Hua Xia Bank : 2016 Annual Report

2016 Annual Report

HUA XIA BANK CO., LIMITED

Contents

3 Message from Chairman

1. Message from President

2. Important Notice

3. Section I Definitions

4. Section II Company Profile and Major Financial Indicators

13 Section III Business Overview

16 Section IV Discussion and Analysis of Operations

62 Section V Significant Events

76 Section VI Details of Changes in Ordinary Shares and

Shareholders

82 Section VII Preference Shares

87 Section VIII Basic Information on Directors, Supervisors,

Senior Management Members and Employees

101 Section IX Corporate Governance

1. Section X Financial Statements

2. Section XI List of Documents for Inspection

3. Written Confirmation of the Annual Report 2016 by Directors and Senior Management Members of Hua Xia Bank Co., Limited

111 Audit Report

2016 Annual Report

Hua Xia Bank Co., Limited

Chairman of the Board: Li Minji

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Message froM ChairMan

Message from Chairman

Hua Xia Bank explored vigorously and worked hard in 2016, fulfilling the objectives set forth in the four-year development plan for 2013 through 2016.

Structural adjustments made progress. Specifically, our proportion of general deposits, return on assets and return on average equity all elevated to the average level of peer banks; our emerging business lines like investment banking and asset management also grew rapidly, contributing increasingly higher to profit growth.

The overall strength improved steadily. Our rankings among global peer banks by total assets and tier 1 capital climbed from the 97th and 111th to the 72nd and 79th, respectively; our outlet number grew from 475 to 886, which were distributed in 96 large and medium-sized cities across 35 provinces, municipalities directly under the central government and autonomous administrative regions.

Financial services went deeper continuously. With the fairly rapid growth of corporate, personal and small & micro customers, we managed to win many active customers and gather preliminary experience necessary for distinctive operation of small & micro enterprise business. Besides, we also launched an array of featured products including Annually Reviewed Loan, Hua Xia ETC cards, and Beijing-Tianjin-Hebei coordination cards, which made us influential in the sector of serving the coordinated development of the region.

The drive of building the "second bank" proceeded steadily. We worked hard to develop Internet finance, continued to optimize the functions of online banking and mobile banking, and vigorously sought for cross-over cooperation. As a result, our Internet-based customer on-boarding ability and service capacity were enhanced further.

We improved operations management and regulated operation, never overstepping the bottom line of risk, and also secured great strides in team building and creation of a harmonious corporate culture. At the same time, our vigorous commitment to social responsibilities helped us win more recognition both internally and externally.

In 2017, we will act on the economic and financial policies set forth by the CPC Central Committee and the Chinese Government, never overstepping the bottom line of risk control. At the same time, to make a difference, we will strive to seize opportunities brought along in such fields as transformation and development, structural adjustment, and reform and innovation.

We will attach equal importance to the Party building and the market-oriented reform, in a bid to lift our work in various fields to a new high resolutely. By including the general requirements for Party building into the corporate governance, we will ensure the absolute leadership of the Party. Pushing forward the market-oriented reform at the same time, we try to work with and remain tough on the both sides, so that they will interact with each other and generate a synergy, thus breaking a new ground.

We will serve the national development strategies and fit ourselves into the mainstream of local economic growth. All our branches and institutions are expected to serve China's three major development strategies in earnest. In the meantime, we should work more proactively to integrate in the mainstream of local government projects and economic development. Proceeding from local conditions, we are in a good position to handle the relationship between "being large and strong" and "being stable and excellent" properly. We hope our bank can maintain sound development while serving the local economic growth with high-quality financial services.

We will highlight our features and capitalize on our business advantages. Serving small and medium-sized enterprises constitutes one of our featured businesses. We will work hard to turn it part of our core competitiveness. In the meantime, with value-driven thinking, we will adjust the structure of products, regions and customers for efficient allocation, in a bid to ensure our asset scale can grow efficiently.

We will strengthen lean management and render services in a professional manner. By such means as balance sheet management and management accounting, we will be able to bring new ideas about comprehensive value management so that our products, industry operations and personnel management all can go in a professional fashion. As a result, we will sharpen the comparative advantages in furnishing professional financial services.

We will strengthen control over non-performing assets and enhance risk mitigating capability. To substantially reduce non-performing assets through multiple channels and in a well- planned way, we will recruit a team of professional employees who demonstrate adequate executive force and competence to dispose all sorts of assets arising from special opportunities in the market.

We will develop a new plan and explore how to devise a good strategy on comprehensive operation and FinTech. The new plan should fully embody our resources and advantage, be aligned with our development objectives and pathways to them, and outline approaches to comprehensive operation and FinTech in particular.

In closing, I would like to extend my gratitude again to all shareholders and people from all walks of life for your substantial support!

Chairman of the Board

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