun is the voting member of Risk

Management Committee and Related Party Transaction

Control Committee and he is also the chairman of

Related Party Transaction Control Committee. Both

of them have attended all the Board meetings and the

relevant committee meetings and were involved in the

consideration and approval of the related matters. In

addition, during the intersession of the Board meetings,

independent directors were aware of significant matters

in our business operation and had active interaction

with management through our communication

channels. In addition, two independent directors have

issued their independent opinion on material related

party transactions reviewed in the 2nd motion of Q4

Risk Management Committee meeting and 3rd motion

of Q4 Board meeting. The independent Directors have

actively participated in the decisions of the Board and

played a supervisory role.

Furthermore, the independent Directors have actively

observed the Letters of Undertaking regarding

prevention of conflict of interests they issued in

accordance with the requirements and spirit of CBRC’s

Guidance Opinion.

CCCL does not have a Board of Supervisors, but has

a Supervisor designated by the shareholders. Our

supervisor, Mr. Mark Hart, performed his duties to

the best of his abilities and attended all of the Board

meetings after his appointment and issued confirmation

letters to the meeting he attended accordingly. In

addition, Mr. Hart supervised the Bank’s financials and

the performance of Directors and Senior Management

Personnel. The Supervisor also provided opinions on

the matters relating to the 2011 audited financials,

the performance of the Directors and the Senior

Management Personnel and their performance relating

to management of liquidity risk.

The structure of the Board of Directors has strengthened

since the establishment of CCCL. As of the end of

December 2012, the CCCL Board of Directors consisted

of 10 Directors, comprising 3 Executive Directors, 5

Non-Executive Directors and 2 Independent Directors.

Each and every Director performed their duties to the

best of their abilities.

In 2012, we held 4 Board meetings at an average of one

every quarter. The Board resolved or heard the reports

on a total of 60 matters (including 27 resolutions and

33 reports). In addition, CCCL has exercised five written

resolutions to five key matters in the periods between

Board meetings. All the Directors performed their duties

to the best of their abilities and protected the interests

of both the company and the shareholder.

In 2012, the structure of the Board of Directors and its

committees were as follows:

UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE

Board of Directors

Independent Directors SupervisorIn 2012, the structure of the Board of Directors and its committees were as follows:

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

NameTitleCCCL Title

Andrew AuChairmanLegal Representative, President

Danny LiuIndependent DirectorN/A

Zhe SunIndependent DirectorN/A

Kai ZhangDirector CFO

Simon ChowDirector EVP

Stephen Bird Director N/A

Deepak SharmaDirector N/A

Daisy YaoDirector N/A

Agnes LiewDirector N/A

Anthony Nappi Director N/A

12

In 2012, the three special committees under the

Board, based on the principle of equally emphasizing

quality and effectiveness, performed important roles in

assisting the Board to make correct decisions. The three

special committees held 12 meetings in total, reviewed

28 motions and heard 56 reports. Each of the three

committees effectively operates with distinct divisions

of responsibility and provides professional advice

and suggestions in terms of audit, risk management

and related party transaction control. This allows the

board to efficiently review, discuss and reach informed

decisions based on their expert counsel.

UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE

As of the end of 2012, there are three professional

committees under the CCCL Board. These are: a Related

Party Transaction Control Committee, an Internal Audit

Committee and a Risk Management Committee. Details

are as below:

Professional Board Committees

11

Internal Audit Committee

Related Party Transaction Control Committee

Risk Management Committee

Chairman

Committee Voting MemberCommittee Voting MemberCommittee Non-Voting Member

Chairman

Committee Voting Member

Committee Voting MemberCommittee Voting MemberCommittee Voting MemberCommittee Non-Voting Member Committee Non-Voting Member

ChairmanCommittee Voting Member

Committee Voting Member

Committee Voting MemberCommittee Voting MemberCommittee Voting MemberCommittee Non-Voting MemberCommittee Non-Voting MemberCommittee Non-Voting MemberCommittee Non-Voting Member

Danny Liu Independent DirectorDaisy YaoAndrew AuSimon Nie

Zhe SunIndependent DirectorDanny Liu Independent DirectorAndrew AuStephen Bird Agnes LiewLili Qin William To

Daisy YaoDanny Liu Independent DirectorZhe SunIndependent DirectorStephen Bird Deepak SharmaAndrew Au Lili QinWilliam ToWai-ling WongMarine Mao

for sensitive functions, key positions and important

vendors. Internal audit also increased the sample size for

reviewing CCTV surveillance records and phone records

of sales to identify any weakness in internal controls.

In 2012, Internal Audit increased the frequency and

depth of reviews on branch and sub-branch internal

control, anti-money laundering (AML), credit area,

account management, market risk, cash management

and trade finance product, outsource and information

technology. The Board of Directors and the Internal Audit

Committee reviewed and discussed the major issues

raised by Internal Audit on a quarterly basis and also

regularly received status updates from the Chief Auditor.

They also oversee the implementation of internal and

external audit plans.

Internal Audit has adopted new internal audit

methodology based on Citigroup standards since

the fourth quarter of 2012. The effectiveness and

completeness of audit plan are ensured through risk

assessment and ongoing business monitoring. More

resources are invested in the planning of each audit so

as to fully understand and review the internal controls

embedded in the relevant processes. Substantive

tests are conducted during the field work based on

the audit result of internal control design. The new

methodology also requires internal audit to focus on

on-time remediation on issues raised, management’s

effectiveness in addressing past due issues,

management’s remediation on regulatory issues, the

level of operational losses, the results of other control

functions’ evaluations and issues being addressed by

management.

The Risk Management Committee supervises senior

management’s control of credit, market, liquidity,

compliance, operation, IT, reputation and other risk

areas. It reviews risk portfolio reports, classified

portfolios, NPLs and loss provisions, as well as key risk

limits against actual exposures.

The Internal Audit Department maintains a close

relationship with Regulators, the Compliance Department

and other related departments in Citi Head Office. The

strength, effectiveness and frequency of Internal Audit

have been enhanced by monitoring banking regulatory

focuses as well as the new products/services launched

in our bank. Regular participation in key management

meetings such as the Business Risk and Compliance

Control Committee, the Control Management

Committee, the Account Reconcilement Committee, the

Legal Vehicles Management Committee, the Country IT

Committee and the Regulatory Reporting Committee

meetings, keeps Internal Audit constantly updated with

the latest business and management information and

allows it to highlight risk areas and lapses in internal

control as well as to share audit results, key findings and

the status of corrective actions.

Internal Audit continues to adopt the practice of

“Surprise Audit” during branch and sub-branch on site

reviews. To meet regulatory requirements on anti-fraud

controls in the banking industry, Internal Audit paid close

attention to anti-fraud controls executed in branches

and sub-branches. The execution of anti-fraud controls

was the focus of branch and sub-branch reviews and

target product and process reviews. Deep dive reviews

were conducted for in-counter business, daily vault

management, significant fund transfer transactions,

numbered forms, loan purpose, and local regulatory

reporting. Internal Audit also conducted on site visits

Robust Risk Management and Internal Control

13 14

We are mindful of our responsibility to engage with all

of our stakeholders in China in a manner that generates

positive outcomes and that reinforces the reputation we

strive to achieve every day of being the most respected

international bank in China.

In 2012, Citi China maintained its commitment to

giving back to the community, adopting a holistic

and systematic approach in our practice to ensure we

support the healthy and sustainable development of the

communities and people we serve.

Agent Penny Program

Much like reading, writing and mathematics, financial

knowledge and capability are important life skills for all

age groups throughout life and need to be developed

at an early stage. However, there is a general lack of

awareness of bringing financial education to children

in China. Addressing such needs, Citi partnered with

organizations to develop the Agent Penny program, a

holistic financial education initiative aimed at providing an

innovative and fun-filled way of instilling sound financial

values in 10-12 year olds, through an illustrated comic

book, theater plays and in and out-of-class team

activities.

In 2012 alone, 70 theater performances in Beijing and

Shanghai were organized and performed by over 300

students in 17 primary schools. More than 5,000 students

viewed the plays at in or out-of-school activities. The

Agent Penny program website also welcomed more than

110,000 viewers ranging from children, parents, school

teachers, staff from educational bureaus and child

education experts. In addition, the program itself was

widely reported by local and national media.

Guizhou Indigenous Craftwork Development Program

Addressing social, economic and environmental issues, Citi

China partnered with the Community-Based Conservation

and Development Research Center of Guizhou (CCDRC)

to launch the “Guizhou Indigenous Batik Development

Program” in 2011. The program was a big success and

achieved several important milestones. 1,000 participating

Miao household increased their annual average household

income by 20-40%. In 2012 the program expanded to

benefit 1,200 poor Miao household enterprises from six

villages in Danzhai County, Guizhou Province in production

of batik, Miao embroidery, homemade wine and handmade

paper. Miao artisans were trained in production techniques,

design, marketing and communication skills, resulting in

increased sales of indigenous craftwork at better prices.

By the end of 2012, all Miao household enterprises saw an

average profit increase of 30-50% compared to 2011. In

addition, all household enterprises adopted indigo, an all-

natural dye resource instead of chemical dye in their batik

and embroidery production.

Financial Education

Enterprise Development

GIVING BACK TO THE COMMUNITY

Citi – CBA Microentrepreneurship Award

Citi’s support for the microfinance sector has spanned two

decades and we’re proud to carry on this tradition in China.

Since 2005, the Citi Microentrepreneurship Award has

been launched in 28 countries, including China. Through

the support of the Citi Foundation, Citi China has partnered

with the China Banking Association to launch the Citi

Microentrepreneurship Award to recognize the efforts of

microentrepreneurs while also raising awareness of the

importance of microfinance efforts to increase access to

finance.

In order to promote outstanding microfinance institutions

which have achieved financial, social and comprehensive

performance, the 2012 Award for the first time included

five institutional awards: Best Sustainable Award, Best

Risk Management Award, Best Social Performance Award,

Best Inclusive Financial Award, as well as Innovation

Development Award.

On November 3rd, Citi China and the China Banking

Association announced the winners of the 8th annual

Microentrepreneurship Awards in China. The awards

ceremony to commend the outstanding microentrepreneurs

and institutions in the microfinance field in the past year

was held in Haikou with over 150 microfinance practitioners

in attendance. and low-income families as well as basic education for

students to better prepare them with skills to enter the

workforce. BNVS, a non-profit school offering free two

year education programs to migrant children from low-

income families, has helped more than 500 children

annually in Beijing, Chengdu, Nanjing and other cities.

In 2012, Citi China supported BNVS to provide all free

education to students in Beijing and Nanjing, so students

can learn vocational skills such as Western pastry

and Chinese cuisine and win paid internships at large

corporations after graduation.

Citi China supported Compassion for Migrant Children

and BN Vocational School (BNVS) since 2010 to provide

vocational training skills for the children of migrant

Microfinance

Youth Education and Livelihood

Global Community Day

On June 16th, Citi employees marked our 200th

anniversary in a very meaningful way; around the globe,

we celebrated Global Community Day (GCD), teaming up

with local community organizations to make a difference

in the communities where we do business.

Andrew Au, CEO of Citi China, said, “In China, we had

a record number of more than 5,100 volunteers in 20

locations participate in 29 events. I am delighted not

only with the huge turnout of our employees but also

with the passion and care shown by our volunteers in the

activities they undertook to help those who need it in the

local community.”

A wide variety of activities were organized around China,

encompassing support for underprivileged children,

education (including financial education), the disabled,

migrant workers, senior citizens as well as support for

a better environment. Citi operates in a diverse number

of cities and regions around China, and each location

that took part in Global Community Day selected an

activity that was particularly meaningful for their local

community. In Chongqing, where parents often seek

work in Beijing and Shanghai, our volunteers spent a

day with the so-called “left behind” children. Volunteers

in Beijing, Shanghai, Chengdu and Nanjing addressed

the other side of the equation: helping young, unskilled

migrants who arrive in these cities looking for work.

In partnership with Bainian Vocational School, which

helps these migrant workers develop skills to find jobs,

Citi employees taught financial education, shared career

advice and engaged in interactive activities.

In Shanghai, more than 1,900 volunteers took part in

a 3.8km walkathon with the objective of raising funds

to help 3,000 children in rural China who are in need of

better nutrition. Specifically, the funds raised helped the

school children eat eggs as part of their diet, something

they are not able to do without such assistance. It was a

beautiful day in Shanghai and our volunteers worked in

teams to complete the walk and also some fun challenges

such as trying a “blind” walk. Gary Yang from Citi’s risk

team, said, “I’m very glad to be able to contribute my

little effort to help these children in rural areas to grow

up healthily and happily.”

Our volunteers also took action to support the

environment. This was seen in a beach clean-up in Dalian

and clearing trash in locations that included Huangshan

Mountain, Tanglang Mountain, Xuefeng Mountain, West

Lake and Lake Taihu.

Another environmental related activity was a trip to the

Beijing Botanical Gardens with migrant students to share

environmental knowledge and practise with migrant

families.

Caring for those members of the community in need was

another focus area, whether it was spending time with

disabled people in Guangzhou, Shenzhen and Tianjin,

the elderly in Zhuhai and Dalian or the underprivileged

in Changsha.

The day was a wonderful example of our employees

coming together from our different businesses and

functions to work together towards a common goal,

while showing our stakeholders around China that the

volunteering spirit is alive and well in our culture.

GIVING BACK TO THE COMMUNITY

15 16

2012 marked Citi’s 200th anniversary, an opportunity

to reflect on two centuries of enabling progress. We

celebrated our rich heritage of innovation in a global

advertising campaign, thanked our clients at events

held around the world and joined together for a Global

Community Day to give back to the communities in which

we live and work.

CELEBRATING 200 YEARS

Best Bank in ChinaBest M&A House in ChinaBest Deal in China

The Asset

Best Foreign Commercial BankBest China Deal

FinanceAsia

Best Brand of Foreign Bank in China

21st Century Business Herald

Best Overall FX Service Provider for CorporatesBest Overall FX Service Provider Voted by Financial Institutions

Asiamoney

Ranked #1 for Asia corporations, China corporations & China financial corportions in both All Products & FX Spot/Forward categories

Euromoney

Most Respected Foreign Bank in China

Money Week

Most Popular Foreign Bank

Hexun

Most Competitive Foreign Bank

China Business Journal

Best Corporate BankBest Credit Card

Global Finance

Best Foreign Bank

Investor Journal

Best Wealth Management Brand (Foreign Bank)

Global Entrepreneur

Best Branch Innovation AwardWealth Management Product Award

The Asian Banker

2012 Rotary Leadership Awards for Citi China’s effort in Corporate Citizenship

Rotary Club Shanghai

AWARDS AND RECOGNITION

17 18

CITI’S MISSION & KEY PRINCIPLES

Citi works tirelessly to serve individuals, communities, institutions and nations.

With 200 years of experience meeting the world’s toughest challenges and seizing

its greatest opportunities, we strive to create the best outcomes for our clients

and customers with financial solutions that are simple, creative and responsible.

An institution connecting over 1,000 cities, 160 countries and millions of people,

we are your global bank; we are Citi.

The four key principles — the values that guide us as we perform our mission — are:

Common Purpose One team, with one goal: serving our clients and stakeholders

Responsible FinanceConduct that is transparent, prudent and dependable

IngenuityEnhancing our clients’ lives through innovation that harnesses the breadth and depth of our information, global network and world-class products

LeadershipTalented people with the best training who thrive in a diverse meritocracy that demands excellence, initiative and courage

Citi’s Mission: Enabling Progress

19 20

BRANCH NETWORK - BRANCHES

01 BEIJING

02 CHANGSHA

03 CHENGDU

04 CHONGQING

05 DALIAN

06 GUANGZHOU

07 GUIYANG

08 HANGZHOU

09 NANJING

10 SHANGHAI

11 SHENZHEN

12 TIANJIN

13 WUXI

Room 101, 1F/16-18F, Excel Center, No.6 Wu Ding Hou Street, Xi Cheng District,

Beijing, 100032

Tel: (8610) 59376700, 59376000 Fax: (8610) 59376729, 59376002

2F, No.110, Furong Middle Road, 2nd Section, Changsha,410015

Tel: (86731) 89860518 Fax: (86731) 89860488, 89860428

Unit 101, 1F/Unit A-E, 30F, City Tower, No.86 Section 1 South Ren Min Road,

Chengdu, Sichuan, 610016

Tel: (8628) 86110066 Fax: (8622) 86202328, 86202160

1F/2F/Ground Unit 1-3,12,18F, No 38, Qing Nian Rd, International Trade Center,

Yu Zhong district, Chongqing, 400010

Tel: (8623) 63106395 Fax: (8623) 63106361, 63106312

Ground Floor, No 2-1 Zhong Shan Square, Zhong Shan District, Dalian, Liaoning

Province, 116001

Tel: (86411) 39733973 Fax: (86411) 39733992

7201-7202, Office Tower, CITIC Plaza, No.233 Tian He North Road, Guangzhou,

510613

Tel: (8620) 38771333 Fax: (8620) 38770990

Gui Yang Branch

Unit 1-01, No.215 South Fu Shui Road, Nan Ming District, Guiyang, 550002

Tel: (0851) 5285888 Fax: (0851) 5258007, 5258009

1F/ Unit A, B, G, 13F, Jia De Plaza, No. 118 Qing Chun Road, Hangzhou, 310003

Tel: (86571) 87229191, 87229088 Fax: (86571) 87222872, 87222827

1F-2F, Nanjing World Trade Center, No.2 Han Kou Road, Nanjing 210005

Tel: (8625) 88011088 Fax: (8625) 89602700

1F, 28-35F, Citigroup Tower, No.33 Hua Yuan Shi Qiao Road, Lu Jia Zui Finance

and Trade Area, 200120

Tel: (8621) 28963333, 28966000 Fax: (8621) 28963590

34F, Duty Free Building, No. 6 1st Fu Hua Road, Fu Tian CBD, Shenzhen, 518048

Tel: (86755) 82371888 Fax: (86755) 25988829

Room 102 & 1810/Room 1801, 18F , The Exchange Tower, No. 189 Nanjing Road,

He Ping District, Tianjin, 300051

Tel: (8622) 58900988, 58900688 Fax: (8622) 83191800, 83191688

1F, 2F, & unit 0701-0703, 0712, 0715-0722,

7F, No.218, Jin Jiang Hotel, Zhongshan Road, Wuxi

Tel: (86510) 82799668 Fax: (86510) 82796900, 82750389

21 22

BRANCH NETWORK - CONSUMER OUTLETS

01 BEIJING

03 CHENGDU

04 CHONGQING

05 DALIAN

Consumer Banking, Beijing Asian Games Village Sub-branch

Unit 1012, 1013, Tower C, No 103, Huizhongli, Chaoyang District

Beijing, P.R.China, 100027

Tel: (8610) 59379050 Fax: (8610) 84871619

Consumer Banking, Beijing Chang-an Sub-branch

1/F, Tower 1, Bright China Chang An Building, No.7 Jianguomennei Avenue,

Beijing, P.R.China 100005

Tel: (8610) 65102458 Fax: (8610) 65102450

Consumer Banking, Beijing Jin Bao Jie Sub-branch

Room F1-1, F1-2, CITS Plaza shopping center, No.1 North Dong Dan Street, Dong

Cheng District Beijing, P.R.China

Tel: (8610) 59379188 Fax: (8610) 65597386

Consumer Banking, Kerry Centre Sub-branch

Unit 201, 2F, North Office Building and Unit 02, 1F, Kerry Center, No.1 Guang Hua

Road, Chao Yang District Beijing, P.R.China 100020

Tel: (8610) 59379000 Fax: (8610) 85298755

Consumer Banking, Beijing Pacific Century Sub-Branch

Unit 109, First Floor, Pacific Century Shopping Mall, Jia 2 Gongti North Road,

Beijing, P.R.China, 100027

Tel: (8610) 59377200 Fax: (8610) 65392716

Consumer Banking, Beijing Upper East Side Sub-branch

A09-A15, Upper East Side Central Plaza, No.6 North Ave, East 4th Ring Road,

Chaoyang District, Beijing, P.R.China 100016

Tel: (8610) 59379100 Fax: (8610) 51307131

Consumer Banking, Beijing Wangjing Sub-branch

Unit 105, No. 429 Wangjing Xiyuan, Guangshun North Street, Chaoyang, Beijing,

P.R.China, 100102

Tel: (8610) 59379333 Fax: (8610) 64716804

Consumer Banking, Beijing Zhong Guan Cun Sub-branch

Room 04 & 05, 1st Floor, Ideal Plaza, No. 58 West Road, North Fourth Ring, Haidian

Haidian District, Beijing, P.R.China 100080

Tel: (8610) 59379288 Fax: (8610) 82607211

Consumer Banking, Chengdu Fund International Plaza Sub-branch

1F, Unit 4~5, No 6, Hangkong Road, Wuhou District, Chengdu, 610041

Tel: (8628) 61517766 Fax: (8628) 61517878

Consumer Banking, Chongqing Airport Sub-branch

Terminal T2A (Departure Hall, beside Gate 4), Chongqing Jiangbei International Air-

port, P.R.China 401120

Tel: (8623) 67155079 Fax: (8623) 67155431

Consumer Banking, Chongqing Bei Cheng Tian Jie Sub-branch

Unit 16, No. 12 Bei Cheng Tian Jie, Jiang bei District, P.R.China 400020

Tel: (8623) 67855956 Fax: (8623) 67857217

Consumer Banking, Dalian Xigang Sub-branch

No.232 & 234 Zhongshan Road, Xigang District, Dalian, P.R.China 116021

Tel: (86411) 83729700 Fax: (86411) 83729726

Consumer Banking, Dalian Xinghai Bay Sub-branch

No 451-13, Zhongshan Road, Shahekou district, Dalian, P.R.China 116021

Tel: (86411) 39570188 Fax: (86411) 39570166

23 24

10 SHANGHAI Consumer Banking, Shanghai Gu Bei Sub-branch

1F Unit 102, Golden Garden, No.1078, Gubei Road,

Shanghai, P.R.China 201103

Tel: (8621) 38627488 Fax: (8621) 62709509

Consumer Banking, Shanghai Hongkou Sub-branch

Unit 605-608 6F and Unit 707-708 7F and Unit 803A, 806, 807 8F and Unit 103,

1F, No.1500, North Sichuan Road, Shanghai, P.R.China 200080

Tel: (8621) 2601 2288 Fax: (8621) 63071396

Consumer Banking, Shanghai Lujiazui Sub-branch

1/F, Marine Tower, No.1 PuDong Avenue,


Tel: (8621) 38627188 Fax: (8621) 68860028

Consumer Banking, Shanghai People Square Metro Station Sub-branch

Unit 1-116, Interchange Hall, People Square Station, Shanghai Metro Line 1


Tel: (8621) 38627600 Fax: (8621) 22057282

Consumer Banking, Shanghai Puxi Sub-branch

1/F, North Building, Peace Hotel, No.19 Zhong Shan Dong Yi Road,


Tel: (8621) 38627000 Fax: (8621) 63297676

Consumer Banking, Shanghai Xin Tian Di Sub-branch

Unit F, Building 1-6, No 222, Madang Road, Luwan District,


Tel: (8621) 38627588 Fax: (8621) 53068396

Consumer Banking, Shanghai West Nanjing Road Sub-branch

Unit A, 1F and 2F, No 762, West Nanjing Road,


Tel: (8621) 38627650 Fax: (8621) 62188572

25 26


06 GUANGZHOU

08 HANGZHOU

Consumer Banking, Guangzhou Fortune Plaza Sub-branch

Unit 101, Fortune Plaza, No.118 TiYu East Road, Tian He District,

Guangzhou, P.R.China 510620

Tel: (8620) 38171888 Fax: (8620) 38931628

Consumer Banking, Guangzhou Huan Shi Dong Sub-branch

(Small amount of RMB exchange, Guangzhou)

1/F, Asian International Hotel, No.326 Huanshidong Road, Guangzhou, P.R. China

510133 Tel: (8620) 38171021 Fax: (8620) 83866918

Consumer Banking, Guangzhou Nong Jiang Suo Sub-branch

Unit 3, 1F, No 34-2, Zhongshan Fourth Road,

Yuexiu District, Guangzhou, Guangdong, P.R. China,5100530

Tel: (8620) 38171688 Fax: (8620) 83893730

Consumer Banking, Guangzhou Wanguo Plaza Sub-branch

Unit 1002, 1st Floor, No.131,133,135,137, Jiangnan Middle Avenue, Haizhu District,

Guangzhou, Guangdong, P.R. China

Tel: (8620) 38171099 Fax: (8620) 84499860

Consumer Banking, Hangzhou Chengxi Sub-branch

No 81, Wen Er West Road, Hangzhou, 310012

Tel: (86571) 88250866 Fax: (86571) 88255603

Consumer Banking, Hangzhou Huanglong Sub-branch

Room 109-110, Floor 1, Jiahua International Business Center, No.15 Hangda Road,

Hangzhou, P.R. China 310007

Tel: (86571) 87687028 Fax: (86571) 87687027

Consumer Banking, Hangzhou Xin Tang Road Sub-branch

Unit 110 , 111, No. 99 Xintang Road, Hangzhou, 310012

Tel: (86571) 88908018 Fax: (86571) 28972758

27 28


11 SHENZHEN

Consumer Banking, Shanghai West Yan An Road Sub-branch

Unit 01, 02, 7F, unit 01 02, 2F and unit 01, 1F, No 500, West Yan An Road,


Tel: (8621) 38627388 Fax: (8621) 32200960

Consumer Banking, Shanghai Xujiahui Sub-branch

No 955-5, Zhao jia Bang Road,

Shanghai, P.R. China 200030

Tel: (8621)38627511 Fax: (8621)54246182

Consumer Banking, Shanghai Yalong Plaza Sub-branch

Unit S01, 1F and Unit S13, B2, No.500, East Jinling Road,


Tel: (8621) 38627333 Fax: (8621) 63732685

Consumer Banking, Shanghai Zhongshan Park Sub-branch

Unit 1055, 1st Floor, Cloud 9 Mall, No.1018 Chang Ning Road,

Shanghai, P.R. China 200042

Tel: (8621) 38627222 Fax: (8621) 62121520

Consumer Banking, Shenzhen Chegongmiao Sub-branch

Podium 101-B103, NEO Lvgen Plaza, Che Gong Miao, Shennan Avenue, Futian District,

Shenzhen, P.R.China 518001

Tel: (86755) 82718199 Fax: (86755) 82777282

Consumer Banking, Shenzhen Futian Sub-branch

Room 105, Duty Free Building, Yitian Road, Futian District,


Tel: (86755) 82766333 Fax: (86755) 88820518

Consumer Banking, Shenzhen Luohu Sub-branch

No. 2041-1, 1st Floor, Xi Long Building, Renmin South Road, Luohu,


Tel: (86755) 82257866 Fax: (86755) 82235166

12 TIANJIN

Consumer Banking, Shenzhen Nanshan Sub-branch

North 1F, Jinhai Building, No.2748, Nanhai Avenue, Nanshan District,


Tel: (86755) 86122988 Fax: (86755) 86121161

Consumer Banking, Shenzhen Shum Yip Sub-branch

1/F, Shum Yip Center (Beside the Book City), No. 5045 Shen Nan East Road,


Tel: (86755) 22945188 Fax: (86755) 82083401

Consumer Banking, Tianjin Binhai Sub-branch

Level 1&2, 23 Fortune Plaza, No.21 Third Avenue, TEDA,

Tianjin, P.R.China 300457

Tel: (8622) 66209229 Fax: (8622) 66219980

Consumer Banking, Tianjin Jin Tower Sub-branch

Unit 3, No 160, Zhang Zi Zhong Road, Heping District, Tianjin, P.R. China 300041

Tel: (8622) 58356150 Fax: (8622) 58356162

Consumer Banking, Tianjin Qi Xiang Tai Road Sub-branch

Unit. 6, No. 89 Qi Xiang Tai Road, Hexi District, Tianjin, P.R. China 300074

Tel: (8622) 83118000 Fax: (8622) 83118058

Consumer Banking, Tianjin Youyi Road Sub-branch

Unit 101 & 201, Zhongfu Tower, No.1 Youyi Road, Hexi District, Tianjin, P.R.China

300201

Tel: (8622) 28353003 Fax: (8622) 28350282

Certified Public AccountantsRegistered in the People’s Republic of China

Chen Sijie

Pan Sheng

of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those

risk assessments, the auditors consider internal control

relevant to the entity’s preparation and fair presentation of

the financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation

of the financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in

all material respects, the financial position of the Bank

as at 31 December 2012, and the financial performance

and the cash flows of the Bank for the year then ended in

accordance with the requirements of Accounting Standards

for Business Enterprises issued by the Ministry of Finance

of the People’s Republic of China.

29

AUDITORS’ REPORT

KPMG Huazhen (Special General Partnership)Shanghai Branch China 12 April 2013China Shanghai

The Board of Directors of Citibank (China) Company Limited:

We have audited the accompanying financial statements of

Citibank (China) Company Limited (the Bank) on pages 1 to

108, which comprise the balance sheet as at 31 December

2012, the income statement, the cash flow statements, the

statement of changes in equity for the year then ended,

and notes to the financial statements.

Management’s Responsibility for the Financial Statements

The Bank’s management is responsible for the preparation

and fair presentation of these financial statements. This

responsibility includes: (1) preparing these financial

statements in accordance with Accounting Standards for

Business Enterprises issued by the Ministry of Finance of

the People’s Republic of China, and fairly presenting them;

(2) designing, implementing and maintaining internal

control which is necessary to enable that the financial

statements are free from material misstatement, whether

due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these

financial statements based on our audit. We conducted

our audit in accordance with China Standards on Auditing

for Certified Public Accountants. Those standards require

that we comply with China Code of Ethics for Certified

Public Accountants, and plan and perform the audit to

obtain reasonable assurance about whether the financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the

financial statements. The procedures selected depend

on the auditors’ judgment, including the assessment

THE ENGLISH TRANSLATION OF THE FINANCIAL STATEMENTS FOR THE YEAR FROM 1 JANUARY 2012 TO 31 DECEMBER 2012IF THERE IS ANY CONFLICT OF MEANING BETWEEN THE CHINESE

VERSION AND THE ENGLISH TRANSLATION,THE CHINESE VERSION WILL PREVAIL

30

CITIBANK (CHINA) COMPANY LIMITED

12,308,582,6706,751,057,7441,430,554,0477,920,000,000

103,566,097,380228,251,112180,510,101252,270,780

9,153,222,437 141,790,546,271

3,970,000,00033,724,090

605,631,2731,305,394,4954,628,757,051

10,543,506,909

152,334,053,180

12,284,537,8305,155,513,7992,069,104,547

524,000,00087,096,006,383

181,778,289210,066,392195,037,924

10,526,465,704 118,242,510,868

3,970,000,00010,357,413

468,309,977818,441,173

3,879,818,703

9,146,927,266

127,389,438,134

Liabilities:

Total liabilities

Equity:

Total equity

Total liabilities and equity

Deposits from inter-banks and non-bank financial institutionsBorrowings from inter-banksDerivative financial liabilitiesFinancial assets sold under repurchase agreementsDeposits from customersEmployee benefits payableTaxes payableInterest payableOther liabilities

Paid-in capitalCapital reserveSurplus reserveGeneral reserveRetained earnings

Assets

Total assets

Citibank (China) Company LimitedBalance Sheet as at 31 December 2012(Expressed in Renminbi Yuan)

Note 2012 2011

1617

9181920

4(c)

21

22232425

Citibank (China) Company LimitedBalance Sheet as at 31 December 2012 (continued)(Expressed in Renminbi Yuan)

31

These financial statements were approved by the Board of Directors.

Andrew Au Kai Zhang Company stampChief Executive Officer Chief Financial Officer

Date: 12 April 2013

The notes on pages 38 to 108 form part of these financial statements.

Cash on hand and deposits with central bankDeposits with inter-banksPlacements with inter-banksTrading financial assetsDerivative financial assetsInterest receivableLoans and advances to customersAvailable-for-sale financial assetsFixed assetsIntangible assetsDeferred tax assetsOther assets


Note 2012 2011

56789

101112131415

30,637,522,42012,786,085,14523,311,688,2693,512,945,0361,690,055,766

457,176,96762,950,509,68116,135,172,130

74,135,56480,561,00395,285,122

602,916,077

152,334,053,180

26,065,131,7395,540,233,727

15,840,879,0118,212,658,3542,297,358,628

499,568,33856,160,482,41411,412,519,480

74,522,38254,369,97574,816,706

1,156,897,380

127,389,438,134

32

Citibank (China) Company LimitedIncome Statement for the year ended 31 December 2012(Expressed in Renminbi Yuan)

Citibank (China) Company LimitedCash Flow Statement for the year ended 31 December 2012(Expressed in Renminbi Yuan)

-

---

4,459,123,1651,892,000

190,659,509

4,651,674,674

(1,746,170,761)

(3,732,326,008)(8,513,923,370)(1,690,760,393)

(7,197,610) (2,719,201,461)(1,444,762,376)(1,132,738,024)

(671,745,392)(897,420,306)

(22,556,245,701)

(17,904,571,027)

16,494,135,837

6,780,294,763209,516,790

1,734,284,0345,119,753,866

12,872,000170,908,408

30,521,765,698

-

- (5,040,275,260)

(349,478,616)--

(1,754,454,271)(1,188,576,641)(1,072,285,865)

(71,264,868)

(9,476,335,521)

21,045,430,177

Note 2012 2011

Net increase in deposits from customers and inter-banksNet increase in borrowings from inter-banks and non-bank financial institutionsCash received from returns on trading financial assetsCash received from disposals of trading financial assetsInterest, fee and commission receiptsRefund of taxesCash received relating to other operating activities

Sub-total of cash inflow from operating activities

Net decrease in placements from inter-banks and customer depositsNet decrease in borrowings from inter-banksand non-bank financial institutionsNet increase in loans and advances to customersNet increase in deposits with central bank and inter-banksCash paid for disposals of trading financial assetsCash paid for acquisition of trading financial assetsInterest, fee and commission paymentsCash paid to and for employeesCash paid for all types of taxesCash paid relating to other operating activities

Sub-total of cash outflows from operating activities

Net cash inflow/(outflow) from operating activities


Cash flows from operating activities

33 34

35(a)

Net interest income Interest income Interest expenses

Net fee and commission income Fee and commission income Fee and commission expenses

Investment incomeGains from changes in fair value Foreign exchange gainsOther operating income

Business taxes and surchargesGeneral and administrative expensesImpairment losses reversal/(charge)Other operating expenses

Add: Non-operating incomeLess: Non-operating expenses

Less: Income tax expense

Net profit for the year


Operating income

Operating expenses

Operating profit

Profit before income tax

Net profit for the year

Other comprehensive income for the year

Total comprehensive income for the year

27

28

2930

3132

33

34

4,629,671,1472,690,207,3684,408,561,165

(1,718,353,797)

497,422,633590,755,963(93,333,330)

908,881,18734,477,582

342,775,514155,906,863

(2,813,040,251)(270,559,583)

(2,547,727,861)6,457,102

(1,209,909)

1,816,630,89615,001,545(3,651,857)

1,827,980,584

(454,767,618)

1,373,212,966

1,373,212,96623,366,677

1,396,579,643

4,387,001,1302,688,781,0344,051,019,157

(1,362,238,123)

418,521,121509,091,069(90,569,948)

868,011,75134,393,086

191,290,257186,003,881

(2,709,831,330)(244,324,698)

(2,233,693,033)(230,198,850)

(1,614,749)

1,677,169,8004,655,628(870,851)

1,680,954,577

(419,858,268)

1,261,096,309

1,261,096,309127,195,922

1,388,292,231

Note 2012 2011

Citibank (China) Company LimitedCash Flow Statement for the year ended 31 December 2012 (continued)(Expressed in Renminbi Yuan)

NotePaid-incapital

Capital reserve

Surplus reserve

General reserve

Retained earnings Total

Citibank (China) Company LimitedStatement of Changes in Equity for the year ended 31 December 2012(Expressed in Renminbi Yuan)

34

24, 26

25, 26

818,441,173

-

-

-

-

486,953,322

1,305,394,495

468,309,977

-

-

-

137,321,296

-

605,631,273

3,970,000,000

-

-

-

-

-

3,970,000,000

10,357,413

-

23,366,677

23,366,677

-

-

33,724,090

3,879,818,703

1,373,212,966

-

1,373,212,966

(137,321,296)

(486,953,322)

4,628,757,051

9,146,927,266

1,373,212,966

23,366,677

1,396,579,643

-

-

10,543,506,909


35 36

Cash received from disposals of investmentsCash received from returns on investments

Sub-total of cash inflows from investing activities

Cash paid for acquisition of investmentsCash paid for acquisition of fixed assets, intangible assets and other long-term assets

Sub-total of cash outflows from investing activities

Net cash (outflow)/inflow from investing activities

Effect of foreign exchange rate changes on cash and cash equivalents

Net increase/(decrease) in cash and cash equivalentsAdd: Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year


Cash flows from investing activities4,796,060,687

510,158,540

5,306,219,227

(9,492,476,412)

(121,278,910)

(9,613,755,322)

(4,307,536,095)

(9,570,523)

16,728,323,55923,815,812,389

40,544,135,948

16,504,579,432766,241,083

17,270,820,515

(5,880,545,393)

(164,782,318)

(6,045,327,711)

11,225,492,804

(282,885,541)

(6,961,963,764)30,777,776,153

23,815,812,389

35(b)

35(c)

Note 2012 2011

Balance at 1 January 2012

Changes in equity for the year(1) Net profit for the year(2) Other comprehensive income

Subtotal of (1) and (2)

(3) Appropriation of profits 1. Appropriation for surplus reserve 2. Appropriation for general reserve

Balance at 31 December 2012

(1)

(2)

(3)

-

-

(4)

NotePaid-incapital

Capital reserve

Surplus reserve

General reserve

Retained earnings Total

Citibank (China) Company LimitedStatement of Changes in Equity for the year ended 31 December 2012 (continued)(Expressed in Renminbi Yuan)

34

24, 26

25, 26

815,047,342

-

-

-

-

3,393,831

818,441,173

342,200,372

-

-

-

126,109,605-

468,309,977

3,970,000,000

-

-

-

-

-

3,970,000,000

(116,838,509)

-

127,195,922

127,195,922

-

-

10,357,413

2,748,225,830

1,261,096,309

-

1,261,096,309

(126,109,605)

(3,393,831)

3,879,818,703

7,758,635,035

1,261,096,309

127,195,922

1,388,292,231

-

-

9,146,927,266


37

Balance at 1 January 2011

Changes in equity for the year(1) Net profit for the year(2) Other comprehensive income

Subtotal of (1) and (2)

(3) Appropriation of profits 1. Appropriation for surplus reserve 2. Appropriation for general reserve

Balance at 31 December 2011

38

01 General information

Citibank (China) Company LimitedNotes to the Financial Statements(Expressed in Renminbi Yuan)

Citibank (China) Company Limited (Citibank China or

the Bank) is a wholly foreign-owned bank incorporated

in Shanghai, the People’s Republic of China (PRC),

established by Citibank, N.A. (Citibank or the Investor).

With the approval of the China Banking Regulatory

Commission (the CBRC) issued on 22 December 2006,

Citibank transformed its Shanghai Branch, Shenzhen

Branch, Guangzhou Branch, Beijing Branch, Tianjin

Branch and Chengdu Branch which were set up in China

during 1988 to 2005 into Citibank China, a wholly

foreign-owned bank invested solely by Citibank.

The Bank obtained a financial license on 20 March 2007 and

a business license (qi du hu zong zi No. 043865) [Municipal

Bureau] issued by the Shanghai Administration of Industry

and Commerce on 29 March 2007, and subsequently

obtained a revised license (No. 310000400507900)

[Municipal Bureau] from the Shanghai Administration of

Industry and Commerce after commencement of operation.

The Bank’s registered capital is Renminbi 3,970,000,000. In

accordance with the Bank’s business license, the Bank has

an undefined operating period from 29 March 2007. The

Bank commenced operation on 2 April 2007 and its scope

of operation includes partial or full scope foreign currency

business and Renminbi business, approved by relevant

regulators.

As at 31 December 2012, the Bank had 13 branches and

40 sub-branches in Shanghai, Shenzhen, Guangzhou,

Beijing, Tianjin, Chengdu, Hangzhou, Dalian, Chongqing,

Guiyang, Nanjing, Changsha, and Wuxi.

02 Basis of financialstatements preparation

These financial statements have been translated into

English from the Bank’s statutory financial statements

issued in the PRC in Chinese.

The financial statements have been prepared on the

basis of going concern.

Statement of compliance

The financial statements have been prepared in

accordance with the requirements of “Accounting

Standards for Business Enterprises—Basic Standard”

and 38 Specific Standards issued by the Ministry

of Finance (MOF) of PRC on 15 February 2006, and

application guidance, bulletins and other relevant

regulations issued subsequently (collectively referred

to as “Accounting Standards for Business Enterprises”

or “CAS”). These financial statements present truly

and completely the financial position of the Bank as

at 31 December 2012, financial performance and the

cash flows of the Bank for the year then ended.

Accounting year

The Bank’s accounting year is from 1 January to 31

December.

Measurement basis

The measurement basis used in the preparation of the

financial statements is historical cost basis except for

the assets and liabilities set out below:

Financial assets and financial liabilities at fair value

through profit or loss (including financial assets or

financial liabilities held for trading) (See Note 3(2)).

Available-for-sale financial assets (See Note 3(2)).

Functional currency and presentation currency

The Bank’s functional currency is Renminbi. These

financial statements are presented in Renminbi.

Functional currency is determined by the Bank on the

basis of the currency in which major income and costs

are denominated and settled.

Citibank (China) Company LimitedNotes to the Financial Statements(Expressed in Renminbi Yuan)

39 40

(1)

(2)

(b)

-

-

(c)

Translation of foreign currencies

When the Bank receives capital in foreign currencies from

investors, the capital is translated to Renminbi at the

spot exchange rate on the date of receipt. Other foreign

currency transactions are, on initial recognition, translated

to Renminbi at the spot exchange rates on the dates of

the transactions. A spot exchange rate is an exchange

rate quoted by the People’s Bank of China (PBOC), the

State Administration of Foreign Exchanges or a cross rate

determined based on quoted exchange rates.

Monetary items denominated in foreign currencies are

translated to Renminbi at the spot exchange rate at the

balance sheet date. The resulting exchange differences,

except for those arising from the principal and interest

of specific foreign currency borrowings for the purpose

of acquisition and construction of qualifying assets,

are recognised in profit or loss. Non-monetary items

denominated in foreign currencies that are measured at

historical cost are translated to Renminbi using the foreign

exchange rate at the transaction date. Non-monetary

items denominated in foreign currencies that are measured

at fair value are translated using the foreign exchange

rate at the date the fair value is determined; the resulting

exchange differences are recognised in profit or loss,

except differences arising from the translation of available-

for-sale financial assets, which are recognised as other

comprehensive income in capital reserve.

Financial instruments

Financial instruments of the Bank include cash on hand

and deposits with central bank, deposits with inter-banks,

placements with inter-banks, trading financial assets,

derivative financial assets, interest receivable, loans

and advances to customers, available-for-sale financial

assets, deposits from inter-banks and non-bank financial

institutions, borrowings from inter-banks, derivative

financial liabilities, financial assets sold under repurchase

agreements, deposits from customers, employee benefits

payable, interest payable and paid-in capital.

and receivables are stated at amortised cost using the

effective interest method.

Held-to-maturity investments

Held-to-maturity investments are non-derivative

financial assets with fixed or determinable payments and

fixed maturity that the Bank has the positive intention

and ability to hold to maturity. Subsequent to initial

recognition, held-to-maturity investments are measured

at amortised cost using the effective interest method.

Available-for-sale financial assets

Available-for-sale financial assets include non-

derivative financial assets that are designated upon initial

recognition as available for sale and other financial assets

which do not fall into any of the above categories.

Available-for-sale investments in equity instruments

whose fair value cannot be measured reliably are measured

at cost subsequent to initial recognition. Other available-

for-sale financial assets are measured at fair value

subsequent to initial recognition and changes therein,

except for impairment losses and foreign exchange gains

and losses from monetary financial assets which are

recognised directly in profit or loss, are recognised as

other comprehensive income in capital reserve. When

an investment is derecognised, the cumulative gain or

loss is reclassified from equity to profit or loss. Dividend

income from the available-for-sale equity instruments

is recognised in profit or loss when the investee declares

the dividends. Interest on available-for-sale financial

assets calculated using the effective interest method is

recognised in profit or loss.

Other financial liabilities

Financial liabilities other than financial liabilities at fair

value through profit or loss are classified as other financial

liabilities.

Recognition and measurement of financial assets and

financial liabilities

A financial asset or financial liability is recognised in the

balance sheet when the Bank becomes a party to the

contractual provisions of a financial instrument.

The Bank classifies financial assets and liabilities into the

following categories at initial recognition based on the

purpose of acquiring assets or assuming liabilities: financial

assets and financial liabilities at fair value through profit or

loss, loans and receivables, held-to-maturity investments,

available-for-sale financial assets and other financial

liabilities.

Financial assets and financial liabilities are measured

initially at fair value. For financial assets and financial

liabilities at fair value through profit or loss, any related

directly attributable transaction costs are charged to profit

or loss; for other categories of financial assets and financial

liabilities, any related directly attributable transaction costs

are included in their initial costs. Subsequent to initial

recognition, financial assets and liabilities are measured as

follows:

Financial assets and financial liabilities at fair value through

profit or loss (including trading financial assets or trading

financial liabilities)

A financial asset or financial liability is classified as at fair

value through profit or loss if it is acquired or incurred

principally for the purpose of selling or repurchasing in

the near term or if it is a derivative. Subsequent to initial

recognition, financial assets and financial liabilities at fair

value through profit or loss are measured at fair value, and

changes therein are recognised in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets

with fixed or determinable payments that are not quoted

in an active market. Subsequent to initial recognition, loans

-

-

-

Among other financial liabilities, financial guarantees

are contracts that require the Bank as the guarantor to

make specified payments to reimburse the beneficiary

of the guarantee (the holder) for a loss the holder incurs

because a specified debtor fails to make payment when

due in accordance with the terms of a debt instrument.

Where the Bank issues a financial guarantee, subsequent

to initial recognition, the guarantee is measured at the

higher of the amount initially recognised less accumulated

amortisation and the amount of a provision determined in

accordance with the principles of contingencies (See Note

3(10)).

Except for the other financial liabilities described above,

subsequent to initial recognition, other financial liabilities

are measured at amortised cost using the effective

interest method.

Offsetting a financial asset against a financial liability

Financial assets and financial liabilities are presented

separately in the balance sheet and are not offset.

However, a financial asset and a financial liability are

offset and the net amount is presented in the balance

sheet when both of the following conditions are satisfied:

the Bank has a legal right to set off the recognised

amounts and the legal right is currently enforceable;

and

the Bank intends either to settle on a net basis, or to

realise the financial asset and settle the financial liability

simultaneously.

Determination of fair value

If there is an active market for a financial asset or financial

liability, the quoted price in the active market is used to

establish the fair value of the financial asset or financial

liability.

03 Significant accountingpolices and estimates

(a)

-

-

Gains or losses arising from the retirement or disposal of

an item of fixed asset are determined as the difference

between the net disposal proceeds and the carrying

amount of the item, and are recognised in profit or loss

on the date of retirement or disposal.

The cost of fixed assets, less its estimated residual value

and accumulated impairment losses, is depreciated

using the straight-line method over its estimated

useful life, unless the fixed assets are classified as held

for sale. The estimated useful lives, residual value rates

and depreciation rates of each class of fixed assets are

as follows:

Useful lives, residual value and depreciation methods

are reviewed at least at each year-end.

Operating lease charges

Rental payments under operating leases are

recognised as part of the cost of another related asset

or as expenses on a straight-line basis over the lease

term. Contingent rental payments are recognised as

expenses in the accounting period in which they are

incurred.

Intangible assets

Intangible assets are stated in the balance sheet

at cost less accumulated amortisation (where the

estimated useful life is finite) and impairment losses

(See Note 3(8)(b)). For an intangible asset with a finite

useful life, its cost less estimated residual value and

accumulated impairment losses is amortised on the

straight-line method over its estimated useful life,

unless it is classified as held for sale. At the balance

41 42

(2)

(d)

-

-

(3)

Financial assets sold under repurchase agreements

Financial assets sold under repurchase agreements are

recorded as the amount actually received when the

transactions occur, and are carried in the balance sheet.

The underlying assets of the repurchase agreements

continue to be recorded in the balance sheet and

measured accordingly.

The difference between the sale and repurchase

consideration is amortised over the period of the

respective transaction using the effective interest

method and included in interest expenses.

Fixed assets

Fixed assets represent the tangible assets held by the

Bank for administrative purposes with useful lives over

one year. Fixed assets are stated in the balance sheet

at cost less accumulated depreciation and impairment

losses (See Note 3(8)(b)).

The cost of a purchased fixed asset comprises the

purchase price, related taxes, and any directly

attributable expenditure for bringing the asset to

working condition for its intended use. The cost of self-

constructed assets includes the cost of materials, direct

labour, capitalised borrowing costs, and any other costs

directly attributable to bringing the asset to working

condition for its intended use.

Where the parts of an item of fixed assets have different

useful lives or provide benefits to the Bank in a different

pattern, thus necessitating use of different depreciation rates

or methods, each part is recognised as a separate fixed asset.

The subsequent costs including the cost of replacing part

of an item of fixed assets, are recognised in the carrying

amount of the item if the criteria to recognised fixed assets

are satisfied, and the carrying amount of the replaced part

is derecognised. The costs of the day-to-day servicing of

fixed assets are recognised in profit or loss as incurred.

(6)

(7)

sheet date, the Bank’s intangible assets consisted of

software, which is amortised over three to five years.

An intangible asset is regarded as having an indefinite

useful life and is not amortised when there is no

foreseeable limit to the period over which the asset is

expected to generate economic benefits for the Bank.

At the balance sheet date, the Bank did not have any

intangible assets with indefinite useful lives.

Impairment of assets

Except for impairment of assets in Note 3(14),

impairment of assets is accounted for using the

following principles:

Impairment of assets

The carrying amounts of financial assets (other than

those at fair value through profit or loss) are reviewed

at each balance sheet date to determine whether

there is objective evidence of impairment. If any such

evidence exists, an impairment loss is recognised.

Loans and receivables and held-to-maturity investments

Held-to-maturity investments are assessed for

impairment on an individual basis. Loans and

receivables are assessed for impairment both on an

individual basis and on a collective group basis.

Where impairment is assessed on an individual basis,

an impairment loss in respect of a loan and receivable

or held-to-maturity investment is calculated as the

excess of its carrying amount over the present value

of its estimated future cash flows (exclusive of future

credit losses that have not been incurred) discounted

at the original effective interest rate. All impairment

losses are recognised in profit or loss.

An assessment is made collectively where loans and

receivables share similar credit risk characteristics (including

(8)

(a)

-

(4)

(5)Asset type

Office and other equipment

Motor vehicles

3-5 years

5 years

0%

0%

20%-33.33%

20%

Estimateduseful life

Residualvalue rate

Depreciationrate

Financial instruments (continued)

If no active market exists for a financial instrument, a

valuation technique is used to establish the fair value.

Valuation techniques include using recent arm’s-length

market transactions between knowledgeable, willing parties,

reference to the current fair value of another instrument

that is substantially the same, discounted cash flow analysis,

option pricing models, and etc. The Bank calibrates its

valuation technique and periodically tests it for validity.

Derecognition of financial assets and financial liabilities

A financial asset is derecognised if the Bank’s contractual

rights to the cash flows from the financial asset expire or if

the Bank transfers substantially all the risks and rewards of

ownership of the financial asset to another party. Where a

transfer of a financial asset in its entirety meets the criteria

of derecognition, the difference between the two amounts

below is recognised in profit or loss:

the carrying amount of the financial asset transferred.

the sum of the consideration received from the transfer

and any cumulative gain or loss that has been recognised

directly in equity.

The Bank derecognises a financial liability (or part of it)

only when the underlying present obligation (or part of it) is

discharged, cancelled or expires.

Cash and Cash equivalents

Cash and cash equivalents comprise cash on hand, non-

restricted balances with central banks, deposits with inter-

banks, placements with inter-banks, and short-term, highly

liquid investments, which are readily convertible into known

amounts of cash and are subject to an insignificant risk of

change in value.


Impairment of assets (continued)

those not individually assessed as impaired), based on their

historical loss experiences, and adjusted by the observable

factors reflecting present economic conditions.

If, in a subsequent period, the amount of an impairment loss

decreases and the decrease can be linked objectively to an

event occurring after the impairment loss was recognised,

the impairment loss is reversed through profit or loss. A

reversal of an impairment loss will not result in the asset’s

carrying amount exceeding what the amortised cost would

have been had no impairment loss been recognised in prior

years.


Available-for-sale financial assets are assessed for

impairment on an individual basis. When an available-

for-sale financial asset is impaired, the cumulative loss

arising from decline in fair value that has been recognised

directly in equity is reclassified to profit or loss even though

the financial asset has not been derecognised. If, after

an impairment has been recognised on an available-for

sale debt instrument, the fair value of the debt instrument

increases in a subsequent period and the increase can

be objectively related to an event occurring after the

impairment loss was recognised, the impairment loss is

reversed through profit or loss.

Impairment of other assets

The carrying amounts of the following assets are reviewed at

each balance sheet date based on the internal and external

sources of information to determine whether there is any

indication of impairment:

fixed assets

intangible assets

If any indication exists that an asset may be impaired, the

asset’s recoverable amount is estimated. In addition, the

43 44

(8)

-

(b)

-

-

(c)

(d)

the present value of expected future cash flows (if

determinable) and zero.

An impairment loss is not reversed in subsequent

periods.

Employee benefits

Employee benefits are all forms of considerations

given and other related expenditures incurred in

exchange for services rendered by employees. Except

for termination benefits, employee benefits are

recognised as a liability in the period in which the

associated services are rendered by employees, with a

corresponding increase in the cost of relevant assets or

expenses in the current period.

Social insurance and housing fund

Pursuant to the relevant laws and regulations of

the PRC, employees of the Bank participate in the

social insurance system established and managed by

government organisations. The Bank makes social

insurance contributions, including contributions to

basic pension insurance, basic medical insurance,

unemployment insurance, work-related injury

insurance, maternity insurance and etc., as well

as contributions to housing fund, at the applicable

benchmarks and rates stipulated by the government

for the benefit of its employees. The social insurance

and housing fund contributions are recognised as part

of the cost of assets or charged to profit or loss on an

accrual basis. Except for the above contributions, the

Bank has no other obligations in this respect.

Share-based payments

Share-based payment transactions in the Bank are

equity-settled share-based payments.

Where the Bank uses shares or other equity

instruments as consideration for services

Bank estimates the recoverable amounts of intangible

assets with indefinite useful lives that have yet to

reach a working condition at least once during each

year irrespective of whether there is any indication of

impairment.

An asset group is the smallest identifiable group of

assets that generates cash inflows and that is largely

independent of the cash inflows from other assets or

asset groups. An asset group is composed of assets

directly related to cash-generation. Identification of

an asset group is based on whether major cash inflows

generated by the asset group are largely independent

of the cash inflows from other assets or asset groups.

In identifying an asset group, the Bank also considers

how management monitors the Bank’s operations and

how management makes decisions about continuing or

disposing of the Bank’s assets.

The recoverable amount of an asset (or asset group or

set of asset groups) is the higher of its fair value less

costs to sell and the present value of its expected future

cash flows. An asset’s fair value less costs to sell is the

amount determined by the price of a sale agreement

in an arm’s-length transaction less the costs directly

attributable to the asset’s disposal. The present value

of an asset’s expected future cash flows is determined

by discounting the future cash flows estimated to be

derived from continuing use of the asset and from

its ultimate disposal to their present value using an

appropriate pre-tax discount rate.

An impairment loss is recognised if the carrying amount

of an asset exceeds its recoverable amount. Impairment

losses are recognised in profit or loss. A provision for

impairment of the asset is recognised accordingly.

Impairment losses related to an asset group or a set of

asset groups reduce the carrying amount of the assets

in the asset group or set of asset groups on a pro rata

basis. However, the carrying amount of an impaired

asset will not be lower than the greastest amount of its

individual fair value less costs to sell (if determinable),

(9)

(a)

(b)

received from employees, the payment is measured

at the fair value of the equity instruments granted

to the employees. If the equity instruments granted

to employees vest immediately, the fair value of

the equity instruments granted is recognised on

its grant date as a relevant cost or expense with

a corresponding increase in capital reserve. If the

equity instruments granted to employees do not

vest until the completion of services for a vesting

period, or until the achievement of a specified

performance condition, the Bank, at each balance

sheet date during the vesting period, makes the

best estimation according to the latest information

of the number of employees who are granted to

vest and revises the number of equity instruments

expected to vest. Based on its best estimation,

the Bank recognises the services received for

the current period as related costs or expenses,

with a corresponding increase in capital reserve,

at an amount equal to the fair value of the equity

instruments at the grant date.

For share-based payment transactions among entities

within the group of companies (comprising the ultimate

parent of the Bank and all of its subsidiaries), the Bank

receiving services recognises the transaction as an

equity settled share-based payment transaction when

the Bank has no obligation to settle the transaction.

Annuity plan

The Bank provides an annuity plan to the eligible

employees. The Bank makes annuity contributions in

proportion to its employees’ gross salaries, which are

expensed in profit or loss when the contributions are

made.

Termination benefits

When the Bank terminates the employment

relationship with employees before the employment

contracts expire, or provides compensation as an


45 46

(9)

(10)

(11)

(14)

The effective interest method is a method of calculating

the amortised cost of financial assets and liabilities and

of allocating the interest income and interest expense

over the relevant period. The effective interest rate is

the rate that exactly discounts estimated future cash

payments or receipts through the expected life of the

financial instrument, or, when appropriate, a shorter

period, to the net carrying amount of the financial

instrument. When calculating the effective interest

rate, the Bank estimates cash flows considering all

the contractual terms of the financial instrument (for

example, prepayment, call and similar options) but

does not consider future credit losses. The calculation

includes all fees and points paid or received between

parties to the contract that are an integral part of the

effective interest rate, transaction costs and all other

premiums or discounts.

Interest on the impaired financial assets is recognised

using the rate of interest used to discount future

cash flows for the purpose of measuring the related

impairment loss.

Fee and commission income

Fee and commission income is recognised in the

income statement when the corresponding service

is provided.

Origination or commitment fees received by the Bank

which result in the creation or acquisition of a financial

asset are deferred and recognised as an adjustment to

the effective interest rate. If the commitment expires

without the Bank making a loan, the fee is recognised

as revenue on expiry.

Government grants

Government grants are transfers of monetary assets

or non-monetary assets from the government to

the Bank at no consideration except for any capital

contribution from the government as a shareholder

entrusted loan agreements with customers, whereby the

customers provide funding (entrusted funds) to the Bank,

and the Bank grants loans to third parties (entrusted loans)

at the instruction of the customers. As the Bank does not

assume the risks and rewards of the entrusted loans and

the corresponding entrusted funds, entrusted loans and

funds are recorded as off-balance sheet items at their

principal amounts and no impairment assessments are

made for these entrusted loans.

Wealth management business refers to agreements

between the Bank and its customers to raise funds

from them for investment in the assets of the Bank or

third parties. In this business, the Bank performs its

management duties and collects corresponding fees in

accordance with the relevant agreements. As the Bank

does not assume the risks and rewards of the funds and

investments, the funds and investments are recorded as

off-balance sheet items.

Revenue recognition

Revenue is the gross inflow of economic benefits

in the periods arising in the course of the Bank’s

ordinary activities when the inflows result in increase

in shareholders’ equity, other than increases relating to

contributions from shareholders. Revenue is recognised

in profit or loss when it is probable that the economic

benefits will flow to the Bank, the revenue and costs

can be measured reliably and the following respective

conditions are met:

Interest income

Interest income arising from the use by others of entity

assets is recognised in the income statement based on

the duration and the effective interest rate. Interest

income includes the amortisation of any discount or

premium or differences between the initial carrying

amount of an interest-bearing instrument and its

amount at maturity calculated on an effective interest

rate basis.

(b)

(13)

of the Bank. Special funds such as investment grants

allocated by the government, if clearly defined in

official documents as part of “capital reserve” are

dealt with as capital contributions, and not regarded

as government grants.

A government grant is recognised when there is

reasonable assurance that the grant will be received

and that the Bank will comply with the conditions

associated with the grant.

If a government grant is in the form of a transfer of

a monetary asset, it is measured at the amount that

is received or receivable. If a government grant is in

the form of a transfer of a non-monetary asset, it is

measured at its fair value.

A government grant related to an asset is recognised

initially as deferred income and amortised to profit or

loss on a straight-line basis over the useful life of the

asset. A grant that compensates the Bank for expenses

to be incurred in the subsequent periods is recognised

initially as deferred income and recognised in profit

or loss in the same periods in which the expenses

are recognised. A grant that compensates the Bank

for expenses incurred is recognised in profit or loss

immediately.

Income tax

Current tax and deferred tax are recognised in profit or

loss except to the extent that they relate to a business

combination or items recognised directly in equity

(including other comprehensive income).

Current tax is the expected tax payable calculated at the

applicable tax rate on taxable income for the year, plus

any adjustment to tax payable in respect of previous

years.

At the balance sheet date, where a taxpayer has the

statutory right and intends to settle on a net amount

Employee benefits (continued)

offer to encourage employees to accept voluntary

redundancy, a provision for the termination benefits to be

provided is recognised in profit or loss when both of the

following conditions are satisfied:

The Bank has a formal plan for the termination of employment

or has made an offer to employees for voluntary redundancy,

which will be implemented shortly;

The Bank is not allowed to withdraw from termination plan

or redundancy offer unilaterally.

Provisions and contingent liabilities

A provision is recognised if, as a result of a past event, the

Bank has a present obligation that can be estimated reliably,

and where it is probable that an outflow of economic

benefits will be required to settle the obligation. Where the

effect of the time value of money is material, provisions are

determined by discounting the expected future cash flows.

In terms of a possible obligation resulting from a past

transaction or event, whose existence will only be confirmed

by the occurrence or non-occurrence of uncertain future

events or a present obligation resulting from a past

transaction or event, where it is not probable that the

settlement of the above obligation will cause an outflow of

economic benefits, or the amount of the outflow can not

be estimated reliably, the possible or present obligation is

disclosed as a contingent liability.

Fiduciary activities

The Bank acts in a fiduciary capacity as a custodian, trustee

or an agent for its customers. Assets held by the Bank and

the related undertakings to return such assets to customers

are excluded from the financial statements as the risks and

rewards of the assets reside with the customers.

Entrusted lending is the business where the Bank enters into

(12)

(a)


47 48

(14)

-

(17)Related parties

If a party has the power to control, jointly control or

exercise significant influence over another party, or

vice versa, or where two or more parties are subject

to common control or joint control from another party,

they are considered to be related parties. Related

parties may be individuals or enterprises. Enterprises

with which the Bank is under common control only

from the State and that have no other related-party

relationships are not regarded as related parties of the

Bank. The Bank’s related parties include, but are not

limited to:

the Bank’s parent;

the Bank’s subsidiaries;

enterprises that are controlled by the Bank’s parent;

investors that have joint control or exercise significant

influence over the Bank;

enterprises or individuals if a party has control or joint

control over both the enterprises or individuals and the

Bank;

joint ventures of the Bank, including subsidiaries of

joint ventures;

associates of the Bank, including subsidiaries of

associates;

principal individual investors and close family members

of such individuals;

key management personnel of the Bank and close

family members of such individuals;

key management personnel of the Bank’s parent and

close family members of such individuals;

other enterprises that are controlled or jointly

controlled by principal individual investors or key

management personnel of the Bank, or close family

members of such individuals; and

an annuity plan for the benefit of employees of the

Bank.

they relate to income taxes levied by the same tax

authority on either:

the same taxable entity; or

different taxable entities which either to intend to

settle the current tax liabilities and assets on a net

basis, or to realise the assets and settle the liabilities

simultaneously, in each future period in which significant

amounts of deferred tax liabilities or deferred tax assets

are expected to be settled or recovered.

Profit distributions to owners

Distributions of profit proposed in the profit appropriation

plan to be authorised by the Board of Directors (BOD) and

declared after the balance sheet date are not recognised

as a liability at the balance sheet date but disclosed in

the notes separately.

(16)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

Segment reporting

Reportable segments are identified based on operating

segments which are determined based on the structure

of the Bank’s internal organisation, management

requirements and internal reporting system. An

operating segment is a component of the Bank that

engages in business activities from which it may

earn revenues and incur expenses, whose financial

performance are regularly reviewed by the Bank’s

management to make decisions about recources to be

allocated to the segment and assess its performance,

and for which financial information regarding financial

position, financial performance and cash flows is

available.

Two or more operating segments may be aggregated

into a single operating segment if the segments have

same or similar economic characteristics and are

similar in respect of the nature of each products and

services, the nature of production processes, the type

or class of customers for the products and services,

the methods used to distribute the products or

provide the services, and the nature of the regulatory

environment.

Inter-segment revenues are measured on the basis

of actual transaction price for such transactions for

segment reporting, and segment accounting policies

are consistent with those for the Bank’s financial

statement.

Income tax (continued)

basis, or simultaneously realise the assets and settle the

liabilities, the current tax assets and liabilities are presented as

post-offset net amounts.

Deferred tax assets and liabilities arise from deductible

and taxable temporary differences respectively, being the

differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their tax bases,

which include the deductible losses and tax credits carried

forward to subsequent periods. Deferred tax assets are

recognised to the extent that it is probable that future taxable

profits will be available against which deductible temporary

differences can be utilised.

Deferred tax is not recognised for temporary differences

arising from the initial recognition of assets or liabilities in a

transaction that is not a business combination and that affects

neither accounting profit nor taxable profit (or tax loss).

At the balance sheet date, the amount of deferred tax

recognised is measured based on the expected manner of

recovery or settlement of the carrying amount of the assets

and liabilities, using tax rates that are expected to be applied in

the period when the asset is recovered or the liability is settled

in accordance with tax laws.

The carrying amount of a deferred tax asset is reviewed at

each balance sheet date. The carrying amount of a deferred

tax asset is reduced to the extent that it is no longer

probable that sufficient taxable profits will be available to

allow the benefit of the deferred tax asset to be utilised.

Such reduction is reversed to the extent that it becomes

probable that sufficient taxable profits will be available.

At the balance sheet date, deferred tax assets and liabilities

are offset if all the following conditions are met:

the taxable entity has a legally enforceable right to offset

current tax liabilities and assets, and

-

-

-

(15)


49 50

(18)

(a)

Impairment of fixed assets and intangible assets

As described in Note 3(8)(b), fixed assets and intangible

assets are reviewed at each balance sheet date to

determine whether the carrying amount exceeds the

recoverable amount of the assets. If any such indication

exists, related assets are regarded as impaired and

impairment losses recognised accordingly.

The recoverable amount of an asset (asset group) is the

higher of its net selling price and the present value of its

expected future cash flows. Since a market price for the

asset (or the asset group) cannot be obtained reliably,

the fair value of the asset cannot be estimated reliably.

In assessing value in use, significant judgements are

exercised over the asset’s production, selling price,

related operating expenses and discount rate to

calculate the present value. All relevant materials which

can be obtained are used to estimate the recoverable

amount, including an estimation of the production,

selling price and related operating expenses based on

reasonable and supportable assumptions.

Fair value of financial instruments

The fair values for financial instruments that lack an

active market to provide quoted prices are established

using valuation techniques. These techniques include

using recent arm’s-length market transactions between

knowledgeable, willing parties; reference to the current

fair value of another instrument that is substantially

the same; discounted cash flow analysis; and option

pricing models. The Bank has established a process

to ensure that valuation techniques are constructed

by qualified personnel and are validated and reviewed

by independent personnel. Valuation techniques are

certified before implementation and are calibrated to

ensure that outputs reflect actual market conditions.

Valuation models established by the Bank make the

maximum use of market inputs and rely as little as

possible on Bank-specific data. However, it should be

noted that some inputs, such as credit and counterparty

risk, and risk correlations, require management

estimates. Management estimates and assumptions are

reviewed periodically and are adjusted if necessary.

Income tax

Determining income tax provisions involves judgement

on the future tax treatment of certain transactions.

The Bank carefully evaluates the tax implications of

transactions and sets up tax provisions accordingly.

The tax treatment of such transactions is reconsidered

periodically to take into account all changes in tax

legislation. Deferred tax assets are recognised for tax

losses not yet used and deductible temporary differences.

As deferred tax assets can only be recognised to the

extent that it is probable that future taxable profits will

be available against which the deductible temporary

differences can be utilised, management’s judgement

is required to assess the probability of future taxable

profits. Management’s assessment is constantly reviewed

and additional deferred tax assets are recognised if it

becomes probable that future taxable profits will allow

the deferred tax assets to be recovered.

(d)

Depreciation and amortization of assets such as fixed

assets, intangible assets

As described in Note 3(5) and (7), fixed assets and

intangible assets are depreciated and amortised over

their useful lives after taking into account residual value.

The useful lives of the assets are regularly reviewed

to determine the depreciation and amortisation costs

charged in each reporting period. The useful lives of the

assets are determined based on historical experiences

of similar assets and estimated technical changes.

If there have been significant changes in the factors

used to determine the depreciation or amortisation,

the rate of depreciation or amortisation is revised

prospectively.

Significant accounting estimates and judgments

The preparation of financial statements requires

management to make estimates and assumptions that affect

the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. Actual

results may differ from these estimates. Estimates and

underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the

period in which the estimate is revised and in any future

periods affected.

Impairment losses on loans and advances

The Bank reviews the portfolios of loans and advances

periodically to assess whether impairment losses exist and

if they exist, an impairment loss is recognised. Objective

evidence for impairment includes observable data indicating

that there is a measurable decrease in the estimated future

cash flows identified with an individual loan. It also includes

observable data indicating adverse changes in the repayment

status of borrowers or issuers in the assets portfolio or

national or local economic conditions that correlate with

defaults on the assets in the portfolio. The impairment loss

for a loan that is individually assessed for impairment is

the decrease in the estimated discounted future cash flow

of that asset. When loans and advances are collectively

assessed for impairment, the estimate is based on historical

loss experience for assets with credit risk characteristics

similar to the loans and advances. Historical loss experience

is adjusted on the basis of the relevant observable data that

reflect current economic conditions. Management reviews

the methodology and assumptions used in estimating future

cash flows regularly to reduce any difference between

estimated and actual losses.

(b)

(c)

(e)


04 Taxation

(a)

(b)

(c)

The major types of taxes applicable to the Bank and their tax

rates are as follows:

Business tax

Business tax is charged at 5% on taxable income.

Income tax

The statutory income tax rate applicable to the Bank is

25%. The applicable income tax rate for the year is the

statutory rate.

Taxes payable

Income tax

Business taxes and surcharges

Withholding taxes

Total

85,827,782

53,675,185

41,007,134

180,510,101

113,376,294

60,519,995

36,170,103

210,066,392

2012 2011

(a)

(b)

05 Cash on hand and deposits with central bank

Cash on hand

Statutory deposit reserves

with central bank

Surplus deposit reserves

with central bank

Total

275,527,540

15,638,323,487

14,723,671,393

30,637,522,420

(a)

(b)

295,435,455

15,288,844,871

10,480,851,413

26,065,131,739

2012Note 2011

The Bank places statutory deposit reserves with

the PBOC in accordance with the Regulation of the

PRC on the Administration of Foreign-funded Banks

(Administrative Regulation) and relevant regulations.

The statutory deposit reserves are not available for use

in the Bank’s daily business. As at the balance sheet

date, the statutory deposit reserve rates applicable to

the Bank were as follows:

The surplus deposit reserves are maintained with the

PBOC mainly for settlement purposes.

Renminbi deposits

Foreign currency deposits

18%

5%

19%

5%

2012 2011

08 Trading financial assets

51 52

06 Deposits with inter-banks

07 Placements with inter-banks

As at 31 December 2012, management considered that

no impairment provision of deposits with inter-banks was

necessary (2011: nil).


no impairment provision of placements with inter-banks

was necessary (2011: nil).

Deposits with inter-banks

− in Mainland China

− outside Mainland China

Subtotal

Deposits with non-bank financial institutions



Subtotal

Total

Placements with inter-banks



Subtotal

Placements with non-bank financial institutions


Subtotal

Total

1,728,623,830

11,006,328,825

12,734,952,655

51,115,871

16,619

51,132,490

12,786,085,145

12,063,459,320

6,986,228,949

19,049,688,269

4,262,000,000

4,262,000,000

23,311,688,269

1,310,825,707

4,183,126,254

5,493,951,961

46,281,766

-

46,281,766

5,540,233,727

9,155,615,227

2,691,925,925

11,847,541,152

3,993,337,859

3,993,337,859

15,840,879,011

2012

2012

2011

2011

Bond investments held for trading 3,512,945,036 8,212,658,354

2012

2012

2011

2011

The bonds investments held for trading are issued by the

following institutions and stated at fair value:

2,003,378,700

1,098,233,820

290,533,340

79,821,200

40,977,976

3,512,945,036

6,356,109,440

1,023,975,780

292,096,020

119,248,320

421,228,794

8,212,658,354

The PBOC

Policy banks

Inter-banks and non-bank institutions

outside Mainland China

Joint-stock enterprises

The MOF

Total

09 Derivatives financial instruments

Interest rate derivatives: Interest rate swap Interest rate option

Currency derivatives: Currency option Forward

Other derivatives: Commodity swap Equity swap

Total

139,697,972,546

2,527,647,336

142,225,619,882

11,558,446,498

201,399,941,349

212,958,387,847

907,133,166

235,458,754

1,142,591,920

356,326,599,649

168,525,230,157

588,312,074

169,113,542,231

9,051,243,218

143,326,335,707

152,377,578,925

732,204,974

118,445,368

850,650,342

322,341,771,498

456,618,654

506,401

457,125,055

26,068,871

1,194,899,631

1,220,968,502

9,608,513

2,353,696

11,962,209

1,690,055,766

881,273,027

1,435,481

882,708,508

66,608,645

1,318,306,642

1,384,915,287

27,569,590

2,165,243

29,734,833

2,297,358,628

421,765,687

214,982

421,980,669

24,426,965

972,184,204

996,611,169

9,608,513

2,353,696

11,962,209

1,430,554,047

804,395,829

-

804,395,829

61,403,717

1,173,570,168

1,234,973,885

27,569,590

2,165,243

29,734,833

2,069,104,547

2012 2011

NotionalAmounts

Total TotalAssets AssetsLiabilities Liabilities

NotionalAmountsFair Value Fair Value

The notional amounts of the derivatives indicate the volume of transactions outstanding at the balance sheet date; they do

not represent the amounts at risk.

Analysed by nature(a)

10 Loans and advances to customers

Corporate loans and advances- loans- discounted bills

Personal loans and advances- residential mortgages- personal consumer loans- credit cards loans

Gross loans and advances

Less: Allowances for impairment losses

Net loans and advances to customers

32,078,445,86419,254,643,950

10,543,940,3461,074,259,688

500,395,636

63,451,685,484

(501,175,803)

62,950,509,681

33,351,495,94714,099,105,688

8,204,370,7221,018,389,423

-

56,673,361,780

(512,879,366)

56,160,482,414

2012Note 2011

(f)

53 54

Analysed by industry sector

* The percentages of these items are less than 1%.

(b)

10 Loans and advances to customers (continued)

Manufacturing Wholesale and retail trade Leasing and commercial servicesTransportation, storage and postal servicesMiningHotel and restaurantConstructionTelecommunications, IT services and softwareReal estateFisheries and agricultureProduction and supply of electricity, gas and waterFinancial servicesOthers

SubtotalDiscounted billsPersonal loans and advances




18,218,312,8586,248,740,4583,512,607,0451,364,332,257

952,825,000701,306,506404,712,940320,930,018137,254,72394,289,11416,631,433

874106,502,638

32,078,445,86419,254,643,95012,118,595,670

63,451,685,484

(501,175,803)

62,950,509,681

29%10%5%2%2%1%1%1%

*0%*0%*0%*0%*0%

51%30%19%

100%

20112012

(f)

Note Amount %

20,380,097,0546,457,130,6423,425,897,111

217,928,10757,561,306

867,624,866565,164,663351,917,283484,444,445200,333,10053,410,28613,713,096

276,273,988

33,351,495,94714,099,105,6889,222,760,145

56,673,361,780

(512,879,366)

56,160,482,414

36%11%6%

*0%*0%2%1%1%1%

*0%*0%*0%1%

59%25%16%

100%

Amount %

Analysed by geographical sector

Analysed by security type

Yangtze River DeltaPearl River DeltaBohai Rim Middle and western regionNortheastern region




Unsecured loansGuaranteed loansSecured loans- by tangible assets other than monetary assets- by monetary assets




34,827,058,10613,655,069,59012,355,518,733

2,271,763,844342,275,211

63,451,685,484

(501,175,803)

62,950,509,681

30,802,918,12314,207,343,97218,441,423,389

11,966,617,1266,474,806,263

63,451,685,484

(501,175,803)

62,950,509,681

55%21%19%

4%1%

100%

2012

2012

(f)

Note

(f)

Note Amount %

(c)

(d)

2011

2011

35,798,920,2837,960,758,931

10,389,161,7472,211,589,245

312,931,574

56,673,361,780

(512,879,366)

56,160,482,414

29,906,884,06712,575,319,16914,191,158,544

9,851,503,4284,339,655,116

56,673,361,780

(512,879,366)

56,160,482,414

63%14%18%

4%1%

100%

Amount %

55 56

Overdue loans analysed by overdue period

Overdue loans represent loans and advances to customers,

of which the whole or part of the principal or interest was

overdue for more than 1 day.

Unsecured loansGuaranteed loansSecured loans- by tangible assets other than monetory assets

Total

Unsecured loansGuaranteed loansSecured loans- by tangible assets other than monetory assets

Total

25,866,44410,141,58239,941,609

39,941,609

75,949,635

15,739,0946,083,180

92,040,868

92,040,868

113,863,142

2,422,80925,814,41146,291,731

46,291,731

74,528,951

1,360,237-

3,768,731

3,768,731

5,128,968

2012

Withinthree months

Withinthree months

Between three monthsand one year

Between three monthsand one year

Between one year and three years

Over three years

Between one year and three years

Over three years

1,756,5291,644,856

34,181,193

34,181,193

37,582,578

812,36534,553,257

128,922,186

128,922,186

164,287,808

320,99528,780,910

117,000,000

117,000,000

146,101,905

---

-

-

Total

Total

30,366,77766,381,759

237,414,533

237,414,533

334,163,069

17,911,69640,636,437

224,731,785

224,731,785

283,279,918

2011

(e) Movements of allowances for impairment losses

Restructured loans and advances to customers

Restructured loans and advances to customers

As at 1 January(Reversal)/charge for the yearAmounts written-offEffect of discountingExchange adjustments

As at 31 December

As at 1 JanuaryCharge for the yearAmounts written-offEffect of discountingExchange differences

As at 31 December

339,595,219(82,118,707)

--

688,934

258,165,446

158,427,195182,514,620

--

(1,346,596)

339,595,219

173,284,14775,661,605(5,392,347)

(215,143)(327,905)

243,010,357

164,400,86519,427,532

(10,031,180)(142,439)(370,631)

173,284,147

131,854,773

Collectiveassessment

Collectiveassessment

Individualassessment

Individualassessment

2012

(f)

(g)

2012

Total

512,879,366(6,457,102)(5,392,347)

(215,143)361,029

501,175,803

322,828,060201,942,152(10,031,180)

(142,439)(1,717,227)

512,879,366

133,156,147

2011

2011

Total

As at 31 December 2012, the Bank’s loan provision ratio

was 0.79% (2011: 0.90%), the provision coverage ratio was

184.69% (2011: 197.10%).

Loan provision ratio represents ratio of loan loss provision

over loans and advances to customers at the balance sheet

date. Provision coverage ratio represents ratio of loan loss

provision over non-performing loans. According to the

five-tier risk classification in CBRC’s Notice on Distributing

Guidelines on Loan Risk classification (Yin Jian Fa [2007] No.

54), non-performing loans represent loans and advances

classified as substandard, doubtful and loss.

57 58

10 Loans and advances to customers (continued)

The available-for-sale bond investments are issued by the

following institutions and stated at fair value:

As at 31 December 2012, management considered that no

impairment provision of available-for-sale financial assets

was necessary (2011: nil).


no impairment provision of fixed assets was necessary

(2011: nil).

11 Available-for-sale financial assets 12 Fixed Assets

Bond investments

The PBOC

The MOF

Total

16,135,172,130

15,407,952,700

727,219,430

16,135,172,130

11,412,519,480

11,362,633,080

49,886,400

11,412,519,480

2012 2011

2012 2011

Cost

As at 1 January 2012

Additions

Disposals

As at 31 December 2012

Less: Accumulated depreciation


Charge for the year

Written back on disposal


Carrying amount



347,184,826

34,865,455

(21,861,797)

360,188,484

(273,438,967)

(34,777,270)

21,761,369

(286,454,868)

73,733,616

73,745,859

3,995,159

-

-

3,995,159

(3,218,636)

(374,575)

-

(3,593,211)

401,948

776,523

351,179,985

34,865,455

(21,861,797)

364,183,643

(276,657,603)

(35,151,845)

21,761,369

(290,048,079)

74,135,564

74,522,382

Office & otherequipment

Motor vehicles Total


no impairment provision of intangible assets was neces-

sary (2011: nil).

Cost


Additions

Disposals


Less: Accumulated amortisation


Charge for the year

Written back on disposal


Carrying amounts



13 Intangible assets

Software

134,709,743

45,740,385

(11,682,720)

168,767,408

(80,339,768)

(17,492,435)

9,625,798

(88,206,405)

80,561,003

54,369,975

59 60

As at 31 December 2012 and 31 December 2011, the

counterparties of the above financial assets sold under

repurchase agreements were the PBOC and domestic banks

in Mainland China.

At the balance sheet dates, the deferred tax assets and

liabilities on the balance sheet, after offsetting each

other, were as follows:

Fair value adjustments for derivativesFair value adjustments foravailable-for-sale financial assetsFair value adjustments for trading financial assetsAdjustments for accrued expensesOthers

Total

Deferred tax assets

Deferred tax liabilities

Total

(57,073,994)

4,019,706

19,694

102,673,98225,177,318

74,816,706

(7,801,437)

-

(3,352)

46,026,235(9,944,633)

28,276,813

163,087,638(67,802,516)

95,285,122

-

(6,946,788)

-

-(861,609)

(7,808,397)

Deferred tax assets/(liabilities)

As at 1January 2012

Current yearincrease/decrease

charged toprofit or loss

Current yearincrease/decrease

recognisedin equity

As at 31December 2012

(64,875,431)

(2,927,082)

16,342

148,700,21714,371,076

95,285,122

143,146,903(68,330,197)

74,816,706

20112012

14 Deferred tax assets

-

6,751,057,744

6,751,057,744

17 Borrowings from inter-banks

Borrowings from inter-banks

- in Mainland China

- outside Mainland China

Total

945,135,000

4,210,378,799

5,155,513,799

2012 2011

7,430,000,000

490,000,000

-

7,920,000,000

18 Financial assets sold under repurchase agreements

16 Deposits from inter-banks and non-bank financial institutions

PBOC notes

Government bonds

Inter-banks bonds

in Mainland China

Total

286,500,000

-

237,500,000

524,000,000

2012 2011

15 Other assets

Settlement accounts

Leasehold improvements

Deferred expenses

Refundable deposits

Receivables

Others

Subtotal

Less: provisions for

impairment losses

Total

Deposits from inter-banks

- in Mainland China


Subtotal

Deposits from non-bank

Financial institutions

- in Mainland China


Subtotal

Total

231,756,983

158,282,164

146,490,760

91,804,819

2,555,633

213,354

631,103,713

(28,187,636)

602,916,077

160,902,318

6,109,029,283

6,269,931,601

3,165,698,244

2,872,952,825

6,038,651,069

12,308,582,670

824,826,232

149,846,921

120,064,117

88,560,745

1,642,144

213,919

1,185,154,078

(28,256,698)

1,156,897,380

9,196,027

4,593,605,002

4,602,801,029

567,362,839

7,114,373,962

7,681,736,801

12,284,537,830

2012

2012

2011

2011

61 62

Current deposits- corporate customers- personal customers

Subtotal of current deposits

Time deposits (including call deposits)- corporate customers- personal customers

Subtotal of time deposits

Other Deposits- inward and outward remittances

Total

20112012

42,099,405,1023,846,897,420

45,946,302,522

33,372,028,6497,679,782,851

41,051,811,500

97,892,361

87,096,006,383

56,480,143,4724,295,546,488

60,775,689,960

33,648,763,4029,085,025,373

42,733,788,775

56,618,645

103,566,097,380

19 Deposits from customers 20 Employee benefits payable

21 Other liabilities

Salaries, bonuses and allowancesSocial insurances Medical insurance premium Pension insurance premium Annuity premium Unemployment insurance premium Work injury insurance premium Maternity insurance premiumHousing fundOthers

Total

Cash collaterals Settlement accountsAccrued expenses Deferred incomeOthers

Total

171,027,4908,572,7042,305,1124,358,3311,350,483

319,26793,469

146,042832,019

1,346,076

181,778,289

1,027,220,288128,963,658

33,601,37364,469,61222,023,472

4,963,1731,450,0632,455,965

28,796,99544,893,535

1,229,874,476

5,692,041,8392,942,486,128

208,305,475154,917,452155,471,543

9,153,222,437

Balance at theend of the year

2011

Accrued during

the yearPaid during

the year

Balance at thebeginning

of the yearNote

2012

(990,552,463)(122,132,981)

(32,488,053)(60,773,683)(20,332,298)

(4,731,056)(1,418,541)(2,389,350)

(25,086,758)(45,629,451)

(1,183,401,653)

207,695,31515,403,381

3,418,4328,054,2603,041,657

551,384124,991212,657

4,542,256610,160

228,251,112

3,948,601,0486,208,493,287

120,363,308118,848,989130,159,072

10,526,465,704

(i)

Pursuant to the relevant laws and regulations of the PRC, employees of the Bank participate in the social insurance system

established and managed by government organisations. The Bank makes social insurance contributions to the local social

insurance entities at the applicable base salary and rates stipulated by the government for the benefit of its employees.

Besides, the Bank provides an annuity plan to the eligible employees. The Bank makes annuity contributions in proportion

to its employees’ gross salaries, which are expensed in profit or loss when the contributions are made.

(i)

63 64

As at 31 December, the Bank’s registered capital and paid-in capital are as follows:

Citibank

Other capital reserve- Available-for-sale financial assets (“AFS”) - Equity-settled share-based payments- Deferred tax - AFS - Share-based payments

Total

3,970,000,000 100% 3,970,000,000

1,037,850

-

--

1,037,850

11,708,330

33,400,541

(2,927,082)(8,457,699)

33,724,090

26,749,300

-

--

26,749,300

-

3,387,924

(6,946,788)(861,609)

(4,420,473)

(16,078,820)

30,012,617

4,019,706(7,596,090)

10,357,413

2011

2012

2012

Amount PercentageRegistered capital and paid-in capital Amount Percentage

100%

22 Paid-in capital

23 Capital reserve

Balance at the beginning of the year

Changes duringthe year

Fair valueadjustments

Transfer to profit or less

Balance at the end of the year

Capital contributions in foreign currency were translated into Renminbi at the exchange rate at the date of the contributions received as quoted by the PBOC.

Certified Public Accountants have verified the above paid-in capital and issued related capital verification reports.

The statutory surplus reserve is as follows:

25 General reserve

Before 1 July 2012, according to the Notice on the Admin-

istrative Measures for the Withdrawal of Reserves for Non-

performing Debts of Financial Enterprises (Cai Jin[2005]

No.49) and the Notice on the Relevant Issues concerning

the Withdrawal of Reserves for Non-performing Debts (Cai

Jin[2005]No.90) issued by the MOF on 17 May 2005 and 5

September 2005, respectively, the Bank appropriated from

net profits the amounts of general reserves as a component

of equity. The Bank appropriated an amount of not less than

1% of its risk-bearing assets at each year end as general reserve.

As at 31 December 2011, the Bank had appropriated an

amount of Renminbi 818,441,173 as general reserve ac-

cording to the above requirements.

From 1 July 2012, according to the Notice on Administrative Meas-

ures on Accrual of Provisions by Financial Enterprises (Cai Jin[2012]

No.20) issued by the MOF on 30 March 2012, a financial enterprise

shall appropriate from net profits an amount of not less than 1.5% of

its risk-bearing assets at the year end as general reserve. Where the

general provision ratio cannot reach 1.5% immediately, it is accept-

able to reach the ratio gradually over a period of not more than five

years in principle. The Bank will appropriate the general reserve in

according with the requirements of Cai Jin[2012]No.20.

24 Surplus reserve


Profit appropriation (Note 26(a))



Profit appropriation (Note 26)


468,309,977

137,321,296

605,631,273

818,441,173

486,953,322

1,305,394,495

Appropriation to general reserve in accordance withthe regulations issued by the MOF

2012

2012

(a) Appropriations to surplus reserve

The Bank appropriated an amount of Renminbi 137,321,296,

representing 10% of profit after tax for the year as surplus

reserve in accordance with relevant regulations and its ar-

ticles.

26 Profit appropriation

Appropriations to

surplus reserve

Appropriations to

general reserve

137,321,296

486,953,322

624,274,618

(a)

25

126,109,605

3,393,831

129,503,436

2012Note 2011

65 66

27 Net interest income

Interest income:Loans and advances to customers- corporate loans and advances- discounted billspersonal loans and advancesPlacements with inter-banksDeposits with central bankDeposits with inter-banksOthers

Total interest income

Include: interest income from impaired financial assets

Interest expense:Deposits from customersDeposits from inter-banks and non-bank financial institutions Financial assets sold under repurchase agreementsBorrowings from inter-banks

Total interest expense

Net interest income

3,356,128,9381,788,421,5071,019,309,699

548,397,732702,846,294292,640,76846,726,23210,218,933

4,408,561,165

215,143

(1,331,619,085)(221,540,695)(118,270,912)(46,923,105)

(1,718,353,797)

2,690,207,368

2,818,427,3351,596,397,419

850,929,463371,100,453890,615,440264,842,14771,757,9055,376,330

4,051,019,157

142,439

(1,234,326,118)(73,874,585)(18,540,770)(35,496,650)

(1,362,238,123)

2,688,781,034

2012 2011

Fee and commission income:Commission on trust and custodian activitiesCredit commitment feesFees for agency servicesTrade finance and guarantee services fees Settlement and clearance feesBank card feesOthers

Total fee and commission income

Fee and commission expenses:Brokerage feesInter-bank transaction feesTrust and custodian feesOthers

Total fee and commission expenses

Net fee and commission income

268,419,75795,819,31478,703,86753,567,62953,086,93410,296,86030,861,602

590,755,963

(42,170,015)(43,934,213)

(370,188)(6,858,914)

(93,333,330)

497,422,633

2012

28 Net fee and commission income

209,695,13785,947,41966,168,42664,625,38952,899,767

3,148,49826,606,433

509,091,069

(41,525,656)(39,757,501)

(985,705)(8,301,086)

(90,569,948)

418,521,121

2011

67 68

Available-for-sale financial assetsTrading financial assetsDerivatives

Total

DerivativesTrading financial assets

Total

574,826,505214,500,622119,554,060

908,881,187

428,620,08346,084,146

393,307,522

868,011,751

27,227,1497,165,937

34,393,086

34,464,17113,411

34,477,582

2011

2011

2012

2012

29 Investment income

30 Income from changes in fair value

31 General and administrative expenses

Staff costs - Salaries, bonuses and allowances etc. - Staff welfare

- Service fees- Rental and property maintenance fees- Business promotion expenses- Depreciation and amortisation- IT equipment maintenance fees- Meetings and office expenses- Travelling expenses- Union fees- Utilities- Business entertainment expenses- Stamp duties- Others

Total

1,027,220,288230,384,915

1,257,605,203

396,783,683277,734,483147,190,441

83,867,26659,277,43649,029,46930,617,44718,152,69914,497,91210,285,845

6,418,899196,267,078

2,547,727,861

2012

918,069,459195,350,726

1,113,420,185

385,571,302232,832,970102,316,670

78,366,03436,500,05740,780,35137,278,42316,819,69112,941,252

9,487,1526,802,173

160,576,773

2,233,693,033

2011

Impairment losses reversal/(charge) for loans and advances to customersImpairment losses charge for other assets

Total

6,457,102-

6,457,102

(201,942,152)(28,256,698)

(230,198,850)

20112012

69 70

32 Impairment losses reversal/(charge)

Income tax expense for the year represents

Reconciliation between income tax expense and accounting profit is as follows:

Profits before taxation

Expected income tax expense at a tax rate of 25% Add/(deduct) the tax effect as follows: - Tax effect of non-deductible expenses - Tax effect of non-taxable income - Over provision in respect of preceding year - Effect of different tax rates applied to Shenzhen Branch

Income tax expense for the year

Current tax expense for the yearChanges in deferred tax assets/liabilitiesOver provision for income tax in respect of preceding year

Total

487,743,642(28,276,813)

(4,699,211)

454,767,618

1,827,980,584

456,995,146

13,266,252(10,794,569)

(4,699,211)-

454,767,618

20112012

431,953,467(11,267,218)

(827,981)

419,858,268

1,680,954,577

420,238,644

5,868,202(4,851,020)

(827,981)(569,577)

419,858,268

20112012

33 Income tax expense

(a)

(b)

34 Other comprehensive income

Gains arising from available-for-sale financial assetsLess: Tax expense Net amounts transferred to profit or loss

Subtotal

Changes in fair value of equity-settledshare-based paymentsLess:Tax expense

Subtotal

Total

26,749,300(6,946,788)

1,037,850

20,840,362

3,387,924(861,609)

2,526,315

23,366,677

2012

98,973,642(37,141,837)

49,593,712

111,425,517

21,131,150(5,360,745)

15,770,405

127,195,922

2011

71 72

Cash and cash equivalents at the end of the yearLess: cash and cash equivalents at the beginning of the year

Net (decrease)/increase in cash and cash equivalents

Cash on handCentral bank deposits available on demandDeposits with inter-banks Placements with inter-banks

Total

Net profitAdd: Impairment losses (reversal)/charge for loans and advances to customers Provision of impairment losses for other receivables Depreciation of fixed assets Amortisation of intangible assets Amortisation of leasehold improvements Losses on disposal of fixed assets, intangible assets and other long-term assets Investment income Gains on changes in fair value Increase in deferred tax assets Unwinding of discount Unrealised foreign exchange losses Increase in operating receivables Increase/(decrease) in operating payables

Net cash inflow/(outflow) from operating activities

Reconciliation of net profit to cash flows from operating activities:

1,373,212,966(6,457,102)

-35,151,84517,492,43531,222,9863,172,191

(571,723,577)(34,477,582)(28,276,813)

(215,143)12,524,209

(3,976,724,878)24,190,528,640

21,045,430,177

2012

35 Supplement to cash flow statement

1,261,096,309201,942,15228,256,69833,977,88919,727,82524,660,32027,898,427

(470,128,936)(34,393,086)(11,267,218)

(142,439)277,580,829

(18,750,128,430)(513,651,367)

(17,904,571,027)

2011

(a) Change in cash and cash equivalents:

Cash and cash equivalents held by the Bank are as follows:

40,544,135,948(23,815,812,389)

16,728,323,559

275,527,540 14,723,671,393 12,786,085,145 12,758,851,870

40,544,135,948

20112012

23,815,812,389(30,777,776,153)

(6,961,963,764)

295,435,45510,480,851,413

5,540,233,7277,499,291,794

23,815,812,389

20112012

(b)

(c)

73 74

The capital adequacy ratio of the Bank as at 31 December 2012 calculated in accordance with Measures for the Management

of CAR of Commercial Banks (revised) (CBRC (2007) No.11) issued by the CBRC is as follows:

(a) The total risk assets include weighted risk assets and 12.5x market risk assets.

36 Capital adequacy ratio (CAR)

Total risk assets (a)

Net capital Including: core capital eligible supplementary capital

Core CAR

CAR

62,035,306,379

10,539,116,33210,315,205,632

223,910,700

16.63%

16.99%

64,924,730,840

9,146,927,3868,953,347,986

193,579,400

13.79%

14.09%

2012 2011

Transactions with the parent:

The balances of transactions with the parent at 31 December are set out as follows:

Information on the Bank’s parent is listed as follows:

The Bank’s ultimate controlling party is Citigroup Inc.

Citibank United StatesBanking and

financial servicesUS dollar

147,514 million 100%

Registeredplace

Stockholder’sequity

Shareholdingpercentage

Principalactivities

Company name

2012

2012

37 Related party relationships and transactions

Interest incomeInterest expensesFee and commission incomeFee and commission expensesInvestment lossesGains/(Losses) from changes in fair valueOther operating incomeGeneral and administrative expenses

Deposits with inter-banksPlacements with inter-banksDerivative financial assetsInterest receivable Other assetsDeposits from inter-banks andnon-bank financial institutionsBorrowings from inter-banksDerivative financial liabilitiesInterest payableOther liabilities

48,669,226 (178,375,210)

13,392,800 -

(43,338,668)298,375,694 153,643,483

(172,294,922)

11,005,798,382 6,985,852,448

318,270,529 1,234,063

11,670,486

(4,930,645,103)(5,793,590,239)

(266,257,406)(28,386,037)

(150,611,940)

100%

Proportion ofvoting rights

2011

2011

47,607,294 (26,041,845)

11,152,953 (25,779)

(76,498,486)(728,115,172)

179,754,471 (156,132,237)

4,191,637,071 2,691,460,945

279,141,292 809,137

17,425,211

(3,201,016,145)(4,210,378,799)

(542,365,113)(7,166,668)

(210,959,537)

(a)

(i)

(ii)

75 76

Transactions between the Bank and its key management

personnel and their close family members

Transactions with the key management personnel and their close family members:

The balances of transactions with the Bank’s key management personnel and their close family members at 31 December

are set out as follows:

The balance of credit commitments with the Bank’s key management personnel and their close family members at 31

December are set out as follows:

37 Related party relationships and transactions (continued)

The balances of commitments with the parent at 31 December are set out as follows:

2012

Operating lease commitments 16,575,165

2011

21,862,863

The notional amounts of derivative contracts with the parent at 31 December are set out as follows:

ForwardsInterest rate swapsCurrency options Interest rate options Commodity swapsEquity swaps

15,441,768,95010,031,131,7611,164,168,9362,527,647,336

453,566,583117,729,377

2012

23,033,448,44310,921,657,7655,174,145,674

588,312,074361,059,062

64,266,110

2011

(iii)

(iv)

(v) In addition, significant related party transaction with the

Bank’s parent was approved by Related Party Transaction

Control Committee and the BOD during the year.

Outsourcing the non-Renminbi cash operation, funds and

securities operation and technology related service to

Citibank N.A. Singapore Branch. Such outsourcing services

cost the Bank Renminbi 154,457,440 in general and

administrative expenses in the year 2012.

A significant related party transaction represents a single

transaction conducted between the Bank and a related

party where the transaction amount is 1% or more of the

total equity of the Bank, or after this transaction, the total

balance with the connected party is 5% or more of the total

equity of the Bank.

2011

2011

2011

2012

2012

2012

Remuneration of key management personnelMaximum loans and advances issued to key management personnel and their close family members

Loans and advances to customersCredit cards loansDeposits from customersEmployee benefits payable

Credit commitments

85,786,752

1,740,757

1,380,209226,353

11,149,22528,112,995

5,523,647

91,021,254

1,578,700

1,481,515-

15,874,76529,056,229

-

(b)

(i)

(ii)

(iii)

Related parties of the Bank include close family mem-

bers of its key management personnel, key management

personnel of the Bank’s parent, close family members of

key management personnel of the Bank’s parent, other

enterprises that are controlled or jointly controlled by its

key management personnel and close family members of

such individuals. The Bank’s transactions with these related

parties are insignificant, thus not disclosed separately.

77 78

Credit transactions between the Bank and its other related personnel

Basic information of the related personnel that have credit transactions with the Bank

31 other related personnels are involved in credit card transactions with the Bank.

The credit balance with the Bank’s other related personnel is set out as follows:

The credit commitments with the Bank’s other related personnel is set out as follows:

The Bank has credit commitments with 66 other related personnels.


TitleName

2012

2012

Loans and advances to customers- Mortgage loans- Credit cards loans

Credit commitments

637,652406,256

5,793,744

(a)(b)

Executive vice presidentBranch manager of Shanghai West Nanjing Road Sub-branch

2011

2011

2,179,209-

-

(c)

(i)

(ii)

(iii)

(iv)

Jin YuJulia Ye

Besides the key management personnel information listed

in Note 37(b), the Bank discloses the credit transactions

between the Bank and its related personnel according

to the requirement of Administrative Measures for the

Related Party Transactions between Commercial Banks

and their Insiders or Shareholders (Order of CBRC No.3

(2004)).

The Bank’s related personnel include the Bank’s insiders,

controlling shareholders, directors or key management

personnel of the Bank’s related legal entities or other

organisations. Insiders include the Bank’s directors, senior

management personnel of the head office and branches and

other personnel who have the power to decide or participate

in the extension of credit or transfer of assets by the Bank.

The credit transaction information relating to the Bank’s executive vice president, Jin Yu, is disclosed in Note 37(b) and thus

not included in Note 36(c).

Transactions between the Bank and other related parties

Transactions with other related parties:

The transactions and percentage between the Bank and its non-bank related parties are set out as follows:

2011

2011

2012

Percentage Percentage2012

Interest incomeInterest expenseFee and commission incomeFee and commission expensesInvestment lossesLosses from changes in fair valueOther operating incomeGeneral and administrative expenses

General and administrative expenses- Service received- Property rented

8,407,292 (584,178)4,999,198

(3,166,454)(350,245)

(919)2,456,708

(339,710,503)

10.20%3.13%

259,940,03479,770,469

240,899,12368,566,205

8,996,819 (844,316)6,419,174

(4,335,850)--

1,846,809 (310,972,639)

10.78%3.07%

(d)

(i)

79 80

The balances of transactions with other related parties at 31 December are set out as follows:

The balance of transactions with non-bank related parties at 31 December are set out as follows:


2012

Deposits with inter-banksPlacements with inter-banksDerivative financial assetsLoans and advances to customersInterest receivableOther assetsDeposits from inter-banks and non-bank financial institutionsDerivative financial liabilitiesDeposits from customersInterest payableOther liabilities

194 57,500,000

- 70,976,431 1,075,922

12,027,927 (8,177,985)

- (96,278,849)

(9,767) (33,083,107)

2011Percentage2012

Placement with non-bank financial institutionsLoans and advances to customers Other liabilities- Service fee payables- Rental payables

0.50%0.07%

0.25%-

117,000,00047,317,618

22,453,856-

57,500,00070,976,431

5,987,43827,095,669

2011

- 117,000,000

2,049,042 47,317,618

659,503 13,529,366

(14,503,483) (532,688)

(108,536,199) (16,162)

(96,824,457)

Percentage

0.36%0.13%

0.06%0.26%

(ii) The notional amounts of derivative contracts with other related parties at 31 December are set out as follows:

The balances of commitments with other related parties at 31 December are set out as follows:

(iii)

(iv)

(v)

2011

2011

2012

2012

ForwardsInterest rate swapsCurrency options

Credit commitmentsOperating lease commitments

10,155,9411,117,604,9853,797,222,632

-119,802,127

---

55,364,760183,310,855

Outsourcing of China Data Centre processing and management

services, software application and enhancement and technical

support to Citicorp Software and Technology Services

(China) Ltd.(including Citicorp Data Processing (Shanghai)

Co., Ltd. and Citicorp Management Consulting (Shanghai)

Co., Ltd.), was approved in prior years. Such outsourcing

services cost the Bank Renminbi 267,872,087 in general

and administrative expenses in the year 2012.

In addition, the significant related party transactions

with other related parties approved by the Bank’s

Related Party Transaction Control Committee and the

BOD are set out as follows:

81 82

Software development,back office operation and outsourcing service, consulting and training

Outsourcing service

Consulting and training

Credit business

Credit business

Credit business

Credit businessProperty holding

Outsourcing serviceBanking

Decision Support,Vendor Oversight

Charge card businessProperty investment business promotion

ATM processingBankingBanking

Security and invesment banking business

Investment businessPhysical and financial commodity

transactionsMarketing and coordinating efforts

with US Head OfficeCommerical banking

Banking

Company nameRelationshipswith the Bank Company type

Group subsidiary

Group subsidiary

Group subsidiary

Group subsidiary

Group subsidiary

Group subsidiary

Group subsidiaryGroup subsidiary

Group subsidiaryGroup subsidiaryGroup subsidiary

Group subsidiary

Group subsidiaryGroup subsidiaryGroup subsidiaryGroup subsidiaryGroup subsidiary

Group subsidiary

Group subsidiaryGroup subsidiary’s

representative office Group subsidiaryGroup subsidiary

Limited liabilitiescompany (WOFE)






Limited liabilitiescompany (WOFE)Private company

Private companyPrivate companyPublic company

Private company

Private companyPrivate companyPrivate companyPrivate companyPrivate company

Private companyLimited liabilities

company (WOFE)Representative officeof foreign enterprise

Public companyLimited liabilities company

Principle activitiesLegalrepresentative Registered place Registered capital

Changes inregistered capital

for the year

Increase by USD5,550 thousand

Decrease by USD5,200 thousand

Decease by USD350 thousand

No changes

No changes

No changes

No changesNo changes

No changesNo changesNo changes

No changes

No changesNo changesNo changesNo changesNo changes

No changes

No changes

No changesNo changesNo changes

Gary Li

Gary Li

Yangwei Du

Jie Liu

Shilu Liu

Sizhen Li

Zhengquan Li*

***

*

*****

*

Qingqing Zhao

Wei HopemanGuolin Guan*

PRC

PRC

PRC

PRC

PRC

PRC

PRCBritish Virgin Island

MalaysiaHong Kong

India

Hong Kong

Hong KongUnited States

MexicoSingapore

Hong Kong

United States

PRC

United StatesTaiwan Nigeria

USD 17,350 thousand

-

-

RMB 34,000 thousand

RMB 34,000 thousand

RMB 34,000 thousand

RMB 38,800 thousandUSD 50 thousand

MYR 5,000 thousandUSD 24,000 thousand and HKD 200,000 thousand

INR 2,500 million

HKD 2 million

HKD 100 thousandUSD 1 thousand

MXN 23,102,484 thousandSGD 1,527,730 thousand

HKD 320,134 thousand

USD 50,000 thousand

USD 2,000 thousand

N/ANT$ 66,033million

USD314.7million


83 84

Citicorp Software and Technology Services (China) Ltd. Note

Citigroup Data Processing(Shanghai) Co., Ltd. Note

Citigroup ManagementConsulting (Shanghai) Co., Ltd. Note

Hubei Jingzhou Gong’anCiti Lending Co., Ltd.Dalian WafangdianCiti Lending Co., Ltd.Hubei Xian’ ning ChibiCiti Lending Co., Ltd.Chongqing BeibeiCiti Lending Co., Ltd.CitiRealty China (BVI) Ltd.Citigroup Transaction Services (Malaysia) Sendirian BerhadCiticorp International LimitedCiticorp Service India LimitedDiners Club International(Hong Kong) Ltd.Citigroup PropertyInvestors China Ltd.Citishare CorporationMexico BanamexCitibank Singapore LimitedCitigroup Global Market Asia Ltd.Citibank Overseas Investment CorporationCitigroup Commodity(Shanghai) Co., Ltd.Citi Ventures ShanghaiRepresentative office Citibank Taiwan LimitedCitibank Nigeria Limited

Note: In 2012, Citicorp Software and Technology Services (China) Ltd. merged Citigroup Data Processing (Shanghai) Co., Ltd.

and Citigroup Management Consulting (Shanghai) Co., Ltd.

* These related parties were registered outside Mainland China where legal representatives are not required.

Expenses recognised for the year arising from share-

based payments are as follows:

The Bank’s share-based payment scheme is devised to

reward staff for their services.

As at 31 December 2012, the outstanding number

of shares in connection with share-based payments

which the Bank granted to its staff but not exercised is

415,741 (2011: 2,239,244). The above shares are all

issued by Citigroup Inc.

Transactions with the annuity plan

Apart from the obligations for defined contributions to

Annuity Fund, no other transactions were conducted

between the Bank and the Annuity Fund during the year.

38 Share-based payments

(e)

Equity-settled share-based payments 25,573,119 37,253,261

2012 2011


The Bank has two reportable segments, which are corporate

banking and personal banking segment, determined based

on the structure of its internal organisation, management

requirements and internal reporting system. Each reportable

segment is a separate business unit which offers different

products and services, and is managed separately because

they require different technology and marketing strategies.

The financial information of the different segments is

regularly reviewed by the Bank’s management to make

decisions about resources to be allocated to each segment

and assess its performance.

Corporate banking

This segment provides a range of financial products and services

to corporations and financial institutions, including: corporate

deposit taking activities, corporate short-term, medium-term

and long-term loans, bank acceptances and bills discounted,

government bonds and financial bonds transactions, foreign

currency securities transactions other than stocks, letters

of credit and guarantees, corporate domestic and foreign

settlements, foreign exchange trade and agent services, inter-

bank placements and takings, safe deposit box services, credit

investigation and advisory services.

Personal banking

This segment provides a range of financial products and

services to individual customers, including: personal deposit

taking activities, personal short-term, medium-term and

long-term loans, personal domestic and foreign settlement,

foreign exchange trade and agent services, insurance agent

services, bank card services and safe deposit box services.

Unallocated items

This segment mainly includes assets, liabilities, income

and expenses which cannot be attributed to directly or

divided reasonably to segments.

Segment results, assets and liabilities

For the purposes of assessing segment performance

and allocating resources between segments, the

Bank’s management regularly reviews the assets,

liabilities, revenue, expenses and financial performance,

attributable to each reportable segment on the following

bases:

Segment assets include all tangible, intangible, other

non-current and current assets, with the exception of

deferred tax assets and other unallocated corporate

assets. Segment liabilities include deposits from

customers, deposits from inter-banks and non-bank

financial institutions, borrowings from inter-banks and

other liabilities attributable to the individual segments.

Financial performance is operating income (including

operating income from external customers and inter-

segment operating income) after deducting expenses,

depreciation, amortisation and impairment losses

attributable to the individual segments. Inter-segment

sales are determined with reference to prices charged

to external parties for similar orders. Non-operating

income and expenses and tax expenses are not allocated

to individual segments. Information regarding the

Bank’s reportable segments set out below includes the

information used for assessing segment performance

and allocating segment assets and liabilities by the

Bank’s management or not used but regularly reviewd by

the Bank’s management:

(a)

39 Segment reporting

85 86

Segment results, assets and liabilities (continued)

(i) Other income includes investment income, gains and losses

from changes in fair value, foreign exchange gains and losses and others.

Corporate banking

2012 2011 2012 2011 2012 2011

1. Operating income Net interest income Net fee and commission income Other income (i)

2. Operating expenses Include: depreciation and amortisation impairment losses reversal /(charge)

3. Operating profit/(loss) Add:non-operating income Less:non-operating expenses

4. Total profit/(loss)

5. Total assets

6. Total liabilities

3,859,509,563 2,452,039,236

191,015,760 1,216,454,567

(1,807,593,435)

(37,608,393)(223,264,431)

2,051,916,128 --

2,051,916,128

117,394,193,492

106,688,731,584

3,915,037,385 2,325,685,876

189,133,241 1,400,218,268

(1,613,855,843)

(39,791,087)26,363,478

2,301,181,542 --

2,301,181,542

139,393,849,482

126,825,113,235

2012 2011

Personal banking

527,491,567 236,741,798 227,505,361 63,244,408

(902,237,895)

(40,757,641)(6,934,419)

(374,746,328)--

(374,746,328)

9,920,427,936

11,553,779,284

714,633,762 364,521,492 308,289,392 41,822,878

(1,199,184,408)

(44,076,179)(19,906,375)

(484,550,646)--

(484,550,646)

12,844,918,576

14,965,433,036

--

-

--

-4,655,628 (870,851)

3,784,777

74,816,706

-

----

-

--

-15,001,545(3,651,857)

11,349,688

95,285,122

-

4,387,001,1302,688,781,034

418,521,1211,279,698,975

(2,709,831,330)

(78,366,034)(230,198,850)

1,677,169,8004,655,628(870,851)

1,680,954,577

127,389,438,134

118,242,510,868

4,629,671,147 2,690,207,368

497,422,633 1,442,041,146

(2,813,040,251)

(83,867,266)6,457,103

1,816,630,896 15,001,545 (3,651,857)

1,827,980,584

152,334,053,180

141,790,546,271

39 Segment reporting (continued)

Unallocated items Total

(a)

87 88

41 Pledged assets

Assets pledged as security

Secured liabilities are recorded as financial assets sold

under repurchase agreements. These transactions are

conducted under usual and customary terms of borrowing.

Secured liabilities

Carrying value of pledged assets analysed by balance sheet classification


Trading financial assets

40 Fiduciary activities

Entrusted lending business

At the balance sheet dates, the entrusted loans and

funds were as follows:

Custodian business

At the balance sheet dates, the Bank’s Qualified Foreign

Institutional Investors (QFII) and Qualified Domestic In-

stitutional Investors (QDII) balances were as follows:

Off-shore wealth management services

At the balance sheet dates, the Bank’s off-shore wealth

management services balances were as follows:

In Mainland ChinaOutside Mainland China

39 Segment reporting (continued)

2012 2011

Specifiednon-current assets

278,739,278-

278,739,278

312,978,730-

312,978,730

Operating incomefrom external customers

2012 2011

5,436,080,980403,728,221

5,839,809,201

6,020,594,804420,763,470

6,441,358,274

(b)

(c)

Geographic information

The following table sets out information about the

geographical location of the Bank’s operating income from

external customers and the Bank’s non-current assets

(excluding financial instruments, deferred tax assets,

same as below). The geographical information is based

Major customers

The Bank’s interest income generated from top ten loans and

advances customers was Renminbi 132,606,016 (2011:

Renminbi 203,263,136), which contributed 4% (2011: 7%)

of the Bank’s total interest income of loans and advances.

on the location of customers receiving services. The

geographical location of the specified non-current assets

is based on the physical location of the asset, in the case

of fixed assets; and the location of the operation to which

they are allocated, in the case of intangible assets.

(a)

(b)

(c)

Entrusted loans

Entrusted funds

QFII

QDII

Off-shore wealth

management services

18,766,531,856

18,766,531,856

75,682,252,678

8,655,813,030

10,684,304,750

7,920,000,000

8,042,092,500

-

12,844,207,145

12,844,207,145

41,564,899,715

17,846,907,507

6,642,771,248

524,000,000

50,353,300

496,386,750

2012

2012

2012

2011

2011

2011

2011

2012

89 90

The Bank is exposed to many financial risks due to its

operating activities. The Bank analyses, evaluates, accepts

and manages risks, or risk portfolios at different levels. The

Bank’s main operating risks include credit risk, market risk

and liquidity risk. Market risks include interest rate risk and

exchange rate risk. The Bank’s objective is to reach an

appropriate balance between risks and rewards, while

minimising the negative impact on its financial statements.

The Bank’s risk management policies aim to identify and

analyse risks to establish appropriate risk limits and control

measures, and to monitor risks and risk limits via an

information system.

The Bank’s BOD is responsible for establishing the Bank’s

risk management strategy. The Bank’s Risk Management

Committee is in charge of the management and supervision

responsibilities related to risk control of the Bank, including

periodically assess the Bank’s overall risk exposures,

provide guidance for developing a sound risk management

and internal control strategies and policies, and monitor

their implementation. The Risk Management Committee

reports to the Board. The Bank’s senior management is

responsible for establishing risk management policies and

procedures, including specific risk management policies for

credit risk, interest rate risk and exchange rate risk based

on the risk management strategy approved by Risk Management

Committee and BOD. These risk management policies are

performed by different head office departments upon

approval from the BOD. The internal audit department of

the Bank is responsible for independently inspecting risk

management and internal control.

Credit risk

Credit risk is the risk that one party to a financial

instrument will cause a financial loss for the other party

by failing to discharge an obligation. Credit risk mainly

arises from credit business. In treasury transactions,

credit risk refers to the possibility that the value of the

assets held by the Bank may decrease due to a fall in the

rating of the issuer of the debt security.

Credit business

Considering the market economic environment, business

development strategy and the requirements of clients,

the Bank provides various direct credit and direct credit

substitute businesses in the scope of risk control to

foreign-invested companies set up in the PRC by

multinationals, domestic companies with good credit

standing, as well as individual customers of good credit.

The Bank has established a strict credit management

system, including credit approval, daily credit monitoring,

remedial management, policies for loan loss provisioning

and loan write-off and restructuring.

(a)

42 Risk management The Bank adopts the loan risk classification approach introduced by Citigroup to monitor the risk condition of its loan portfolios.

Loans are classified by a five-tier grading system: pass/PWL, special mention/substandard (accruing), substandard (non-

accruing), doubtful and loss, according to risk levels. The five-tier grading for loans and advances is defined as follows:

* The definition does not include corporate banking’s branch SME loan product.

** The definition is taking personal mortgage loan for example. The consumer bank sets out different internal credit

gradings according to the overdue days for different products.

*** Corporate banking’s branch SME loan product applies the over-due method used by consumer banking.

Definition of consumerbanking**/corporatebanking***

Definition of corporatebanking*

Internal creditgrading

Pass/PWL

Special mention / substandard (accruing)

Substandard (non-accruing)

Doubtful

Loss

No evident weakness

Has potential weakness that deserve man-agement’s close attention. If left uncorrected, the potential weakness may result in deterio-ration of the paying capacity or credit position of the obligor at some future date

Inadequately protected by the current net as-sets and paying capacity of the obligor. As-sets so classified must have a well-defined weakness, or weaknesses, that jeopardise the timely repayment of its obligations

With the added characteristic that the weak-nesses make collection or liquidation in full, on the basis of current conditions, highly questionable and improbable

Uncollectible and of such little value that their continuance as bankable assets is not war-ranted

No overdue records

Overdue 1-89 days

Overdue 90-179 days

Overdue 180-359 days

Overdue over 360 days

91 92

A comparison of the Bank’s loan risk classification criteria

and Yin Jian Fa [2007] No. 54 has been filed with the CBRC

as follows:

DefinitionFive-tiergradingDefinition

Internalgrading

Pass/PWL

Special mention / substandard (accruing)

Substandard (non-accruing)

Doubtful

Loss

No evident weakness

Has potential weakness that deserves close attention

Has a well-defined weakness that jeopardise the paying capacity of the obligor

Collection or liquidation in full highly questionable and improbable

Uncollectible

Normal

Special mention

Substandard

Doubtful

Loss

Normal loans

The repayment might be adversely affected by some factors

The obligor’s capacity to repay is apparently in question and certain losses might occur even when guarantees are executed

Cannot repay principal and interest in full and significant losses will occur even when guarantees are executed

Principal and interest cannot be recovered after taking all possible measures

93

The last three gradings of CBRC’s five-tier classification

are regarded as impaired loans and advances. If there is

any indication of objective evidence that impairment and

impairment loss has occurred, the loan is classified as an

impaired loans and advances. The provision for impairment

of impaired loans and advances shall be assessed collectively

or individually based on the actual condition.

The Bank manages, restricts and controls identified

centralised credit risks, especially credit risks centralised

in a single borrower, group or industry. The Bank sets

limits on the same borrower, group or industry to optimise

its credit risk structure. The Bank monitors these risks

regularly, and reviews them annually or more frequently

if necessary. The Bank manages credit risk via timely

analysis of the borrower’s ability to repay the principal

and interest, and adjusts its credit lines accordingly.

Other specific risk management and mitigation measures

include the following:

The objective of credit commitment is to ensure the client

obtains the funds needed. When the amount of credit

commitment applied by a client exceeds the credit line

originally authorised, the Bank asks for a deposit from the

client to reduce the related credit risk.

The Bank mitigates credit risk by obtaining collateral,

guarantees and security from companies or individuals.

The Bank has specified categories of acceptable collateral,

including properties, commercial assets (commercial

properties and accounts receivables), and financial

instruments (bonds and stocks). To reduce credit risk, the

Bank has stipulated discount rates for different collaterals

(the ratio between the fast cash realisable value to the

market fair value of the collateral) to reflect the cash

realisable value. For a loan guaranteed by a third party,

the Bank assesses the guarantor’s financial condition,

historical credit record and ability to settle the debts on

behalf of the borrower.

Except for loans, collaterals or guarantees needed for

other financial assets shall be determined by the nature of

the instruments. Generally, no collaterals are designated

for investments in debt securities, treasury bonds and

other notes, and financial instrument portfolios are

generally used as collateral for asset-backed securities.

Treasury business

The Bank sets credit limits based on the credit risk

inherent in the products, counterparties and geographical

area. The system closely monitors the credit exposure on

a real-time basis. The Bank regularly reviews its credit

limit policies and routinely updates the credit limits.

Maximum credit risk exposure

The maximum exposure to credit risk is represented by

the carrying amount of each financial asset, including

derivative financial instruments, in the balance sheet.

The maximum exposure to credit risk in respect of these

financial guarantees at the balance sheet date is disclosed

in Note 44(a).

(i)

94

42 Risk management (continued)

Distribution of loans and advances to customers in terms of credit quality(ii)

271,365,674 (243,010,357)

28,355,317

62,797,395 (256,601)

62,540,794

63,117,522,415 (257,908,845)

62,859,613,570

62,950,509,681

230,324,425 (173,284,147)

57,040,278

92,955,325 (559,275)

92,396,050

56,350,082,030 (339,035,944)

56,011,046,086

56,160,482,414

20112012Note

ImpairedIndividually assessed and impaired gross amountImpairment losses

Carrying amount

Overdue but not impaired- less than 90 daysImpairment losses

Carrying amount

Neither overdue nor impairedGross amountImpairment losses

Carrying amount

Total carrying amount

(a)

(b)

(b)

(a) As at 31 December 2012, the overdue but not impaired

loans and advances amounted to Renminbi 62,797,394.

The covered portion and uncovered portion of these loans

and advances were Renminbi 37,754,490 and Renminbi

25,042,904, respectively. The fair value of collaterals held

against these loans and advances amounted to Renminbi

129,243,217.

The fair value of these collaterals was estimated by the

Bank based on the external valuations adjusted after

taking into account the current realisation experience in

view of the collaterals and pledges as well as the latest

market situation.

(b) The balances represent collectively assessed allowances

of impairment losses.

290,533,34019,357,583,826

-

19,648,117,166

2012

2012

Neither overdue nor impaired- A to AAA- B to BBB+- unrated

Total carrying amount

- AAA- AA- to AA+- A- to A+

Total

27,652,675,2816,601,304,9691,843,793,164

36,097,773,414

2011

2011

14,014,148,2736,894,452,218

472,512,247

21,381,112,738

292,096,0201,614,339,294

17,718,742,520

19,625,177,834

(iii)

(iv)

Distribution of amounts due from inter-banks in terms

of credit ratings of counterparties

Amounts due from inter-banks include deposits and

placements with inter-banks. Distribution of amounts

Distribution of debt securities in terms of credit quality

The carrying amounts of debt securities analysed by the

external rating agency Standard & Poors’ designations

at the balance sheet dates were as follows:

Debt securities include trading financial assets and

available-for-sale financial assets.

due from inter-banks in terms of credit quality mainly with

reference to the external rating agency Standard & Poors’

was as follows (counterparties without external ratings are

presented using their parent companies’ ratings):

95 96


Market risk

Market risk management involves an overall process of

market risks identification, measurement, monitoring and

control. Market risk refers to the risk of financial instruments’

fair value or future cash flow fluctuations due to changes

in market prices, including foreign exchange risk, interest

rate risk and other price risk. Foreign exchange risk refers

to the risk of financial instruments’ fair value or future cash

flow fluctuations due to changes in foreign exchange rates;

interest rate risk refers to the risk of financial instruments’

fair value or future cash flow fluctuations due to changes

in interest rates; other price risk refers to the market risks

other than foreign exchange risk and interest rate risk.

The Bank’s interest rate risk includes the risks arising from

mismatches of the term structures of assets and liabilities

related to banking business and from positions held for

trading purpose in treasury transactions. The Bank calculates

its interest rate risk exposure according to the maturity dates

of all its interest-bearing assets and liabilities, and performs

daily interest rate sensitivity analysis and periodical stress

test. Meanwhile, by closely observing interest rate trends

(both in Renminbi and foreign currency) and market interest

rate changes, the Bank conducts proper scenario analysis

and makes timely adjustments to the loan and deposit

interest rates (both in Renminbi and foreign currency) in line

with the benchmark interest rates to reduce its interest rate

risk.

The Bank’s foreign currency risk exposures mainly arise

from on balance sheet assets and liabilities designated

in foreign currencies and off balance sheet derivatives

designated in foreign currencies. The Bank’s main principle

of currency risk control is to match the assets and liabilities

of the respective individual currency to minimize the foreign

exchange risk, and to control the currency risk within limits

set by the Bank. The Bank, based on the guiding principles

of Risk Management Committee, relevant laws and

regulations and the management’s evaluation of the current

environment, has set risk tolerance limits, and minimises

the mismatch of assets and liabilities in different currencies

(b) via reasonable arrangements on the source and usage

of foreign currency capital. Foreign currency exposures

are managed based on business category, delegated

trader authorisation limits, currencies and risk factors.

The Bank conducts hedge transactions with overseas

branches of Citibank to offset exchange rate risks for

derivatives designated in foreign currencies.

The Bank classifies financial instruments into investment

portfolios held for trading and non-trading investment

portfolios to effectively monitor market risk. The Bank

mainly manages market risk via its market risk limit

policy. According to the CBRC’s Market Risk Management

Guidelines for Commercial Banks and Citigroup’s global

risk management policy, the Bank has established

market risk limits and measurement policies to set

related limits and approval mechanism on all market

risk exposures. The policies illustrate the structure and

approval system of market risk limits. Market risk limits

mainly include risk factor limits, position limits, value-

at-risk (VaR) limits, stop-loss trigger and stress testing

analysis.

VaR analysis

For investment portfolios held for trading, the Bank

adopts VaR analysis to evaluate market risk. VaR

estimates potential losses arising from changes in market

interest rates and prices within a defined period and

confidence interval. The Bank’s market risk management

department calculates the VaR of investment portfolios

held for trading according to the historical changes of

the market interest rates and prices (confidence interval:

99%, observation time: 1 trading day).

Although VaR is an important tool for measuring market

risk, the assumptions on which the model is based do

give rise to some limitations, including the following:

A 1-day holding period assumes that it is possible to

hedge or dispose of positions within that period. This

is considered to be a realistic assumption in almost all

cases but may not be the case in situations in which

there is severe market illiquidity for a prolonged period;

A 99% confidence level does not reflect losses that may

occur beyond this level. Even with the model used there

is 1% probability that losses could exceed the VaR;

VaR is calculated on an end-of-day basis and does not

reflect exposures that may arise on positions during the

trading day; and

The use of historical data as a basis for determining the

possible range of future outcomes may not always cover

all possible scenarios, especially those of an exceptional

nature.

A summary of the VaR of the Bank’s trading portfolios at

the balance sheet date and during the respective year is

as follows: (Renminbi million)

To address the above limitations in VaR analysis, the

Bank performs retrospective tests periodically to ensure

the effectiveness of the relevant models. Furthermore,

the Bank performs market risk stress testing periodically

to assess the maximum losses under extreme price

fluctuation scenarios.

Liquidity risk

Liquidity risk is the risk that a financial institution fails

to meet its obligations related to financial liabilities due

to lack of funds caused by mismatches between the

amounts and maturity dates of assets and liabilities.

The primary liquidity risk management measure

adopted by the Bank is to match the maturity date

structures between assets and liabilities. Due to

differences between various businesses and maturity

tenors, it is impractical to maintain a perfect match

between assets and liabilities. To meet relevant

liquidity requirements, the Bank has established a set

of thresholds for managing, measuring, monitoring

and reporting liquidity risk, including liquidity limits

for normal operations, liquidity ratios, market triggers

and regular stress testing. In addition, the Bank

established Liquidity Funding Plan and Contingency

Funding Plan to maintain an appropriate balance of

cash flows and to ensure all the required funds can be

provided at maturity.

The Finance department provides a daily calculation of

regulatory liquidity ratios to relevant departments of

the Bank. Global Markets department is responsible for

managing the liquidity risk on daily basis and executes

the liquid funds instructions. Market Risk Management

monitors the liquidity risk independently. The Asset

Liability Committee will also regularly review the

liquidity status of the Bank.

The following tables provide an analysis of the contractual

undiscounted cashflows of the Bank’s financial assets and

liabilities at the balance sheet dates. Interest receivable

and payable of financial assets and liabilities with fixed

terms are presented according to the due dates of interest

stipulated in the contracts; current financial assets and

liabilities (including interest receivable and payable as at

the balance sheet dates) are presented under the item

“repayable on demand”. Since derivatives are generally

held for short-term purposes, their cashflows are not

included in the following analysis.

(c)-

-

-

-

Interest rate risk

Foreign currency risk

Total VaR

Interest rate risk

Foreign currency risk

Total VaR

41.45

21.09

43.93

34.12

17.19

46.58

25.87

11.70

30.01

18.18

8.88

28.35

25.70

12.52

28.95

17.32

11.86

23.45

16.33

3.66

21.17

12.64

2.65

19.23

2012

2011

Minimum

Minimum

Maximum

Maximum

Average

Average

As at 31December

As at 31December

97 98


Liquidity risk (continued)

More thanfive years

AssetsCash on hand and deposits with central bankDeposits and placements with inter-banksTrading financial assetsDerivative financial assetsAvailable-for-sale financial assets Loans and advances to customersOther assets

Total assets

LiabilitiesDeposits and borrowings from inter-banksDerivative financial liabilitiesFinancial assets sold under repurchase agreementsDeposits from customersOther liabilities

Total liabilities

Net position

Between one monthand three months

-5,215,999,658

---

19,725,625,23648,813,847

24,990,438,741

1,178,378,110-

-10,721,544,697

62,268,663

11,962,191,470

13,028,247,271

Between three months and one year

-8,681,254,972

623,497,155-

8,145,071,57712,717,046,422

151,812,366

30,318,682,492

1,844,041,561-

-9,653,847,516

96,064,431

11,593,953,508

18,724,728,984

Between one yearand five years

-997,852,136

3,045,934,147-

8,611,385,62210,535,569,201

170,485,881

23,361,226,987

3,550,392,269-

-66,199,01540,501,574

3,657,092,858

19,704,134,129

--

100,700,045--

17,853,577,646315,001

17,954,592,692

--

---

-

17,954,592,692


2012

Withinone month

Contractualundiscounted

cashflows

30,637,522,42036,403,894,3563,770,131,3471,690,055,766

16,756,457,19975,869,163,243

783,294,402

165,910,518,733

19,132,376,8671,430,554,047

7,927,453,889108,825,303,786

9,478,826,877

146,794,515,466

19,116,003,267

Carryingamount

30,637,522,42036,097,773,4143,512,945,0361,690,055,766

16,135,172,13063,451,685,484

783,294,402

152,308,448,652

19,059,640,4141,430,554,047

7,920,000,000103,566,097,380

9,478,826,877

141,455,118,718

10,853,329,934

-9,099,832,442

---

13,412,044,75229,606,412

22,541,483,606

6,355,350,214-

7,927,453,88919,732,060,205

36,919,974

34,051,784,282

(11,510,300,676)

Repayable on demand/

Terms undated

30,637,522,42012,408,955,148

-1,690,055,766

-1,625,299,986

382,260,895

46,744,094,215

6,204,214,7131,430,554,047

-68,651,652,3539,243,072,235

85,529,493,348

(38,785,399,133)

99 100

(c)

AssetsCash on hand and deposits with central bankDeposits and placements with inter-banksTrading financial assetsDerivative financial assetsAvailable-for-sale financial assets Loans and advances to customersOther assets

Total assets

LiabilitiesDeposits and borrowings from inter-banksDerivative financial liabilitiesFinancial assets sold under repurchase agreementsDeposits from customersOther liabilities

Total liabilities

Net position

Liquidity risk (continued)


101 102

More thanfive years

Between one monthand three months

-3,229,946,578

552,417,047-

1,338,880,05016,868,969,494

83,803,825

22,074,016,994

1,266,827,854-

-9,462,594,834

57,053,565

10,786,476,253

11,287,540,741

Between three months and one year

-6,135,841,6126,064,457,631

-50,975,400

14,708,995,73188,895,091

27,049,165,465

--

49,548,8894,603,939,317

53,838,656

4,707,326,862

22,341,838,603

Between one yearand five years

-1,546,339,2751,591,628,452

-10,671,865,566

6,713,821,218201,554,744

20,725,209,255

1,641,465,568-

-47,901,172

7,905,779

1,697,272,519

19,027,936,736

-181,192,728

---

14,148,616,1848,134,141

14,337,943,053

--

-----

14,337,943,053

2011

Withinone month

Contractualundiscounted

cashflows

26,065,131,73921,728,582,3078,389,695,8582,297,358,628

12,061,721,01666,731,040,073

1,414,811,378

138,688,340,999

17,483,850,3602,069,104,547

524,736,11187,240,965,98210,784,432,928

118,103,089,928

20,585,251,071

Carryingamount

26,065,131,73921,381,112,7388,212,658,3542,297,358,628

11,412,519,48056,673,361,780

1,414,811,378

127,456,954,097

17,440,051,6292,069,104,547

524,000,00087,096,006,38310,784,432,928

117,913,595,487

9,543,358,610

-5,754,199,398

---

12,582,607,18074,724,916

18,411,531,494

2,344,265,545-

475,187,22223,081,664,865

53,902,883

25,955,020,515

(7,543,489,021)

Repayable on demand/

Terms undated

26,065,131,7395,062,255,444

-2,297,358,628

-1,708,030,266

957,698,661

36,090,474,738

12,231,291,3932,069,104,547

-50,044,865,79410,611,732,045

74,956,993,779

(38,866,519,041)

(c)

Financial instruments measured at fair value

The following table presents the carrying value of financial

instruments measured at fair value as at 31 December

across the three levels of the fair value hierarchy. The

level in the fair value hierarchy within which the fair value

measurement is categorised in its entirety is determined on

the basis of the lowest level input that is significant to the

fair value measurement in its entirety. The levels are defined

as follows:

Level 1 – fair value measurements using quoted prices

(unadjusted) in active markets for identical assets or

liabilities

Level 2 – fair value measurements using inputs other than

quoted prices included within Level 1 that are observable

for the asset or liability, either directly (i.e., as prices) or

indirectly (i.e., derived from prices)

This category includes instruments using valuation

technique: quoted market prices in active markets for

similar instruments; quoted prices for identical or similar

instruments in markets that are considered less than active;

or other valuation techniques where all significant inputs

are directly or indirectly observable from market data.

Level 3 – fair value measurements using inputs for the asset

or liability that are not based on observable market data

(i.e., unobservable inputs)

This category includes all instruments where the valuation

technique includes inputs not based on observable data and

the unobservable inputs have a significant effect on the

instrument’s valuation. This category includes instruments

that are valued based on quoted prices for similar instruments

where significant unobservable adjustments or assumptions

are required to reflect differences between the instruments.

(a) Fair values of financial assets and financial liabilities

that are traded in active markets are based on quoted

market prices or dealer price quotations. For all other

financial instruments the Bank determines fair values

using valuation techniques.

Valuation techniques include net present value and

discounted cash flow models, comparison to similar

instruments for which market observable prices exist,

polynomial option pricing models and other valuation

models. Assumptions and inputs used in valuation

techniques include risk-free and benchmark interest

rates, credit spreads and other premia used in estimating

discount rates, bond and equity prices, foreign currency

exchange rates, equity and equity index prices and

expected price volatilities and correlations. The objective

of valuation techniques is to arrive at a fair value

determination that reflects the price of the financial

instrument at the reporting date, that would have been

determined by market participants acting at arm’s length.

The Bank uses widely recognised valuation models for

determining the fair value of common and more simple

financial instruments, like interest rate and currency

swaps that use only observable market data and require

little management judgement and estimation. Observable

prices and model inputs are usually available in the market

for listed debt and equity securities, exchange traded

derivatives and simple over the counter derivatives like

interest rate swaps.

43 Fair value of financial instruments

For more complex financial instruments, the Bank

uses proprietary valuation models, which usually are

developed from recognised valuation models. Some

or all of the significant inputs into these models may

not be observable in the market, and are derived

from market prices or rates or are estimated based

on assumptions. Example of instruments involving

significant unobservable inputs include certain over

the counter structured derivatives, certain loans

and securities for which there is no active market

and retained interests in securitisations. Valuation

models that employ significant unobservable inputs

require a higher degree of management judgement

and estimation in the determination of fair value.

Management judgement and estimation are usually

required for selection of the appropriate valuation

model to be used, determination of expected future

cash flows on the financial instrument being valued,

determination of probability of counterpart default and

prepayments and selection of appropriate discount

rates. For those more complex financial instruments,

the Bank performs calibration and back testing of

models against observed market transactions and

conduct regular stress testing.

The Bank has an established control framework with

respect to the measurement of fair values. The Bank’s

processes include a number of key controls that

are designed to ensure that fair value is measured

appropriately, particularly where a fair value model

is internally developed and used to price a significant

product. Such controls include a model validation

policy requiring that valuation models be validated

by qualified personnel, independent from those who

created the models and escalation procedures, to

ensure that valuations using unverifiable inputs

are identified and monitored on a regular basis

by senior management. Approvals from both market

risk department and product control department

must be obtained prior to the use of valuation

methodologies. The Bank’s valuation models are

reviewed and approved by market risk department

which is independent from the front office.

103 104

43 Fair value of financial instruments (continued)

Balance at the beginning of the yearTotal (losses)/gains- in profit or loss


Total (losses)/gains for the year recognised in profit or loss for assets held at the end of the year

6,482,914

(4,217,059)

2,265,855

(4,217,059)

(6,482,914)

4,217,059

(2,265,855)

4,217,059

---

-

-

2012

Total

RMB

Derivative financialassets

RMB

Derivative financialof liabilities

RMB

The movement of fair value measurements in Level 3 of the fair value hierarchy for the year is as follows:

TotalRMB

Level 3RMB

Level 2RMB

Level 1RMB

AssetsTrading financial assetsDerivative financial assetsAvailable-for-sale financial assets

Total

LiabilitiesDerivative financial liabilities

-2,265,855

-

2,265,855

2,265,855

3,512,945,0361,690,055,766

16,135,172,130

21,338,172,932

1,430,554,047

79,821,2001,687,789,911

-

1,767,611,111

1,428,288,192

3,433,123,836-

16,135,172,130

19,568,295,966

-

89

11

9

2012

Note

TotalRMB

Level 3RMB

Level 2RMB

Level 1RMB

AssetsTrading financial assetsDerivative financial assetsAvailable-for-sale financial assets

Total

LiabilitiesDerivative financial liabilities

-6,482,914

-

6,482,914

6,482,914

8,212,658,3542,297,358,628

11,412,519,480

21,922,536,462

2,069,104,547

-2,290,875,714

-

2,290,875,714

2,062,621,633

8,212,658,354-

11,412,519,480

19,625,177,834

-

89

11

9

2011

Note

Financial instruments measured at fair value (continued)(a)

During the year ended 31 December 2012, there was no

significant transfer between instruments in Level 1 and

Level 2.

During the year ended 31 December 2012, there was no

change in valuation techniques for fair value measurements.

Sensitivity analysis on fair value mearsurements

in Level 3 of the fair value hierarchy

The Bank’s Level 3 financial instruments are mainly

structured derivatives. Any deals between the Bank and its

customers are fully squared with other financial institutions

and there is no open position. Thus, although fair value

measurements of Level 3 use inputs that are not based on

observable market data and the measurement is uncertain,

there is no impact on the Bank’s current year profit or

equity if such judgement and estimation on unobservable

inputs changes.

105 106

Credit risk weighted amount

The credit risk weighted amount refers to the amount as

computed in accordance with the rules set out by the CBRC

and depends on the status of the counterparty and the

maturity characteristics. The risk weights used range from

0% to 100% of contingent liabilities and commitments. The

credit risk weighted amounts stated above have taken into

account the effects of bilateral netting arrangements.

892,182,262

340,296,000

1,835,802,955

3,068,281,217

3,460,711,261

930,318,098

458,689,473

526,958,366

67,562,984

5,444,240,182

8,512,521,399

Capital commitments

As at 31 December, the capital commitments of the Bank

were as follows:

2012

Operating lease commitments

As at 31 December, the total future minimum lease payments

under non-cancellable operating leases of properties were

payable as follows:

(b) (c)

Credit risk weighted amount

of contingent liabilities

and commitments 5,349,695,464

2011

6,048,168,241

Within 1 year (inclusive)

After 1 year but

within 2 years (inclusive)

After 2 years but

within 3 years (inclusive)

After 3 years

Total

256,611,906

214,188,843

104,987,530

47,325,141

623,113,420

248,016,643

233,792,865

211,008,416

107,946,809

800,764,733

2012 2011

Leasehold improvement contracts

entered into but not performed or

performed partially

Purchase contracts entered into

but not performed

Total

7,638,650

762,496

8,401,146

13,869,726

512,782

14,382,508

2012

2012

2011

44 Commitments and contingent liabilities

Fair value of other financial instruments

(not measured at fair value)

The Bank’s other financial assets mainly include deposits

with central bank, deposits with inter-banks, placements

with inter-banks and loans and advances to customers.

Except for loans and advances to customers, most

financial assets are due within one year or are measured

at fair value; therefore their carrying amounts are close

to their fair values.

Loans and advances to customers are recorded at

amortised cost less impairment losses (See Note 10). Since

the interest rates for loans and advances are adjusted on a

real-time basis based on PBOC’s stipulated interest rates,

and impaired loans have been reduced at the amount of

impairment losses to reflect the recoverable amount, the

carrying amounts of loans and advances are close to their

fair values.

The Bank’s financial liabilities that are recorded at

amortised cost mainly include deposits from inter-banks

and non-bank financial institutions, borrowings from

inter-banks, financial assets sold under repurchase

agreements and deposits from customers. As at the

balance sheet date, the carrying amounts of the Bank’s

financial liabilities are close to their fair values.

The above assumptions and methodologies provide

the same basis for calculating the fair value of the

Bank’s assets and liabilities. However, because other

financial institutions may use different assumptions and

methodologies, the fair value disclosed by each financial

institution may not be comparable.

Credit commitments

At any given time the Bank has outstanding commitments

to extend credit. The Bank provides loan commitments,

unused credit card facilities, financial guarantees and

letters of credit to guarantee the performance of customers

to third parties. The Bank assesses the potential loss of

credit commitment on a regular basis and recognises

liabilities if necessary.

The contractual amounts for loan commitments and

credit card unused facilities represent the total amounts

if the Bank makes the fully payments. The amounts in the

table for guarantees and letters of credit represent the

maximum potential loss that would be recognised at the

balance sheet date if counterparties failed completely to

perform as contracted. Acceptances comprise undertakings

by the Bank to pay bills of exchange drawn by customers.

The Bank expects most acceptances to be settled

simultaneously with reimbursement from customers.

As the credit facilities may not be fully used upon maturity,

the contractual amount sets out below does not represent

the expected cash flow out in the future.

(a)

(b)

Contractual amount

Unused credit card facilities

Loan commitments

− with an original maturity within one year

− with an original maturity of one year or over

Standby letters of credit issued and

guarantees

Acceptances

Letters of credit accepted

Letters of credit issued

Letters of credit confirmed

Total

-

277,335,000

1,759,744,499

2,037,079,499

5,553,419,857

940,928,459

482,264,892

533,374,238

139,618,602

7,649,606,048

9,686,685,547

43 Fair value of financial instruments (continued)

2011

107 108

ANNUAL REPORT 2012 - Citi · 2016. 3. 3. · Citi has long been a leader in the provision of...

Documents

Transcript of ANNUAL REPORT 2012 - Citi · 2016. 3. 3. · Citi has long been a leader in the provision of...