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+Unless otherwise stated, all monetary sums stated in this report are expressed in RMB.
+Chapter VIII Financial Statements
+161
+Chapter VII Changes in Shares and Information on Shareholders
+150
+Chapter VI Important Events
+143
+Chapter V Corporate Governance
+104
+China Merchants Bank
+Annual Report 2021
+Chapter IV Environmental, Social and Governance (ESG)
+91
+88 3.12 Outlook and Coping Tactics
+3.11 Risk Management
+81
+3.10 Business Operation
+59
+3.9 Key Business Concerns in Operation
+47
+Miao Jianmin, Chairman of the Company, Tian Huiyu, President and Chief Executive Officer, Wang Liang, First
+Executive Vice President, Chief Financial Officer and Secretary of the Board of Directors, and Li Li, the person in
+charge of the Finance and Accounting Department, hereby make representations in respect of the truthfulness,
+accuracy and completeness of the financial statements in this report.
+3.8 Implementation of Business Development Strategies
+Definitions
+The Company, the Bank, CMB or China Merchants Bank:
+CMB International Capital Holdings Corporation Limited
+CMB International Capital or CMBIC:
+CMB Financial Leasing Co., Ltd.
+CMB Financial Leasing or CMBFL:
+CMB Wing Lung Bank and its subsidiaries
+CMB Wing Lung Group:
+CMB Wing Lung Bank Limited
+CMB Wing Lung Bank:
+Definitions/Significant Risk Warning
+The Rules Governing the Listing of Securities on the SEHK
+The Stock Exchange of Hong Kong Limited
+Hong Kong Stock Exchange or SEHK:
+China Securities Regulatory Commission
+China Banking and Insurance Regulatory Commission
+CSRC:
+CBIRC:
+China Merchants Bank and its subsidiaries
+The Group:
+China Merchants Bank Co., Ltd.
+Hong Kong Listing Rules:
+44
+3.7 Other Financial Disclosures under the Regulatory Requirements
+43
+Significant Risk Warning
+2
+Definitions
+2
+1
+Contents
+Contents
+China Merchants Bank
+Annual Report 2021
+3
+CHINA MERCHANTS BANK
+M
+2021 Annual Report
+Preference Share Stock Code: 04614
+H Share Stock Code: 03968
+(a joint stock company incorporated in the
+People's Republic of China with limited liability)
+CHINA MERCHANTS BANK CO., LTD.
+CHINA MERCHANTS BANK
+M 招商銀行
+公 招商銀行
+Important Notice
+4
+Chairman's Statement
+3.6 Results of Operating Segments
+43
+3.5 Analysis of Capital Adequacy
+40
+3.4 Analysis of Loan Quality
+34
+3.3 Analysis of Balance Sheet
+29
+3.2 Analysis of Income Statement
+22
+Chapter III Management Discussion and Analysis
+Chapter II Summary of Accounting Data and Financial Indicators
+22
+222
+18
+Chapter I Company Information
+13
+President's Statement
+8
+CMB Wealth Management:
+CMB Wealth Management Company Limited
+22 3.1 Analysis of Overall Operation
+China Merchants Fund Management Co., Ltd.
+Chairman's Statement
+- Insist on sustainable development and focus on fulfilling social responsibilities. We will implement the central
+government's policies to deal with the impact of the pandemic, improve the quality and efficiency of serving the real
+economy, increase efforts to cultivate and support the "specialised, competitive, distinguished and innovative (*)"
+enterprises, and vigorously promote the development of inclusive finance by fully leveraging our Fintech advantages. We
+will also focus on and support the development of green finance, optimise the risk management system of green finance,
+and assist in the implementation of the State's "peaking carbon dioxide emissions" and "carbon neutral" goals.
+2022 is the year for the 20th National People's Congress of the Party, and in which CMB will also celebrate its 35th
+anniversary. Those who share common aspirations will win, and those who overcome challenges together will
+prosper. We will unswervingly deepen model transformation and business transformation, and unremittingly enhance the
+construction of "three capabilities" to create more value for customers, employees, partners, shareholders and society. We
+will construct our own "Malik Curve" of model transformation, cross over the economic cycles to build a well-known brand
+for a century and realise a long-lasting business.
+China Merchants Bank Co., Ltd.
+Chairman
+5
+建民
+18 March 2022
+-
+8
+President's Statement
+Annual Report 2021
+President's Statement
+In 2021, China Merchants Bank strived to implement the new development concept, and once again paid tribute to the
+historical intersection of the "two centennial goals" by delivering quality development. ROAA and ROAE of the Group
+increased to 1.36% and 16.96%, respectively, asset quality was further improved, and the non-performing loan ratio
+returned to below 1%. More customers chose CMB as the principal bank for wealth management and corporate services.
+Total assets under management (AUM) from retail customers exceeded RMB10 trillion, and aggregate financing products to
+corporate customers (FPA) increased to nearly RMB5 trillion.
+2021 was the first year of CMB's extensive wealth management, and the dream that "wealth management could knock on
+the door of every ordinary Chinese household" was gradually coming true. "Zhao Zhao Bao ()" linked up the main
+payment accounts and wealth management accounts, and lowered the threshold for wealth management so that young
+customers may get their first experience with wealth management. The open wealth management platform redefined the
+industry ecology and the logic of competitive and cooperative relationship. Our cyclic value chain of "wealth management -
+asset management - investment banking" operated efficiently, with the size of assets under management exceeding RMB4
+trillion, and the size of assets under custody increasing to nearly RMB20 trillion. The extensive wealth management income²
+for the year accounted for nearly 16% of the net operating income, becoming the key minority in our exploration of a new
+business model.
+Since the second half of the "Light-model Bank" transformation, we have been making unprecedented efforts to build a
+Digital Bank, enabling customers to enjoy the convenience of digitalisation in every process of customer services. We led
+organisational evolution with openness and integration and staged a "quiet revolution". Hundreds of integration teams
+were active across organisational boundaries, breaking the walls between business lines as well as departments. Technology
+and culture are becoming two "wings" for the extensive wealth management, invisible but powerful.
+The 3.0 model was still an obscure concept three years ago when we proposed the exploration. After three years of hard
+work, we now see in front of us an increasingly clear outline - "extensive wealth management business model + digital
+operational model + open and integrated organisational model", which is also the closest thing to what our ideal "Light-
+model Bank" would look like.
+The higher we climb, the more we see the greatness of mountains and the insignificance of ourselves. We can
+only address the uncertainties of global changes unseen in a century with the certainties of our own progress. China is
+undergoing "the grandest and most unique practice and innovation in human history". Economic transformation and
+upgrading have converged with people's desire for a better life. The cross-boundary application of technology and capital
+has blurred industrial and regional boundaries, and direct financing is increasingly becoming the mainstream.... Facing such
+changes, we are aware that we have not been fully prepared. Over the years, commercial banks have been committed to
+building a financial statement based on accounting standards, and endeavored to strike a balance in managing "risk, capital
+and business". However, this statement narrows our focus to operating results instead of more diverse customer needs or
+more subtle problems faced by customers. Only changing from managing merely "the bank's financial statement" to
+managing also "the customers' financial statements", can we achieve quality growth while bringing value to customers.
+This is the core essence of CMB's exploration of the 3.0 model.
+China Merchants Bank
+China Merchants Bank
+Annual Report 2021
+- Insist on quality development and focus on building risk management capabilities. We will build a cyclic extensive
+wealth management value chain in a light-capital way, and reasonably control the growth rate of risk-weighted assets. We
+will further improve our capability to asset allocation, strengthen the Group-wide unified risk management, continuously
+improve anti-money laundering and internal control compliance management, and increase efforts in the management and
+treatment of risky accounts.
+- Insist on business transformation and focus on building Fintech capabilities. We will accelerate the full application
+of Fintech to support business transformation. We will as always support investment in Fintech, constantly adhere to the
+concept of fault tolerance, and encourage and support major, cutting-edge and disruptive Fintech innovations. And we will
+continue to carry out "independent innovation" and master "core technologies".
+China Merchants Fund or CMFM:
+The profit appropriation plan: it was proposed that 10% of the audited net profit of the Company for 2021 of
+RMB109.794 billion, equivalent to RMB10.979 billion, would be allocated to the statutory surplus reserve, while
+1.5% of the amount of the increased balance of the Company's assets that bearing risks and losses at the end of
+the period, equivalent to RMB11.874 billion, would be appropriated to the general reserve. Based on the total share
+capital of A Shares and H Shares on the record date for implementation of the profit appropriation, the Company
+will declare a cash dividend of RMB1.522 (tax included) for every share to all shareholders of the Company whose
+names appear on the register, payable in Renminbi for holders of A Shares and in Hong Kong Dollars for holders
+of H Shares. The actual profit appropriations amount in HKD would be calculated based on the average benchmark
+rate for RMB to HKD published by the People's Bank of China for the previous week (including the day of the
+shareholders' general meeting) before the date of the shareholders' general meeting. The retained profits will be
+carried forward to the next year. In 2021, the Company did not transfer any capital reserve into share capital. The
+above profit appropriation plan is subject to consideration and approval at the 2021 Annual General Meeting of the
+Company.
+We have included in this report certain forward-looking statements with respect to the financial position, operating
+results and business development of the Group. We use words such as "will", "may", "expect", "try", "strive",
+"plan", "anticipate", "aim at", and similar expressions to indicate forward-looking statements. These statements
+are based on current plans, estimates and projections. Although we believe that the expectations reflected in these
+forward-looking statements are reasonable, we give no assurance that these expectations will turn into reality or
+prove to be correct. Therefore they should not be deemed as the Group's commitments. Investors should not place
+undue reliance on such statements and should pay attention to investment risks. You are cautioned that such
+forward-looking statements are related to future events or future financial position, business, or other performances
+of the Group, and are subject to a number of uncertainties which may cause substantial differences from those in
+the actual results.
+3
+China Merchants Bank
+Annual Report 2021
+Chairman's Statement
+Chairman's Statement
+2021 is a milestone year in which the Communist Party of China celebrated its centenary, and China achieved its first
+centennial goal and geared into a new journey towards its second centennial goal. This year, China Merchants Bank
+thoroughly practiced quality development and achieved outstanding operating results. The Group realised net operating
+income for the year amounting to RMB331.4 billion, a year-on-year increase of 14.17%, and net profit attributable to
+shareholders of the Bank amounting to RMB119.9 billion, a year-on-year increase of 23.20%. With continued improvement
+of asset quality and constant reinforcement of ability to withstand risks, the Group recorded the non-performing loan
+ratio of 0.91% and the allowance coverage ratio of 483.87%. The cost-to-income ratio saw a "inflection point" for the
+first time since 2016. The operation efficiency improved significantly. The return on average equity (ROAE) and the return
+on average assets (ROAA) of the Group reached 16.96% and 1.36%, respectively, representing a year-on-year increase of
+1.23 percentage points and 0.13 percentage point, respectively. In 2021, China Merchants Bank was selected as the "Best
+Bank in China" by Euromoney for the third consecutive year, which marked the first "3 Consecutive Championships" in its
+awarding history.
+"Business fortunes are closely bound up with national destiny." China Merchants Bank's healthy development and
+outstanding achievements epitomised vigorous development in China since the reform and opening up, a portrayal of
+reform and innovation of financial industry in the country, and the culmination of continuous efforts of the generations of
+CMBers by upholding their original aspiration, sticking to the "Two Consistent Principles", and adhering to the concepts
+of marketisation, differentiation, innovative development and prudent risk management. We are grateful to the
+contemporary age and live up to its expectation. Standing at the historical intersection of the "two centennial goals",
+and riding the tide of the times, we pay tribute to history and march toward the future.
+"Transformation will lead to flexibility, and thus lead to long-term success." Only by continuously advancing
+transformation and reform can we therefore maintain our long-term market competitiveness and achieve a long-lasting
+foundation. The "Malik Curve" named after the European management scientist Fredmund Malik explains that enterprises gain
+new development space through transformation and reform, which not only fits our development process, but also brings us
+profound enlightenment. The first is that enterprises will gradually become mediocre or even disappear if the transformation
+and reform is not carried out in a timely manner; the second is to firmly make key strategic decisions during the strategic
+window; the third is that making key strategic decisions requires a strong sense of crisis and strategic insight; the fourth is
+that long-term and firm strategy execution is required. In 2021, on the basis of summarising the achievements and experience
+of the "13th Five-Year Plan" and in consideration of the operating environment in the new development stage of the nation,
+we formulated the "14th Five-Year" strategic plan, which highlighted the strategic vision of "building the best value creation
+bank with innovation-driven development, leading model and distinguished features", put forward the China Merchants Bank
+3.0 model of "extensive wealth management, digital operation and openness and integration", focused on the three capacity
+building of "wealth management, Fintech and risk management", and thus making key strategic decisions at the strategic
+transition window and realising the "Malik Curve" of China Merchants Bank in the new era.
+"One who stands on tiptoes can't stand firm, and one who strides can't walk far." We adhere to the general tune
+of making steady progress, and do not make progress blindly and do not rush for quick but short-term success. In 2021,
+we took a solid step towards the strategic vision of the "14th Five-Year Plan" and achieved a breakthrough in
+the "3.0 model", assuming a good start. We adhere to the principle of "customer-centric" and focus on both assets and
+liabilities of the customer's balance sheet to promote the cyclic value chain of extensive wealth management. As of the end
+of 2021, the retail customer base exceeded 170 million, and total assets under management (AUM) from retail customers
+exceeded 10 trillion with an increment of more than RMB1 trillion again. The scale of assets under custody increased to
+nearly RMB20 trillion with the scale of assets under management exceeding RMB4 trillion'. We are highly open to the
+outside world and highly integrated internally. We vigorously promoted the construction of an open wealth management
+platform, built an ecosystem of wealth management, attracted 87 asset management institutions, and introduced high-
+quality products from the wealth management subsidiaries of 8 peer banks. We insisted on investing in Fintech, and
+continued to promote host cloud and application cloud, and our technical capabilities are among the best in the domestic
+financial industry in terms of natural language processing, knowledge graph and human-computer dialogue. We relied on
+technological capabilities to enhance service efficiency, leveraged on corporate digital services to achieve the rapid growth
+of corporate customer base, so as to highlight the characteristics and enhance the competitiveness of corporate business.
+At the end of 2021 and the beginning of 2022, the digital RMB was successfully launched, and CMB officially became a
+digital RMB operating agency recognised by the central bank.
+1
+The scale of assets under management includes the total of asset management businesses of CMB Wealth Management, China Merchants Fund, CMB
+International Capital and CIGNA & CMAM as of the end of the reporting period.
+Miao Jianmin
+Chairman
+China Merchants Bank
+Annual Report 2021
+Chairman's Statement
+"Taking actions after well planning, and knowing our objectives and goals, we will thus know the direction and
+expectation of work, and will achieve perfection." Under the impact of the pandemic unseen in a century, the changes
+unseen in a century have evolved at an accelerated pace, and the external environment has become more complicated,
+severe and uncertain. The domestic economic development faced triple pressures of shrinking demand, disrupted supply and
+weakening expectations. Under the changing circumstances, we had strong strategic confidence and strategic determination
+to deal with the situations calmly, and have always adhered to the "three constants" principles of the President assuming
+full responsibility under the leadership of the Board of Directors, the market-oriented incentive and restraint mechanism,
+and the stability of the management team and talents. We will continue to strengthen the implementation of strategies,
+take the enhancement of the "three capabilities in wealth management, Fintech and risk management" and building the
+3.0 model as major tasks in implementing the "14th Five-Year Plan", and uphold quality development which integrates
+innovation, coordination, green finance, openness and shared development. We will grasp the dialectical relationship
+between "stability" and "advancement" by promoting "advancement" with "stability" and consolidating "stability" with
+"advancement". We will continue to catch up with and outpace peers in the industry dispersion trend. We will handle the
+evolutionary relationship between "light" and "heavy" properly, strengthen the capital-heavy credit business and expand
+the capital-light wealth management business, and accelerate the transformation of the business model.
+- Insist on model transformation and focus on building wealth management capabilities. We will continue to
+expand our customer base, enhance our asset allocation for customers and product portfolio management, and become
+the "preferred" bank for clients' wealth management. We will further push ahead with the "Original Aspiration Plan (
+)", focus on improving the experience of customers and employees, and systematically upgrade wealth management
+capabilities.
+Therefore, the essence of the 3.0 model is to uphold our original aspirations. "Being customer-centric and creating value
+for customers" is our unchanging original aspiration and our most authentic values. The deviation and wavering of the
+value propositions at any time are the biggest obstacles on our way forward. Value propositions are not vague concepts.
+They are reflected in every consideration of our operation and management, as well as every choice we make when faced
+with dilemmas.
+2
+"Be well prepared to benefit all the people". We are not only seeking business opportunities, but also planning
+for the nation. In 2021, we integrated into the overall situation of the development of the nation, thoroughly
+implemented ESG concepts, and actively fulfilled our corporate social responsibilities. We built the CMB Sunflower
+Sustainable Development Model, practiced financial charity, responded to climate changes, broadened the career platform
+for our employees, enhanced people's well-being, elevated customer experience, and promoted sound governance. We
+supported the technological innovation of the whole society, served the technological self-reliance of the nation with
+finance, and nourished "specialised, competitive, distinguished, and innovative ()" enterprises with financial
+innovation as the "running water". We actively assisted the implementation of national and regional major strategies
+and regional coordinated development strategies, and accelerated the creation of a "cross-border wealth management"
+service system. Adhering to the principle of inclusiveness, we served the development of the economy and the people's
+livelihood, and used digital technology to improve the efficiency and coverage of financial services. As at the end of 2021,
+the balance of SME inclusive finance loans amounted to RMB601.1 billion, representing a faster growth rate than that of
+loans in general. We continuously improved and perfected the modern corporate system, and strived to promote quality
+development with high-quality corporate governance. We promoted and accelerated the development of green finance,
+clarified the strategic goal and implementation path of green finance, and increased efforts to promote innovation in
+the services and products of green finance. As at the end of 2021, the balance of green loans was RMB263.8 billion,
+representing an increase of 26.49% as compared with the beginning of the year. In 2021, China Merchants Bank's MSCI
+ESG rating was upgraded to A. We assisted in the prevention and control of the pandemic and vigorously fulfilled our
+social responsibilities. In the election of the 11th China Charity Award of the Ministry of Civil Affairs, the Company won
+the "China Charity Award" for its outstanding contributions to the fighting against the pandemic. Yongren and Wuding,
+the two counties we helped with poverty alleviation, have been lifted out of poverty as scheduled. Nevertheless, we will
+continue to devote ourselves to effectively supporting the comprehensive revitalisation of the two counties.
+China Merchants Bank
+Annual Report 2021
+China Merchants Bank
+The Company has disclosed herein the major risks involved in its operations and the proposed risk management measures.
+Please refer to Chapter III for the details in relation to risk management.
+Significant Risk Warning
+Model Code for Securities Transactions by Directors of
+Listed Issuers of Hong Kong Stock Exchange
+Model Code:
+Securities and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong)
+SFO:
+Deloitte Touche Tohmatsu Certified Public Accountants LLP:
+Deloitte Touche Tohmatsu Certified Public Accountants
+LLP (Special General Partnership)
+CMB YunChuang Information Technology Co., Ltd. with
+100% equity interest held by the Company indirectly
+CMB Network Technology:
+China Merchants T-Bank Co., Ltd. (under preparation)
+CMB YunChuang:
+China Merchants T-Bank:
+Merchants Union Consumer Finance Company Limited
+MUCFC:
+CIGNA & CMB Life Insurance Co., Ltd.
+CIGNA & CMB Life Insurance:
+China Merchants Bank (Europe) Co., Ltd. ((&)
+有限公司)
+CIGNA & CMB Asset Management Company Limited
+CMB Europe S.A.:
+The income from extensive wealth management includes the fees and commissions from wealth management, asset management and custody businesses.
+CIGNA & CMAM:
+Important Notice
+Annual Report 2021
+China Merchants Bank Network Technology (Shenzhen)
+Co., Ltd. with 100% equity interest held by the Company
+indirectly
+1.
+President's Statement
+For returning to our original aspirations, we must first be closer to our customers. Banks have been challenged by
+"the impossible trinity" of "serving large numbers of customers while maintaining quality offerings at limited costs" for
+many years. At present, 0.17 billion retail customers and 2.32 million corporate customers have selected China Merchants
+Bank, but most of them still remain underserved. If things go on like this, customers will eventually become an abstract
+concept on the financial statement. The more socially alienated the era becomes, the more precious the warmth of "we
+are here" is. We shall give full play to the advantages of "people + digitalisation", and establish a 24/7 service network
+consisting of "relationship managers + remote services + APP", so as to shorten reach time, expand service radius and
+enable China Merchants Bank to respond to you anytime, anywhere.
+Important Notice
+6
+Getting closer to customers is to better understand them. China's economy is experiencing an unstoppable rising trend
+and has become a crucial force in the reconstruction of the global industry chain. In face of the new economies and the
+new growth engine entities, we are still fresh learners who should remain in awe of the complexity of the business world,
+proactively improve our industry knowhow through specialised operation and industry self-organisation, and seek to speak
+the same language with more customers we serve, so as to achieve synergy. Likewise, under the "filter" of traditional asset
+stratification, our observation of retail customers' risk-return preferences is far from concrete. Responding to different
+expectations of segmented customer groups will surely be the future of wealth management. We will attempt to perceive
+customer preferences from more dimensions, to understand customers with not just big data, but also a human touch.
+Creating value for customers requires a broader perspective on our professional capabilities. A large number of
+rivals have emerged on the track of wealth management. Whoever leads in pivoting from "self-centric product sales"
+to "customer-centric asset allocation" will be able to occupy the dominant position and build a real "moat" for wealth
+management. From the standpoints of running businesses, it is increasingly difficult to regard multi-dimensional scenarios as
+separate cases, namely sales, procurement, capital operation, digital transformation, industrial chain and investment chain
+arrangements, retail banking needs of executives and employees, etc. We will put together our knowhow in investment
+banking, commercial banking, private banking, technology, and research ("ICPT") as a combined offering for customers,
+creating an integrated and comprehensive service capacity that only CMB can deliver.
+Today, the barriers between departments within banks have made it increasingly difficult to meet the needs of
+customers for comprehensive services. The traditional bureaucratic system and regional profit centers of banks form
+a "grid-like (#%)" block structure. Each business unit is confined in its own block with little understanding of the
+bigger picture. Interests of different blocks, which make perfect sense in their separate ways, often become conflicted
+and unreasonable when integrated at the customer level. Culture determines the success or failure of an organisation in a
+subtle but real way. We took openness and integration as the methodology, attempted to address complex demands for
+comprehensive services with a more flexible organisational formation, fix customers' extended pain points on their industry
+chain and investment chain, and offer the experience of "One CMB" to meet group customers' needs with different CMB
+branches across the country. We believe that this may be a key to solving the problem of "fallacy of composition (?
+誤)”.
+Creating value for customers calls for a workforce that places "values above KPIs". Some of our staff have long
+been accustomed to strong performance orientation, and can do nothing without KPIs, which breeds short-termism,
+parochialism and commercial opportunism. If everything we do is based on the KPIs, all the numbers will only become the
+basis of next year's tasks. However, if we do things in a customer-centric manner, all the efforts will become the basis for
+future development. We believe that all truly great and inspiring things are created by self-motivated individuals. We've
+made clear that values are the primary criterion for evaluating cadres, and attempted to exempt "KPI" appraisals for some
+units, so that employees could find the meaning of work in creating value for customers while realising their own value.
+Performance appraisal of large enterprises has always been a difficult problem. However, we must confront and solve the
+problem, because business models determine how well we can develop, and value propositions determine how far we can
+go.
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu (both being auditors
+of the Company) have separately reviewed the 2021 annual financial report prepared in accordance with the PRC
+Generally Accepted Accounting Principles and International Accounting Standards, and have separately issued
+standard auditing reports with unqualified opinions.
+The 37th meeting of the Eleventh Session of the Board of Directors of the Company was convened on 18 March
+2022 by way of video conference. The meeting was presided by Miao Jianmin, Chairman of the Board of Directors.
+16 out of 16 eligible Directors attended the meeting in person. 9 Supervisors of the Company were present at the
+meeting. The convening of the meeting complied with the relevant provisions of the Company Law of the People's
+Republic of China and the Articles of Association of China Merchants Bank Co., Ltd.
+Today, the symbiotic relationship between enterprises and the outside world is closer than any previous historical period.
+People's well-being is the cause and purpose of all wealth creation. CMB has the obligation and ability to assume greater
+social responsibilities. We will infiltrate the ESG concept into our daily operation and management with greater efforts and
+more resources. CMB will insist on common prosperity, use wealth to improve the well-being of people, make contributions
+and play its role in the fields of rural revitalisation, education, environmental protection, etc., and serve as a bridge
+connecting customers, employees and partners, connecting charitable activities with financial innovation and technological
+empowerment, as well as connecting the commercial world with humanistic spirit.
+2.
+contents.
+The Board of Directors, the Board of Supervisors, Directors, Supervisors and senior management of the Company
+confirm that the contents in this annual report are true, accurate, and complete and have no false representations,
+misleading statements or material omissions, and they will severally and jointly accept legal responsibility for such
+7.
+6.
+5.
+3.
+4.
+223
+Tibet
+70
+Jiangxi
+Yunnan
+64
+Fujian
+Beijing
+Hebei
+67
+Tianjin
+25
+41
+191
+Shaanxi
+78
+Shanxi
+46
+Henan
+Gansu
+3
+Hubei
+No. of
+complaints
+11
+Inner Mongolia
+Shandong
+Region
+Regarding the information security and privacy protection of retail customers, the Company issued the "Management
+Measures for Retail Finance Personal Information of China Merchants Bank (Fifth Edition)" (±Ð
+\()), set up a safety protection system for the whole life cycle, from collecting, transmitting,
+using, sharing to saving retail financial personal information, as well as the treatment mechanism for personal
+information protection such as emergency plan, risk management, supervision and inspection, and personal
+information complaint channel, carried out tiered and classified authorisation management, strictly controlling the
+scope of authorisation for personal information inquiry, enhancing the safety impact assessment and management
+on the use of personal information, standardising the approval management of personal information use, carrying
+out internal control and inspection, emergency drill and other activities of personal information, and strengthening
+the publicity and education of personal information protection, in order to strictly prevent data leakage risks.
+Region
+In terms of elderly-oriented transformation, during the reporting period, CMB APP launched a special version for
+the elderly, and CMB Life APP launched a large-font care version to provide considerate service to the elderly. In
+November 2021, the Company launched 95555 elderly-oriented "Dedicated Line for the Elderly ()", and as
+at the end of the reporting period, we have provided 6,420 quick access to one-stop exclusive manual services for
+elderly customers, with a connection rate of 96.63% of the "Dedicated Line for the Elderly (K)".
+In terms of barrier-free transformation, the Company provided convenient services for the disabled by setting up
+ramps for the disabled, one-button calls, wheelchairs for the disabled, and posting assistance telephone numbers
+at barrier-free passages. As at the end of the reporting period, all domestic outlets of the Company have been
+equipped with barrier-free services.
+225
+4.3.4 Security of financial products
+The Company adopted various measures to ensure compliance in the sales of products and effectively protected the
+interests of customers.
+The Company has set up a strict product access and risk assessment process. In terms of the introduction of
+cooperative institutions and agency sales products, the Company strictly complied with the internal and external
+regulations and requirements, conducted in-depth research, strict access and unified management for seed
+candidates and all kinds of asset management products, and established a risk control mechanism for the whole
+process of product access, marketing and after-sales service. In terms of the display of agency sales products,
+the Company highlighted the reminders of product management agencies, risk rating and investment duration in
+various sales channels and information query platforms, so as to help customers identify the sources and elements
+of products. In terms of system restrictions, the sales system is able to clearly remind or restrict customers to avoid
+purchases that excess their risk appetite. In terms of sales quality control, the Company set up special areas for
+wealth management (agency sales) products sales in its outlets to strictly implement the requirements on audio and
+video recording during the sales process.
+The Company was committed to building a full-process companion system for products. Through live product
+roadshows, a series of investor education articles and one-minute short videos on wealth management, we helped
+customers better understand wealth management products; through the interpretation of relevant policies and
+regulations, investment strategy reviews and comments, quarterly product operation reports, aperiodic market
+fluctuation reviews, we popularised financial knowledge to customers; through continued expansion of companion
+service for online wealth management products, we constantly improved after-sales service experience.
+Information security and privacy protection
+The Company attaches great importance to the protection of customer privacy and data security management, and
+actively implements the requirements of national laws and regulations as well as financial industrial standards such
+as "Network Security Law of the People's Republic of China" (+#\R##), "Personal Information
+Protection Law of the People's Republic of China" (±) and "Personal Financial
+Information Protection Technical Specification" (\), so as to make every effort to protect
+the security of personal information.
+China Merchants Bank
+Annual Report 2021
+Chapter IV Environmental, Social and Governance (ESG)
+Regarding the information security and privacy protection of corporate customers, the Company issued the
+"Management Measures for Users of Wholesale Customer Relationship Management System of China Merchants
+Bank (Second Edition)"
+¬¤¤¤Ƒ¯«¥¤£¾¾ÐƑ†ŒÌ), and strictly controlled system users
+and the content of corporate customer information that users can access. Important customer information was
+labelled, and customer behavior was refined through such labels to avoid leakage of detailed customer information.
+Customer information was divided into more than 100 modules, and different modules were controlled under
+different authorisations, sensitive information could only be viewed by authorised personnel, and browsing traces for
+customer information inquiries and access were kept.
+During the reporting period, the Company did not have any major incident of Internet security, information security
+or privacy leakage.
+complaints
+4.3.5 Consumer rights protection
+During the reporting period, the Company effectively assumed the main responsibility of consumer rights protection.
+With great focus by the Board of Directors and the senior management, the Company continued to promote the
+integration of self-discipline supervision and business development, so as to make its own contribution in the
+prevention and mitigation of financial risks, create a pure environment for financial consumption, and "satisfy
+people's new expectations for a better life". During the reporting period, the Company revised the documents such
+as "Application for Opening Personal Account" (\\\F\Ƒ¢\»), "Service Agreement of CMB Life Platform"
+#and "Wealth Management Product Sales Agreement of China Merchants Bank" (
+Rí¡ŒYȦ¤¶)), fully respected and consciously protected the legitimate rights of consumers, actively
+implemented a pre-examination mechanism for the protection of consumer rights to shift the risk threshold forward,
+identified and corrected potential hazards that may harm the legitimate rights of consumers from the customers'
+perspective, covering all aspects including design and development, pricing management, agreement formulation,
+marketing and publicity of product and service, and conducted 34,063 consumer rights protection reviews during
+the reporting period. Special trainings on consumer rights protection comprehensively covered senior management,
+business line personnel related to consumer rights protection, grassroots personnel and new employees, with more
+than 80,000 participants. In terms of performance appraisal, the Company included the protection of consumer
+rights and the handling of consumer complaints into the comprehensive assessment index system of branches and
+the Head Office. In terms of independent auditing, the Company put the protection of consumer rights into the
+scope of the annual audit as the focus of audit work every year.
+The Company provided consumers with convenient ways to obtain information on consumer rights protection,
+opened up a large-font column of customer rights protection on the official website of "All-in-one Net", published
+information such as complaint handling procedures and acceptance channels in various ways, and updated financial
+knowledge, case study and work briefings from time to time.
+97
+98
+China Merchants Bank
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2021
+During the reporting period, the Company received a total of 21,628 complaints transferred from regulatory
+authorities. The regional distribution is shown in the table below.
+No. of
+No. of
+Region
+complaints
+The Company attaches great importance to the protection of consumer rights, has always been committed to
+building the bank with best customer experience. By dynamically integrating the "People-centered" philosophy with
+the "Customer-centered" value, the Company adheres to the notion of "extensive wealth management system
+with the companionship of consumer protection throughout the whole process", so as to earnestly implement
+the requirements of the People's Bank of China and China Banking and Insurance Regulatory Commission for the
+protection of consumer rights.
+Qinghai
+Note:
+Liaoning
+118
+Sichuan
+179
+Qingdao
+68
+Anhui
+62
+Guizhou
+9
+Shenzhen
+1,246
+including complaints related to credit cards.
+Zhejiang
+During the reporting period, the rate of customer feedback (including customer complaints, rational suggestions
+and opinions) of the Bank was 0.33%. According to the business classification of customer feedback, debit cards
+accounted for 39%, and credit cards accounted for 61%.
+China Merchants Bank
+Annual Report 2021
+Chapter IV Environmental, Social and Governance (ESG)
+4.3.6 Human resources development
+In terms of recruitment management, the Company is committed to eliminating discrimination in terms of gender,
+age, ethnicity, family status, religion, sexual orientation and social origin in recruitment and employment, and
+stipulates that discriminatory descriptions are strictly prohibited in external recruitment announcements. The
+Company focuses on campus recruitment, which is supplemented by social recruitment, the recruitment channels
+are mainly resume delivery on the official website and internal recommendation. During the reporting period, the
+Company made every effort to build the best employer brand, publicised through "online+offline" channels in a
+three-dimensional all-round manner via carriers that attract young people like short videos and long graphics and
+texts, so as to attract more excellent talents in the extent possible.
+In terms of remuneration management, the Company adheres to the principle of gender equality in remuneration
+and benefit, and sticks to the notion that gender is not a factor affecting remuneration and benefits. At the same
+time, the annual remuneration analysis report focused on the remuneration and benefits of different genders, and
+no abnormalities were found. The Company adjusts the salary standard of different posts according to the market
+situation and provides employees with competitive remuneration.
+In terms of career development paths, the Company has established a dual-channel development system
+for employees with management capabilities or professionalism, which has changed the single, narrow and
+administrative cadre promotion channel that used to be like "thousands of men trying to cross a thin little log over
+a river". At the same time, a reserve talent pool has been established to encourage employees to choose their own
+posts, so that employees can be their own masters.
+In terms of performance appraisal, the Company continues to optimise the closed-loop performance management of
+the whole process, and satisfies the actual needs in performance appraisal through various methods. The Company
+supervises objective setting, process coaching, performance evaluation and results communication, and prompts
+quarterly and annual performance communication in a timely manner. The Company optimised the 2021 employee
+appraisal plan, and added value evaluation to the appraisal plan for cadres and staff at various levels. The Company
+held two training courses for certified performance managers and completed the certification of 50 performance
+managers within the year. The Company realised online operation of full performance management process, and
+improved the professional capability and management level of teams in each business line.
+In terms of employee training, during the reporting period, the Company continued to improve the comprehensive
+employee training system covering different employees and business lines. In terms of new employee training,
+the single training model was upgraded to a "three-in-one" comprehensive model of centralised training, remote
+connection and open classrooms. During the reporting period, 100% coverage of new employee induction training
+was achieved. In terms of professional staff training, we have built a cross-business line integrated curriculum
+system, enhanced the customisation and professionalism of curriculum, and stimulated the motivation of employees
+to learn. For the training of leaders and cadres, a "CMB-oriented, light-model and normalised" management cadre
+training system was established, and refined leadership training was promoted at different levels, a training plan
+was formulated by focusing on "strategy, culture and team leadership", a closed learning loop that includes pre-
+assessment, online learning, intensive study and discussion, on-the-job practice and post-evaluation was built.
+During the reporting period, the Head office organised and carried out 29 leadership training sessions, with 1,194
+management cadres attended.
+In terms of employee health, safety and welfare, the Company advocates the work philosophy of "Happy Work,
+Healthy Life" and provides comprehensive non-salary benefits to employees. The Company actively responds to
+the implementation of national maternity policy, implements maternity leave in accordance with the requirements
+of the place of operation, and pays remuneration and benefits as normal attendance during maternity leave. In
+accordance with the requirements of laws and regulations and in consideration of the actual situation, an enterprise
+annuity system has been established and operated for nearly 20 years since 2001, and the Company continued to
+provide holiday greetings, physical examinations, short-term group personal insurance and critical illness insurance,
+supplementary medical insurance and other benefits to the retired employees.
+99
+Chapter IV Environmental, Social and Governance (ESG)
+Assuming social responsibilities
+Spreading amiability and strength
+During the reporting period, the Company developed publicity and education plans on different topics according to
+different groups of people and at different timing. In the "March 15 Financial Consumer Rights Day", "Popularising
+Financial Knowledge and Guarding Your Money Bag" and "Financial Knowledge Popularisation Month, Financial
+Knowledge Enters Ten Thousand of Homes, Strive to be a Rational Investor and Strive to be a Good Financial
+Netizen" activities in 2021 organised by the regulatory authorities, the Company organised a total of 22,608
+activities with 641 million consumers attended. The Company has established long-term publicity and education
+zones in all outlets, actively carried out publicity activities in campuses, communities, factories and companies to
+effectively remind consumers of financial risks, intercepted frauds, and encouraged branches to carry out diversified
+normal financial knowledge publicity activities in accordance with local conditions. The Company actively created a
+variety of online publicity campaigns, such as mini games, videos, music videos and interactive graphics and texts,
+and cross-industry publicity. "Zhao Xiao Bao ()", the Company's financial knowledge popularisation and
+consumer education brand, successively published more than 70 short videos on financial knowledge on WeChat
+video account, with a cumulative view of more than 100 million, and a single video with up to 20 million views.
+Some original video works were reposted by the Criminal Investigation Bureau of the Ministry of Public Security and
+the National Anti-fraud Center.
+7
+56
+62
+92
+Hunan
+67
+Ningxia
+14
+Jilin
+13
+Guangdong
+232
+Xinjiang
+30
+Heilongjiang
+Xiamen
+61
+20
+Dalian
+30
+Shanghai (Note)
+17,876
+Hainan
+5
+Ningbo
+23
+Jiangsu
+206
+Chongqing
+Guangxi
+China Merchants Bank
+Annual Report 2021
+108
+96
+Meanwhile, the Company actively disseminated the concept of green environmental protection to the public. At
+the beginning of 2022, the Company launched the "Carbon Quest 2021(2021) Annual Bill" campaign with
+the theme of "carbon neutrality" through CMB APP, combining the theme and content of low-carbon life with the
+user's income and expenditure in the past year, and appealing to everyone, starting from his/her own consumption
+behavior, for taking action and working together to achieve low-carbon and sustainable development, and the
+number of participants has reached nearly 10 million.
+(ESG)), a type of one-year enhanced fixed-income wealth management scheme products and 3 ESG
+wealth management schemes issued and managed by the wealth management subsidiary of peer bank. Joining the
+Green and Sustainable Investment Committee organised by AMAC, China Merchants Fund actively participated in
+the research organised by the AMAC on ESG-related issues and took the lead in the research of due diligence ESG
+management and product specifications regarding bond funds. As one of the first companies to issue product with
+application of CSI ESG index, China Merchants Fund issued and established the Shanghai and Shenzhen 300ESG ETF
+(Exchange Traded Funds). As at the end of the reporting period, there were 5 existing ESG-related products, with an
+existing size of RMB1.462 billion and a size growth rate of 129%.
+In terms of green investment, the Company proactively introduced wealth management products with ESG concept
+to provide retail customers with a diversified selection of ESG wealth management products. During the reporting
+period, the Company's agency sales of new energy and photovoltaic industry funds amounted to approximately
+RMB17.8 billion, and distributed CMB Wealth Management Zhao Rui Rui Yuan Wen Jin (ESG Select) (R
+In terms of green bonds, during the reporting period, the Company issued 2 USD bonds under the "Green, Social
+Responsibility and Sustainable Development Bond Framework of China Merchants Bank" with a total issuance size of
+USD600 million. The Company served as leading underwriter for 38 green bonds with issuance size of RMB61.372
+billion. CMB Financial Leasing issued dual-currency "carbon-neutral" themed green bonds with issuance size of
+USD900 million and EUR100 million, respectively, which was the first Euro green bonds issued by a Chinese financial
+leasing company.
+In terms of green credit, the Company has formulated and improved credit policies such as "Green Credit Policy",
+"Credit Policy for Energy Conservation and Environmental Protection Industry", Credit Policy for Photovoltaic
+Power Generation Industry" and "Credit Policy for New Energy Vehicle Industry", covering energy conservation,
+environmental protection, new energy vehicles, hydropower, wind power, photovoltaic power generation,
+photovoltaic manufacturing, biomass power generation and other industries. The Company actively promoted
+the digestion, integration, transfer and elimination of overcapacity industries, strictly controlled new loans to
+industries with high pollution and high energy consumption, adhered to the one-vote veto system for environmental
+assessment, and avoided any involvement of the low-level and redundant projects in industries with "high pollution,
+high energy consumption and overcapacity". For enterprises operating in environmentally sensitive industries
+featured with "high pollution and high emission", the Company stringently reviewed whether the environmental
+impact evaluation, energy-saving review and pre-approval review on land use regarding the relevant projects have
+been passed. For projects and enterprises which failed to meet the environmental protection regulations, no credit
+facility will be granted, and the granted credit facility will be withdrawn. As at the end of the reporting period,
+the Company's balance of green loans was RMB263.842 billion, representing an increase of RMB55.254 billion
+or 26.49% as compared with the beginning of the year, 19.49 percentage points higher than the growth rate in
+corporate loan, and accounting for 14.02% of the total corporate loan. Green loans were mainly granted to the
+fields of energy conservation and environmental protection, clean production, clean energy, ecological environment,
+green upgrade of infrastructure and green services. During the reporting period, the Company obtained funds from
+carbon emission reduction support tools granted by the People's Bank of China and granted loans in respect of
+carbon emission reduction of RMB6.974 billion to 70 projects, resulting in a carbon emission reduction of 1.2152
+million tons of CO₂ equivalent. During the reporting period, in terms of green credit, CMB Financial Leasing provided
+service to 78 customers in new energy power generation and granted loans of RMB16.5 billion; and served 18
+customers in energy conservation and environmental protection and granted loans of RMB2.4 billion.
+"I
+Annual Report 2021
+Chapter IV Environmental, Social and Governance (ESG)
+China Merchants Bank
+92
+22
+91
+Social contribution value per share = basic earnings per share + (taxes paid + employee expenses + interest expenses + total external donations)/total
+share capital of ordinary shares at the end of the period.
+26
+During the reporting period, the Company incorporated green finance responsibilities into the terms of reference
+of the Strategy Committee under the Board of Directors. At the same time, the Company specified its strategic
+objectives and strategic measures related to green finance, formulated the "CMB 'Dual Carbon' Working Mechanism
+and Action Plan", and established a green finance inter-departmental collaboration team at the Head Office level so
+as to continuously improve and refine the green finance management mechanism.
+4.2.1 Green finance
+In support of the national "3060" goal in reaching carbon emission peak and achieving carbon neutrality, the
+Company comprehensively promotes green finance and green operation to build a green homeland. The Company
+had no material environmental violations during the reporting period.
+96
+Implementing the corporate social responsibility
+concept of "originating from society and returning to
+society" to extend public welfare to various fields such
+as rural revitalisation, education and public health
+China Merchants Bank
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2021
+China Merchants Bank
+Annual Report 2021
+Environmental, Social and Governance (ESG)
+Reaching the brand new development phase of the "14th Five-Year Plan", the Company continued to uphold the
+social responsibility philosophy of "originating from society and returning to society", undertaking of "striving
+for sustainable finance, enhancing sustainable value and contributing to sustainable development" as its goal of
+sustainable development. Fully integrating the concept of environmental, social and governance (ESG) into the
+Company's daily operation and management, the Company continuously improved the sustainable development
+management mechanism while appropriately communicating with stakeholders, thereby striving to achieve quality,
+efficient, fair, sustainable, and safe development.
+In order to further improve the quality and efficiency of ESG work, the Company promoted and improved the
+relevant responsibilities of the Board of Directors at the top-level design. In August 2021, the green finance-
+related responsibilities were incorporated into the terms of reference of the Strategy Committee under the Board
+of Directors. In January 2022, upon the resolution approved by the Board of Directors, the "Strategy Committee
+under the Board of Directors" was renamed as the "Strategy and Sustainability Committee under the Board of
+Directors" so as to perform ESG-related responsibilities in a coordinated manner (this resolution will take effect after
+the completion of revising the Articles of Association of the Company and other related documents), which further
+ensured the formation of clear governance structure, smooth information communication, and sophisticated working
+mechanism in relation to ESG.
+During the reporting period, the Company took the initiatives to cope with climate change and vigorously promoted
+the development of green finance; comprehensively served the real economy and supported the improvement of
+people's livelihood; continuously improved the accessibility of financial services and equipped itself with Fintech tools
+to provide customers with low-cost and affordable financial services anytime and anywhere. The Company attached
+great importance to the security of financial products, information security and privacy protection and consumer
+rights protection, created a high-quality working environment for employees and realised the effective connection
+between the consolidation of poverty alleviation and the revitalisation of rural areas. In 2021, the Company achieved
+social contribution value of RMB14.36 per share 26 (calculated on the Group's statistical caliber) and made external
+donation of RMB32.23 million in aggregate.
+In September 2021, MSCI upgraded the Company's ESG rating from BBB to A.
+For further information on the ESG of the Company, please refer to China Merchants Bank Co., Ltd. Sustainability
+Report 2021 published on the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the
+Company.
+4.2 Environmental Information
+4.1 ESG Review
+Chapter IV Environmental, Social and Governance (ESG)
+The Company vigorously innovated green products and services, served the development of green industries via
+financial measures, thereby supporting the transformation of economic and social activities towards green, low-
+carbon and sustainable development.
+The Company continued to promote the establishment of smart service system. By strengthening smart service
+capabilities, enriching online services, and optimising service points, the Company provided a wide range of digital
+financial services to hundred-million customers to reduce the frequency of customers going to physical outlets
+for business in an effective manner, thereby decreasing carbon emissions from customer travel. The Company
+also encouraged credit card customers to accept electronic bills. As at the end of the reporting period, with the
+proportion of credit card electronic bills exceeding 99%, the Company saved more than 1.9 billion pieces of paper
+in billing and realised an environmentally friendly transformation toward green operation.
+China Merchants Bank
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2021
+4.3.2 Supporting improvement of people's livelihood
+In terms of medical care, the Company supported the Ministry of Human Resources and Social Security of the
+People's Republic of China to carry out the application of electronic social security cards, continued to carry out
+strategic cooperation with the National Healthcare Security Administration to promote electronic medical insurance
+certificates. As at the end of the reporting period, the Company has issued a total of 32.76 million of electronic
+social security cards and a total of 14.26 million of electronic medical insurance certificates.
+In terms of education, the Company has assisted 44 competent education authorities at provincial, municipal and
+district-level to realise the whole-process management of after-school tutoring institutions via the " fund supervision
+system for after-school tutoring institution" independently developed by the Company, serving 1,622 after-school
+tutoring institutions. The Company cooperated with colleges in scenarios such as electronic campus card, electronic
+alumni card, and campus payment, which helped colleges to achieve informatisation upgrade.
+The Company continued to increase input of resources, and separately set up a special limit for loans to small-
+sized enterprises of RMB20 billion in the credit facility of the Bank, requiring first-level branches to break down the
+special limit and implement. For companies with temporary difficulties in operation due to the pandemic, by full
+consultation with the companies and premised on controllable risks, the Company provided them with a temporary
+extension arrangement of principal and interest repayment pursuant to the principles of marketisation and the
+rule of law. The Company set up inclusive finance business indicators in the comprehensive performance appraisal
+plan for branches, with the weight accounting for more than 10%, and set up special marketing incentive fees to
+guide such branches to increase inclusive loan granting and support. The Company has successively released the
+rules including "Implementation Rules for the Accountability and Due Diligence of Small-sized Enterprises Engaging
+Credit Business" and the "Notice on Clarifying the Tolerance for Non-Performing Loans of Private Enterprises
+and Inclusive Small- and Micro-sized Enterprises", offered tolerance of non-performing loans in accordance with
+regulatory requirements, implemented due diligence and liability exemption therefore. In addition, the Company
+continuously improved the digital inclusive financial service system, provided online digital products and services to
+meet the needs of small- and micro-sized enterprises in terms of digital management, withholding and payment,
+short-term financing, daily management of accounts and payroll service, thereby solving the "last mile" problem
+of inclusive finance through digital solution. As at the end of the reporting period, the Company's balance of SME
+inclusive finance loans amounted to RMB601.100 billion, representing an increase of 18.22% as compared with the
+beginning of the year. The total number of registered users of CMB Zhao Dai (1) APP exceeded 2 million, and the
+credit facility of micro-finance loans applied and granted through CMB Zhao Dai (1) APP reached RMB164.741
+billion for the year.
+In terms of housing, the CMB APP launched the national housing provident fund WeChat applet developed by the
+Ministry of Housing and Urban-Rural Development, covering all 341 urban provident fund centers and approximately
+150 million housing provident fund contributors nationwide.
+In terms of physical channels, the Company continued to promote the construction and layout optimisation of
+domestic branches. During the reporting period, 67 new outlets were opened, and more than 120 existing outlets
+were relocated and optimised. Through steady increase in number of outlets and scientific location selection, the
+effective coverage of outlets was further expanded and more efficient offline financial services were provided to
+customers.
+In terms of electronic channels, the Company has built a comprehensive online business capability matrix leveraging
+its long-term accumulation of technological capabilities such as big data, artificial intelligence and cloud computing.
+Such capability matrix includes: migrating various services to online channels such as mobile APP and WeChat
+to support users handle various businesses without leaving their homes; formulating customer group operation
+strategies based on a bank-wide business platform to reach and serve users online in multiple dimensions, such as
+online live broadcast and Al Xiao Zhao (Al); supporting branches to provide online localised and personalised
+services, such as special zone in branches and online stores of outlets; strengthening the 95555 manual customer
+service and providing 24/7 smart customer service; creating an open platform to coordinate with third-party wealth
+management institutions to provide online wealth management, companionship and other services. Through online
+multi-channel services, the Company served all customers including those in areas that cannot be covered by physical
+outlets, and used digital technology to improve the efficiency and coverage of financial services, making financial
+services affordable and easy to access, thereby significantly reducing users' demand for physical outlets and offline
+manual services, so that users can enjoy the "uninterrupted" ultimate caring service without going to the outlets in
+person.
+At the same time, the Company actively promoted the elderly-oriented and barrier-free transformation of online
+and offline financial service channels, helped special groups, including the elderly and the disabled, to overcome
+their difficulties in using digital channels, and ensured that all groups can equally and effectively enjoy high-quality
+financial services.
+4.2.2 Green operation
+95
+4.3.3 Access to financial services
+Focusing on the needs of new growth engine companies, the Company integrated various resources to provide
+companies with comprehensive and full life-cycle services, strategically supported cutting-edge manufacturing
+projects that fill the gap in domestic market and assisted excellent manufacturing enterprises in enhancing
+market competitiveness through technological innovation, research and development, cutting-edge technology
+commercialisation, strategic mergers and acquisitions, etc.. As at the end of the reporting period, the Company's
+balance of loans to strategic emerging industries was RMB219.154 billion.
+The Company was committed to helping alleviate the weakness in the areas of people's livelihood such as pension,
+medical care, and education, and invested financial resources in the key areas that people paid great importance to.
+In terms of pension, as one of the financial institutions with the most comprehensive pension licenses, the Company
+has licenses for enterprise annuity schemes, account manager and custodian, and China Merchants Fund, one of its
+subsidiaries has the license for enterprise annuity investment manager. As at the end of the reporting period, the
+Company's entrusted scale of enterprise and occupational annuities totalled RMB138.234 billion.
+3
+In terms of water resources management, the Company earnestly carried out water conservation publicity and water
+conservation sign posting; replaced lift-up faucets with sensor faucets; used high-pressure scrubbers to clean the
+square floor; timely conducted inspection and maintenance to eliminate water running, overflowing, dripping and
+leaking; removed bottled water in the break room and completed direct drinking fountain renovation; partly adopted
+the air-cooled heat dissipation in the Shenzhen R&D Data Center and Pinghu Data Center in Shenzhen, which can
+substantially save the water consumption resulting from heat dissipation of the air-conditioning system as compared
+with the heat dissipation of the open cooling tower.
+The Company adhered to the concept of green operation and green office, striving to reduce the impact of
+operation on the environment.
+In terms of paper management, the Company promoted paperless office, advocated double-sided printing to reduce
+paper documents; continuously optimised the office platform "Zhaohu ()" and normalised online meeting
+and training, which led the reduction of voluminous paper consumption while reducing carbon emissions due to
+employee commuting. During the reporting period, as the only representative of a financial enterprise in Shenzhen
+City, the Company carried out integrated financial management involving "invoices, bills, taxation, and filing", so
+that the entire process of reimbursement from submission to filing can be completed as fast as 6 minutes, saving
+cost incurred from printing, delivering, sorting out and filing numerous paperback accounting information, thereby
+achieving the good deeds of environmental protection with simple actions.
+In terms of waste management, the Company has set up various treatment methods for different types of wastes to
+ensure that wastes shall be treated in a timely and scientific manner.
+93
+During the reporting period, in active response to the regional development strategy of China, the Company carried
+out economic research in key regions such as the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze
+River Delta, provided regional financial planning services for local governments and local government financing
+platform enterprises, and increased credit support for key regions.
+94
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2021
+4.3 Social Responsibility Information
+4.3.1 Serving the real economy
+The Company adhered to the origin of financial institutions serving the real economy, continued to channel financial
+resources to key areas of the real economy and weak links in the development of people's livelihood, and improved
+the quality of financial offerings by leveraging its advantages in extensive wealth management and Fintech to
+effectively meet the needs of high-quality economic and social development.
+China Merchants Bank
+In terms of energy management, the Company has adopted various energy-saving measures to promote the
+reduction of carbon emissions from operational activities. The first was to renovate the lighting system, replace and
+upgrade the lightings of the Head Office Tower and Shenzhen R&D data center with LED energy-saving lamps, install
+smart lighting systems on the shared office floor, and set up sensing devices in the negotiation room, conference
+room and other areas. The logo lights of Head Office Tower were retrofitted to dimmable lights to further reduce
+energy consumption. The second was to optimise the air-conditioning system, and renovate and upgrade the air-
+conditioning systems of the Head Office Tower, Pinghu Data Center in Shenzhen, and Zhangjiang Data Center
+in Shanghai so as to save electricity. The third was to apply the smart energy system, and install smart water and
+electricity meters on the floors and equipment rooms of the Head Office Tower to collect information of and monitor
+energy consumption on a real-time basis, while intending to complete data storage and analysis through a third-
+party system platform to reduce unit energy consumption of the tower. The fourth was to publicise the concept of
+environmental protection, post energy-saving signs in all public areas of office, strengthen the publicity of energy-
+saving activities such as National Energy Conservation Week, Earth Day, and Low Carbon Day, and encourage
+employees to commute and work in a green way.
+Board of Directors
+Wong See Hong Male
+No
+2021.8-2022.6
+Independent Non- 2017.2-2022.6
+1953.6
+Secretary of the
+First Executive Vice
+2019.4-2022.6
+Chief Financial
+President
+2021.8-2022.6
+334.26
+50.00
+Officer
+Executive Director
+Shi Yongdong
+Male
+1968.11
+250,000
+Male
+1958.9
+Male
+Li Chaoxian
+1957.5
+Li Menggang
+Male
+1970.5
+Male
+Liu Qiao
+50.00
+2018.11-2022.6
+Independent Non-
+1967.4
+Tian Hongqi
+240,000
+during the
+Executive Director
+reporting
+period (in ten
+thousands)
+(share)
+the period of the period
+(share)
+Term of
+office
+Birth (Y/M) Title
+Gender
+Name
+Date of
+during the
+parties
+Xiong Liangjun Male
+related
+Company's
+from the
+period
+2019.8-2022.6
+Wang Daxiong
+1960.12
+1965.12
+China Merchants Bank
+Annual Report 2021
+Male
+Wang Liang
+Director
+Yes
+2019.7-2022.6
+Non-Executive
+1970.9
+Male
+Luo Sheng
+Director
+Yes
+2016.11-2022.6
+Non-Executive
+Male
+1963.2
+Shareholder
+2018.11-2022.6
+Xu Zhengjun
+40.00
+2016.6-2022.6
+External Supervisor
+1963.7
+Male
+Han Zirong
+40.00
+2016.6-2022.6
+External Supervisor
+1956.6
+Ding Huiping Male
+100
+Yes
+2021.6-2022.6
+Male
+1955.9
+External Supervisor
+2019.6-2022.6
+1962.10
+Wang Jianzhong Male
+17.14
+114,050
+124,550
+Employee Supervisor 2021.12-2022.6
+1970.7
+Shareholder
+Female
+279.52
+181,000
+181,000
+Employee Supervisor 2018.7-2022.6
+1964.9
+Wang Wanging Male
+40.00
+Cai Jin
+Executive Director
+Independent Non-
+Executive Director
+Independent Non-
+Executive Director
+Independent Non-
+Executive Director
+Independent Non-
+Executive Director
+Chairman of Board
+of Supervisors,
+1965.9
+Guo Xikun
+2021.8-2022.6
+No
+18.28
+2021.8-2022.6
+No
+18.28
+2021.8-2022.6
+No
+50.00
+2019.8-2022.6
+No
+No
+No
+2 2 2
+50.00
+240,000
+240,000
+321.23
+No
+Supervisor
+Yes
+2016.6-2022.6
+reporting
+1976.8
+Male
+Wu Heng
+Male
+Supervisor
+2019.6-2022.6
+Shareholder
+1963.10
+Male
+Peng Bihong
+Supervisor
+Employee
+Yes
+the Company
+Male
+before tax
+Beijing Audit Division
+Anti-money Laundering, Sanction
+and Compliance Management Committee
+IT Management Committee
+Business Continuity Management
+Committee
+Fintech Committee
+5.2 Overview of Corporate Governance
+During the reporting period, the Company convened 1 Shareholders' general meeting, reviewed 14 proposals and
+heard 5 reports, as further described in "Information about Shareholders' General Meetings".
+During the reporting period, the Company convened 14 meetings of the Board of Directors, at which 83 proposals
+were reviewed and 19 reports were heard; convened 30 meetings of special committees under the Board of
+Directors, at which 104 proposals were reviewed and 35 reports were heard; and convened 1 meeting of
+Non-Executive Directors, at which 1 report was heard. During the reporting period, the Company convened the 21st
+meeting, the 22nd meeting, the 23rd meeting, the 24th meeting, the 25th meeting, the 26th meeting, the 27th
+meeting, the 28th meeting, the 29th meeting, the 30th meeting, the 31st meeting, the 32nd meeting, the 33rd
+meeting and the 34th meeting of the 11th session of the Board of Directors on 17 March, 19 March, 23 April, 20
+May, 31 May, 10 June, 25 June, 12 August, 13 August, 19 August, 13 October, 19 October, 22 October and 26
+November, respectively, at which Directors paid most of their attention on reviewing the Company's annual financial
+reports, profit distribution plan, the "14th Five-Year Plan", the outline of the five-year plan for development of
+extensive wealth management, the outline of the five-year plan for development of Fintech, the outline of the
+five-year plan for the acquisition of risk management capability, the comprehensive risk report, the report on the
+execution of risk appetites, the report on capital adequacy, the report on the human resources management and
+the implementation of talent strategy, the work report of the Board of Directors, the report on the evaluation
+of performance of duties of the Board of Directors and its members, the report on the development of inclusive
+finance and its work plan, the work report on the anti-money laundering and sanction compliance, the report on
+the related transaction management, the report on the protection of consumer rights and the report on sustainable
+development, among other proposals.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+105
+During the reporting period, the Company convened 14 meetings of the Board of Supervisors, at which 36
+proposals were reviewed and 26 reports were heard; and 8 meetings of the special committees under the Board of
+Supervisors, at which 10 proposals were reviewed. In addition, 2 collective researches were organised by the Board
+of Supervisors.
+For details of the proposals reviewed by the meetings of the Board of Directors and the Board of Supervisors, please
+refer to the disclosure documents including the announcements on resolutions published by the Company on the
+websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+Having conducted thorough self-inspection pursuant to relevant requirements of the Announcement Regarding
+Implementation of Special Actions on Listed Companies Governance ([2020] No.69) issued by CSRC and the Notice
+Regarding Promoting the Principal Responsibility of Listed Companies in the Jurisdiction for Enhancing Governance
+to Achieve High Quality Development ([2020] No. 128) issued by CSRC Shenzhen Office, the Company was not
+aware of any material non-compliance of its corporate governance practice with the requirements set out in the
+laws, administrative regulations and CSRC's regulatory documents governing the corporate governance of listed
+companies.
+5.3 Information about Shareholders' General Meetings
+Fuzhou Audit Division
+During the reporting period, the Company convened 1 Shareholders' general meeting, being the 2020 Annual
+General Meeting held in Shenzhen on 25 June 2021. The notice, convening, holding and voting procedures of
+such meeting were in compliance with the relevant requirements of the Company Law of the People's Republic of
+China, the Articles of Association of China Merchants Bank Co., Ltd. and the Hong Kong Listing Rules. 14 proposals
+were reviewed and approved at the meeting, including the 2020 Work Report of the Board of Directors, the 2020
+Work Report of the Board of Supervisors, the 2020 Annual Report (including the audited financial report), the 2020
+Financial Statement Report, the 2020 Profit Distribution Plan (including the declaration of final dividends), and the
+appointment of accounting firm for the year 2021. For details of the relevant resolutions reviewed and reports heard
+at the meeting, please refer to the disclosure documents including the 2020 Annual General Meeting documents,
+the general meeting circulars and the announcements on resolutions published by the Company on the websites of
+Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company. For details of the attendance of Directors
+at the Shareholders' general meeting, please refer to "Attendance of Directors at relevant meetings" in this report.
+Chengdu Audit Division
+00000
+Board of Directors
+Board of Supervisors
+Office of the Board of
+Directors
+Office of Board of
+Supervisors
+Related Party Transactions Management and
+Consumer Rights Protection Committee
+Executive Office of
+President
+Supervisory Committee
+Assets and Liabilities Management
+Committee
+Risk and Compliance Management
+Committee
+Shanghai Audit Division
+Audit Department
+Shenzhen Audit Division
+Xi'an Audit Division
+Nanjing Audit Division
+Shenyang Audit Division
+Wuhan Audit Division
+5.4 Directors, Supervisors and Senior Management
+Shareholding
+at the Shareholding
+beginning of at the end
+the period of the period
+(share)
+Male
+Birth (Y/M) Title
+1965.1 Chairman
+Non-Executive
+Term of
+office
+2020.9-2022.6
+2020.9-2022.6
+Director
+Fu Gangfeng
+Male
+1966.12
+Vice Chairman
+2018.7-2022.6
+Non-Executive
+2010.8-2022.6
+Director
+Tian Huiyu
+Executive Vice
+Miao Jianmin
+Gender
+Name
+Date of
+Whether or
+Total
+not had
+received
+from the
+Company's
+remuneration remuneration
+before tax
+received from
+the Company
+during the
+reporting
+Nomination Committee
+related
+during the
+period (in ten
+reporting
+(share)
+thousands)
+period
+Yes
+parties
+received from
+Shareholders' General Meeting
+Risk and Capital Management Committee)
+2014.9-2022.6
+2016.11-2022.6
+Non-Executive
+Director
+Non-Executive
+Director
+Female 1968.2
+Su Min
+1964.10
+Male
+Zhang Jian
+Director
+2007.6-2022.6
+Non-Executive
+1963.3
+Hong Xiaoyuan
+Director
+2018.10-2022.6
+Yes
+Non-Executive
+No
+Yes
+remuneration remuneration
+beginning of at the end
+at the Shareholding
+Shareholding
+received
+Total
+not had
+Whether or
+Annual Report 2021
+Chapter V Corporate Governance
+China Merchants Bank
+106
+Yes
+Yes
+Yes
+ON
+1972.4
+Male
+Zhou Song
+Chapter IV Environmental, Social and Governance (ESG)
+During the reporting period, the Board of Directors of the Company effectively performed its relevant duties in
+environmental, social and governance (including ESG matters such as green finance, inclusive finance, human
+resources, consumer rights protection, philanthropy and social responsibilities). The Board of Directors and its
+relevant special committees reviewed and approved the relevant resolutions on the "14th Five-Year Strategic Plan
+(2021-2025) of China Merchants Bank", the "Report on Performance in Risk Management under the Trend of Green
+Finance", the "Inclusive Finance Development for 2020 and Work Plan Report for 2021", the "Human Resources
+Management and Talent Strategy Implementation for 2020", the "Employee Behavior Evaluation Report for 2020",
+the "Work Report on Consumer Rights Protection for 2020", the "Bank-wide Customer Complaint Analysis Report
+for 2020", the "Sustainable Development Report for 2020", the full text and summary of 2020 Annual Report, and
+the full text and summary of 2021 Interim Report, so as to further promote the Company's active development of
+green finance to serve the national goal of carbon peak and carbon neutrality, strictly implement the national policy
+on inclusive finance, vigorously enhance the awareness and strength of consumer rights protection, thoroughly
+implement the responsibility of "originating from society and returning to society", and work together with all
+stakeholders to promote a better society. In addition, in accordance with the guidance of national policy and
+requirements of regulatory policy, the Company has included the duties in relation to green finance into the duties
+of the Strategy Committee under the Board of Directors. At the same time, the Company is planning to change
+the name of the "Strategy Committee under the Board of Directors" to the "Strategy and Sustainability Committee
+under the Board of Directors" to coordinate and perform ESG-related responsibilities.
+During the reporting period, the Board of Supervisors of the Company studied and reviewed the "Inclusive Finance
+Development for 2020 and Work Plan Report for 2021", the "Internet Loan Development for 2020 and Work Plan
+Report for 2021", the "Work Report on Consumer Rights Protection for 2020" and the "Sustainable Development
+Report for 2020", focusing on the Board of Directors and senior management's duty performance on the issues
+related to inclusive finance, green finance, consumer rights protection and social responsibilities, and put forward
+opinions and suggestions.
+For more details on corporate governance, please refer to Chapter V.
+Adhering to the philosophy of
+wealth for common good
+Helping you to achieve
+everlasting growth
+Providing "personal-family-corporate
+social" private banking service system
+to high-net-worth individuals and their
+enterprises
+104
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+Corporate Governance
+5.1 Corporate Governance Structure
+Strategy Committee
+Nomination Committee
+Remuneration and Appraisal Committee
+China Merchants Bank
+Annual Report 2021
+102
+101
+The Company continued to improve and perfect its modern corporate systems, upheld prudent operation and
+strengthen risk control, so as to promote quality development with high quality of corporate governance. The core
+of the Company's corporate governance mechanism is to adhere to the leadership of the Party, strengthen Party-
+building, continuously play the core role of the Party in corporate governance, and integrate the leadership of the
+Party into all aspects of corporate governance. The key to the Company's corporate governance mechanism is to
+adhere to the President assuming full responsibility under the leadership of the Board of Directors, the market-
+based talent selection and employment mechanism and the remuneration incentive mechanism. The Company's
+shareholding structure is reasonable and the shareholders' behaviors are regulated. The Shareholders' General
+Meeting is the Company's authority and exercises its powers according to law. The Board of Directors, the Board of
+Supervisors and the senior management diligently perform their duties with emphasis on the Company's adherence
+to the President assuming full responsibility under the leadership of the Board of Directors, which provides a
+fundamental guarantee for the long-term, healthy and sustainable development of the Company. The Board of
+Directors mainly controls overall situation, steers development direction and ensures efficient implementation, with
+focus on strategic guidance, risk management, incentives and constraints. The Board of Supervisors performed
+its supervisory functions comprehensively and thoroughly in respect of major issues relating to the operation
+and development of the Company. It actively carried out supervision and evaluation of the performance of the
+Board of Directors, senior management and their members, with emphasis on strengthening the supervision of
+development strategies, financial activities, internal control and risk management in a scientific, standardised and
+effective manner, so as to effectively safeguard the legitimate rights of corporate governance stakeholders such as
+the Company, its shareholders and employees. The Company has established a sound hierarchical discussion and
+management authorisation system under which the President is accountable to the Board of Directors. The Company
+adheres to the market-oriented talent selection and employment mechanism and the remuneration incentive
+mechanism to fully stimulate the vitality of talents, and guides officials and employees to establish the concept of
+sharing interests and risks with the Company, thereby providing a strong mechanism guarantee for its long-term
+stable development.
+419.83
+335,500
+335,500
+2013.8-2022.6
+2013.9-2022.6
+President and Chief
+Executive Officer
+Executive Director
+1965.12
+Audit Committee
+Male
+4.3.7 Rural revitalisation
+The Company resolutely implemented the relevant requirements of "Opinions of the Central Committee of the
+Communist Party of China and the State Council on Comprehensively Promoting Rural Revitalisation and Accelerating
+the Modernisation of Agriculture and the Countryside”(黨中央、國務院《關於全面推進鄉村振興加快農業農村現代化
+and "Assessment and Evaluation Measures for the Effectiveness of Paired-up Poverty Alleviation of State-
+owned Entities" (+£±Ì££%✯✯by increasing the assistance to Wuding and Yongren
+counties in Yunnan instead of reducing the assistance in the five-year transition period starting from the date of
+poverty alleviation. Taking consolidating the achievements in poverty alleviation and effectively linking up rural
+revitalisation as the guiding principles of rural revitalisation assistance, the Company gradually realised the smooth
+transition from pooling resources for poverty alleviation to consolidating the achievements in poverty alleviation and
+comprehensively promoting rural revitalisation.
+During the reporting period, the Company formulated the "CMB 2021 Rural Revitalisation Work Plan" (HMR
+12021 »), and actively carried out paired-up poverty alleviation focusing on five aspects,
+i.e. industrial revitalisation, talent revitalisation, cultural revitalisation, ecological revitalisation and organisational
+revitalisation, for which the Company invested supporting funds of RMB48,586,300, helped raise supporting
+funds of RMB9,036,000, trained 2,042 grassroots officials and 3,869 technicians, purchased agricultural products
+worth RMB13,955,500 from poverty-stricken areas, and helped poverty-stricken areas sell agricultural products
+worth RMB5,580,200 in Wuding County and Yongren County, Yunnan Province, thus further consolidating the
+achievements of "guarantee the supply of food and clothing, guarantee compulsory education, basic medical care
+and housing safety", and successfully accomplishing the tasks of paired-up poverty alleviation designated to State-
+owned entities. At the same time, President Tian Huiyu and Executive Vice President Wang Yungui led respective
+teams to conduct research on poverty alleviation in each of the two counties, and offered on-site guidance on
+poverty alleviation.
+China Merchants Bank
+Annual Report 2021
+Chapter IV Environmental, Social and Governance (ESG)
+Next, the Company will focus on researching and assisting the two counties to establish a mechanism to prevent
+the reoccurrence of poverty. By focusing on both increasing income and preventing the reoccurrence of poverty, the
+Company will explore the establishment of a long-term mechanism for solving the poverty problem and effectively
+link poverty alleviation with rural revitalisation centering around the rural revitalisation strategy.
+4.4 Governance Information
+Chapter IV Environmental, Social and Governance (ESG)
+2019.4-2022.6
+Supervisor
+240,200
+1962.10
+Former Shareholder
+2016.6-2021.4
+Supervisor
+Liu Xiaoming Male
+1963.11
+Former Employee
+2019.6-2021.12
+145,000
+145,000
+202.69
+Supervisor
+Liu Hui
+Female 1970.5
+Former Executive
+2019.4-2021.5
+222,100
+199,400
+108.61
+2 2 2
+No
+No
+No
+Assistant President
+Notes:
+Male
+(1)
+Wen Jianguo
+Former Employee
+1962.9
+of the Board of
+Directors
+Former Independent 2015.1-2021.8
+Non-Executive
+Director
+Former Independent 2015.1-2021.8
+31.72
+No
+31.72
+No
+2
+107
+Non-Executive
+Director
+Liu Yuan
+Male
+1962.1
+Former Chairman
+2014.8-2021.8
+270,000
+270,000
+239.89
+No
+of Board of
+Supervisors,
+Supervisor
+Zhao Jun
+(2)
+(4)
+Annual Report 2021
+5.4.2 Changes in information of Directors and Supervisors
+1.
+2.
+3.
+4.
+5.
+6
+6.
+240,200
+8.
+9.
+10.
+11.
+Mr. Zhang Jian ceases to concurrently serve as the vice chairman of the board of directors of China
+Merchants Capital Management Co., Ltd. (涶¶) and the vice chairman of the board
+of directors of China Merchants Capital Holdings Co., Ltd. (¯¤¯£¶¶¶) and the director of
+China Merchants Union (BVI) Limited (¾¬).
+Mr. Wang Daxiong ceases to concurrently serve as the chairman of the COSCO SHIPPING Investment Holdings
+Co., Ltd. (中遠海運投資控股有限公司).
+Mr. Luo Sheng concurrently serves as the acting person in charge of Dajia Insurance Group Co., Ltd.
+Mr. Wang Liang serves as the First Executive Vice President, Secretary of the Board of Directors and Company
+Secretary of the Company, as well as the authorised representative in charge of matters in relation to listing
+in Hong Kong and the executive council member of the sixth session of Banking Accounting Society of China.
+Mr. Wong See Hong ceases to concurrently serve as the Independent Director of HDR Global Trading Limited.
+Mr. Li Menggang ceases to concurrently serve as the chairman of the Professional Committee of the Logistics
+Informatisation and Industrial Security System (ÀȪÀ¤££¾$$*£) of Institute of Electrical
+and Electronics Engineers (IEEE) and the independent director of Hunan Copote Science & Technology Co.,
+Ltd., a company listed on Shanghai Stock Exchange.
+Mr. Liu Qiao ceases to concurrently serve as the independent non-executive director of Zensun Enterprises
+Limited (formerly known as ZH International Holdings Limited, a company listed on Hong Kong Stock
+Exchange).
+Mr. Xiong Liangjun concurrently serves as the member of Shenzhen Finance Development Consultation
+Committee (深圳市金融發展諮詢委員會).
+Mr. Peng Bihong concurrently serves as the director of China State-owned Enterprise Structural Adjustment
+Fund Co., Ltd. (+£Ħ✰***&S) and the vice chairman of the council of China
+Oceanic Development Foundation, the vice chairman and council member of Communications Branch (
+) of China Institute of Internal Audit, the vice chairman of China Communications Accounting Society, the
+member of the Strategy Advisory Committee () of Shanghai National Accounting Institute, the
+intelligent finance specialist of Shared Finance Special Committee (*) of The Innovation &
+Entrepreneurship Education Alliance of China.
+Mr. Wu Heng concurrently serves as the director of Wuhan Kotei Informatics Co., Ltd. (
+), a company listed on Shenzhen Stock Exchange.
+Mr. Guo Xikun ceases to serve as the vice chairman of the board of directors of Hebei Port Group Finance
+Co., Ltd. (□) but serves as the chairman of the board of directors thereto instead
+and ceases to concurrently serve as the supervisor of National Coal Exchange Co., Ltd.
+109
+Chapter V Corporate Governance
+(3)
+China Merchants Bank
+In August 2021, Mr. Zhu Jiangtao was appointed as the Executive Vice President of the Company in accordance
+with the resolutions passed at the 30th meeting of the 11th session of the Board of Directors of the Company. In
+September 2021, the qualification of Mr. Zhu Jiangtao as the Executive Vice President was approved by the CBIRC.
+In October 2021, the qualifications of Mr. Zhong Desheng and Mr. Wang Xiaoqing as the Executive Assistant
+President were approved by the CBIRC.
+The remuneration received by the Directors, Supervisors and senior management who were appointed or resigned during the
+reporting period is calculated based on the length of their terms of office during the reporting period. Mr. Wang Xiaoqing received
+his remuneration from China Merchants Fund, a subsidiary of the Company.
+The aggregate pre-tax remuneration of full-time Executive Directors, Chairman of the Board of Supervisors and senior management
+of the Company is still being verified. The remaining part will be disclosed separately upon the completion of confirmation and
+payment.
+As at the end of the reporting period, the spouse of Mr. Zhou Song held 23,282 A Shares in the Company and Ms. Cai Jin held
+114,050 shares in the Company, of which consisted 109,500 A Shares and 4,550 H Shares. The Shares held by others listed in the
+above table were all A Shares. The changes in Ms. Cai Jin's shareholding was resulting from the shareholding reduction before her
+appointment as an Employee Supervisor and the changes in Ms. Liu Hui's shareholding was resulting from the shareholding reduction
+after six months as of her resignation as the Executive Assistant President. The changes in others' shareholding during the reporting
+period were all resulting from shareholding increase.
+None of the Directors, Supervisors or senior management listed in the above table has been punished by the securities regulator(s)
+over the past three years.
+(5)
+None of the Directors, Supervisors or senior management listed in the above table holds any share options of the Company or has
+been granted any of its restricted shares.
+108
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.4.1 Appointment and resignation of Directors, Supervisors and senior management
+Directors
+In May 2021, Mr. Liu Jianjun ceased to be the Executive Director, Executive Vice President and Secretary of the
+Board of Directors of the Company due to change of work arrangement.
+In June 2021, according to the relevant resolutions passed at the 2020 annual Shareholders' general meeting of the
+Company, Mr. Li Chaoxian and Mr. Shi Yongdong were elected as the Independent Non-Executive Directors of the
+Company, whose qualifications as the Independent Directors were approved by the CBIRC in August 2021. At the
+same time, Mr. Leung Kam Chung, Antony and Mr. Zhao Jun ceased to be the Independent Non-Executive Directors
+of the Company due to the expiry of their appointments.
+Supervisors
+In April 2021, Mr. Wen Jianguo ceased to be the Shareholder Supervisor of the Company due to change of work
+arrangement.
+In June 2021, according to the relevant resolutions passed at the 2020 annual Shareholders' general meeting of the
+Company, Mr. Guo Xikun was elected as the Shareholder Supervisor of the Company.
+In August 2021, Mr. Liu Yuan ceased to be the Chairman of Board of Supervisors and Employee Supervisor of the
+Company due to change of work arrangement.
+In August 2021, Mr. Xiong Liangjun was elected as the Employee Supervisor of the Company at the staff congress
+of the Company. According to the resolutions passed at the 21st meeting of the 11th session of the Board of
+Supervisors of the Company, Mr. Xiong Liangjun was elected as the Chairman of the Board of Supervisors of the
+Company.
+In December 2021, Mr. Liu Xiaoming ceased to be the Employee Supervisor of the Company due to change of work
+arrangement.
+In December 2021, Ms. Cai Jin was elected as the Employee Supervisor of the Company at the staff congress of the
+Company.
+Senior management
+Mr. Li Delin was appointed as the Executive Vice President of the Company at the 20th meeting of the 11th session
+of the Board of Directors of the Company. In March 2021, the qualification of Mr. Li Delin as the Executive Vice
+President was approved by the CBIRC.
+In May 2021, Ms. Liu Hui ceased to be the Executive Assistant President of the Company due to change of work
+arrangement.
+In July 2021, Mr. Xiong Kai was appointed as the Secretary of the Party Discipline Committee of the Company.
+In August 2021, Mr. Wang Liang was appointed as the First Executive Vice President and Secretary of the Board of
+Directors of the Company in accordance with the resolutions passed at the 30th meeting of the 11th session of the
+Board of Directors of the Company.
+For details of the appointments and resignation, please refer to the relevant announcements published by the
+Company on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+1952.1
+7.
+2019.7-2021.5
+160,000
+210,000
+306.43
+No
+2
+2021.3-2022.6
+200,000
+204,400
+306.65
+No
+2021.9-2022.6
+175,000
+198,800
+75.11
+No
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Whether or
+not had
+Total
+received
+remuneration remuneration
+before tax
+from the
+received from
+2019.6-2022.6
+President
+Executive Vice
+President
+Executive Vice
+President
+Executive Vice
+President
+1972.12
+Zhu Jiangtao Male
+Leung Kam Chung, Male
+Antony
+306.43
+222222
+No
+No
+No
+No
+No
+No
+President
+Shi Shunhua
+Male
+Shareholding
+1962.12
+2019.4-2022.6
+245,000
+245,000
+306.65
+NO
+No
+Wang Yungui
+Male
+1963.6
+Li Delin
+Male
+1974.12
+Executive Vice
+at the Shareholding
+Male
+Company's
+related
+1967.7
+Executive Assistant
+2021.10-present
+166,600
+177,300
+50.31
+No
+President
+Wang Xiaoqing Male
+1971.10
+Liu Jianjun
+Male
+1965.8
+Executive Assistant
+President
+Former Executive
+Director
+2021.10-present
+No
+2019.8-2021.5
+240,000
+240,000
+139.21
+Former Executive
+2013.12-2021.5
+Vice President
+the Company
+Former Secretary
+Zhong Desheng Male
+Committee
+No
+No
+Party Discipline
+during the
+Name
+Date of
+Birth (Y/M)
+Title
+Term of
+office
+beginning of
+the period of the period
+at the end
+reporting
+parties
+during the
+period (in ten
+Gender
+(share)
+reporting
+225,600
+2021.7-present
+Secretary of the
+1971.4
+225,600
+Xiong Kai
+period
+thousands)
+(share)
+Male
+149.12
+5.4.6 Securities transactions of Directors, Supervisors and relevant employees
+Position
+The Company has adopted the Model Code set out in Appendix 10 to the Hong Kong Listing Rules as the code
+of conduct for Directors and Supervisors of the Company in respect of their dealings in the Company's securities.
+Having made specific enquiry, so far as the Company is aware, all the Directors and Supervisors of the Company had
+complied with the aforesaid Model Code during the reporting period.
+The Company has also established the guidelines for the relevant employees' dealings in the Company's securities,
+which are no less exacting than the Model Code.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.4.7 Interests and Short Positions of Directors, Supervisors and Chief Executives
+under Hong Kong Laws and Regulations
+as at the end of the reporting period, the interests and short positions of the Directors, Supervisors and chief
+executives of the Company in the shares, underlying shares and debentures of the Company and its associated
+corporations (as defined in the SFO), which are required to be notified to the Company and Hong Kong Stock
+Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, including the interests and short positions which the
+Directors, Supervisors and chief executives of the Company are taken or deemed to have under such provisions of
+the SFO, or which are required to be and are recorded in the register required to be kept pursuant to Section 352
+of the SFO or as otherwise required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
+Model Code set out in Appendix 10 to the Hong Kong Listing Rules, were as follows:
+Name
+Capacity
+Tian Huiyu
+Executive Director,
+A Share
+Long/short
+position
+Long position
+No. of
+Shares
+(shares)
+Percentage
+of the
+relevant class
+of shares
+in issue (%)
+Percentage
+of the
+total issued
+ordinary
+shares (%)
+Beneficial owner
+Class of
+shares
+The Board of Directors of the Company evaluates the performance of the senior management through the "Policies
+on Remunerations of Senior Management of China Merchants Bank Co., Ltd." and the "Assessment Standards of
+the H-Share Appreciation Rights Incentive Scheme for the Senior Management". According to the "Measures on
+Evaluation of Performance of Directors and Supervisors of CMB", the Board of Supervisors evaluates the annual duty
+performance of the Directors and Supervisors through monitoring their duty performance in the ordinary course,
+conducting duty performance interviews, reviewing and evaluating their annual duty performance records (including
+but not limited to, attendance of meetings, participation of researches, provision of recommendations and the term
+of office in the Company), the "Duty Performance Self-Evaluation Questionnaire" completed by each Director and
+Supervisor and work summaries, and then reports the same to the shareholders' general meeting and regulatory
+authorities. According to the "Policies on Evaluation of Duty Performance of Senior Management by the Board of
+Supervisors (Trial)", the Board of Supervisors evaluates the annual duty performance of senior management through
+monitoring their duty performance in the ordinary course and accessing to their duty performance information
+(including but not limited to, major speeches, major meeting minutes and the evaluation of the duty performance
+of senior management by the Board of Directors) and work reports, and then reports the same to the shareholders'
+general meeting and regulatory authorities.
+Mr. Li Delin is an Executive Vice President of the Company. Mr. Li obtained a doctorate degree in Economics from
+Wuhan University, and is a senior economist. He joined the Company in October 2013 and successively served as
+the Director of the Head Office, the General Manager of the Strategic Customer Department, the General Manager
+of the Strategic Customer Department and the General Manager of the Institutional Customer Department, and
+the General Manager of Shanghai Branch and the General Manager of Shanghai Pilot Free Trade Zone Branch of
+the Company. He served as an Executive Assistant President of the Company in April 2019 and has served as an
+Executive Vice President of the Company since March 2021. Concurrently, he is the Chairman of the Board of
+Supervisors of Shenzhen Public Companies Association and the Vice President of National Association of Financial
+Market Institutional Investors.
+5.4.5 Evaluation and incentive system for Directors, Supervisors and senior
+management
+335,500
+Mr. Han Zirong is an External Supervisor of the Company. Mr. Han obtained a bachelor's degree in Business
+Economics from Jilin Finance and Trade College, and is an economist and certified public accountant. He is currently
+a partner of Shu Lun Pan Hong Kong CPA Limited, and is concurrently an External Supervisor of Bank of Chengdu
+Corporation Limited (a company listed on Shanghai Stock Exchange) and an Independent Director of Xuzhou Rural
+Commercial Bank Co., Ltd. (NÆN✯✯R1 and Chengdu Rural Commercial Bank Co., Ltd.. He
+served as a credit administrator of Industrial and Commercial Bank of China, Changchun Branch from August 1985
+to October 1992. He served as an Assistant Director in the Audit Firm under Audit Bureau of Shenzhen Municipality
+from October 1992 to September 1997. He served as a managing partner of Shenzhen Finance Accounting Firm
+from October 1997 to October 2008. He served as a senior partner of Daxin Certified
+Public Accountants from October 2008 to October 2012. He served as an Independent Director of Bank of Chengdu
+Corporation Limited (a company listed on Shanghai Stock Exchange) and Bank of Hainan.
+Mr. Xu Zhengjun is an External Supervisor of the Company. Mr. Xu obtained a master's degree in the Maritime
+Transportation Management from Shanghai Maritime University and is a senior political engineer. He is currently an
+Independent Director of China Merchants RenHe Life Insurance Co., Ltd.. He previously served as the Section Chief
+and the Department Head of Shanghai Ocean Shipping Co., Ltd., the General Manager of the crew company and
+land property company of COSCO Container Lines Co., Ltd., the Assistant to General Manager of COSCO Container
+Lines Co., Ltd., the General Manager of Shanghai Ocean Shipping Co., Ltd., the Secretary of the Disciplinary
+Committee of COSCO Container Lines Co., Ltd., the General Manager of COSCO (HK) Industry & Trade Holdings
+Ltd., the Vice Chairman of Shenzhen Guangju Energy Co., Ltd. (a company listed on Shenzhen Stock Exchange),
+the Vice President and General Counsel of COSCO (Hong Kong) Group Limited and the Director of True Smart
+International Limited, the General Manager and Executive Director of COSCO International Holdings Limited, the
+Chairman of the Corporate Governance Committee of COSCO International and the Independent Director of
+Sinotrans Shipping Limited.
+Mr. Wang Wanqing is an Employee Supervisor of the Company. Mr. Wang obtained a bachelor's degree in Chinese
+Language & Literature from Anhui University. Mr. Wang currently serves as the Business Director of the Head Office
+and the General Manager of the Audit Department of the Company. He is concurrently the executive member of
+the China Institute of Internal Audit and a member of professional committee under the supervisory committee of
+China Association for Public Companies. Mr. Wang started his career in Anhui University in July 1986. He worked in
+the General Office in Anhui Province from November 1991 to February 2001. He consecutively served as the Head,
+Assistant President and Vice President of the Hefei Branch of the Company from February 2001 to April 2007. He
+served as the General Manager of the Human Resources Department at the Head Office of the Company and the
+Deputy Director of the Labour Union from April 2007 to August 2012. He served as the Business Director of the
+Head Office, the General Manager of the Human Resources Department and the Deputy Director of the Labour
+Union of the Company from September 2012 to March 2014. He has been an Employee Supervisor of the Company
+since July 2018.
+Ms. Cai Jin is an Employee Supervisor of the Company. Ms. Cai obtained a bachelor's degree in Finance from
+Hunan University of Finance and Economics. She is an economist. She currently serves as the Director of the Labor
+Union of the Head Office of the Company. In August 1992, she started her career in Shashi Branch of Industrial
+and Commercial Bank of China in Hubei Province. She joined the Company in May 1995. She successively served as
+the Assistant General Manager of the Human Resources Department, the Deputy General Manager of the Banking
+Department of the Head Office and the Deputy General Manager of the Asset Custody Department of the Head
+Office from April 2010 to December 2021.
+Senior management
+Mr. Tian Huiyu, please refer to Mr. Tian Huiyu's biography under the heading of "Directors" above.
+Mr. Wang Liang, please refer to Mr. Wang Liang's biography under the heading of "Directors" above.
+Mr. Wang Jianzhong is an Executive Vice President of the Company. He obtained a bachelor's degree in
+Accounting from Dongbei University of Finance and Economics and is an assistant economist. Mr. Wang joined
+the Company in November 1991 and successively served as the General Manager of Changsha Branch, the Deputy
+General Manager of the Corporate Banking Department of the Head Office, the General Manager of Foshan Branch,
+the General Manager of Wuhan Branch, the Business Director of General Office of Corporate Finance Group of the
+Head Office and the General Manager of Beijing Branch of the Company since October 2002. He has served as an
+Executive Vice President of the Company since April 2019. He is concurrently a Director of China UnionPay Co., Ltd.
+and a member of Visa Asia Pacific Senior Advisory Council.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+The Company offers remuneration to Independent Directors and External Supervisors according to the "Resolution in
+Respect of Adjustment to Remuneration of Independent Directors" and the "Resolution in Respect of Adjustment to
+Remuneration of External Supervisors" considered and passed at the 2016 First Extraordinary General Meeting; offers
+remuneration to Executive Directors and other senior management according to the "Policies on Remunerations
+of Senior Management of China Merchants Bank Co., Ltd."; and offers remuneration to Employee Supervisors in
+accordance with the policies on remunerations of employees of the Company. All of the Directors and Supervisors
+nominated by shareholders of the Company do not receive any remuneration from the Company.
+Mr. Shi Shunhua is an Executive Vice President of the Company. He obtained an MBA degree from China
+Europe International Business School and is a senior economist. Mr. Shi joined the Company in November 1996
+and successively served as the Assistant General Manager and the Deputy General Manager of Shanghai Branch,
+the General Manager of Suzhou Branch, the General Manager of Shanghai Branch and the Business Director of
+the General Office of Corporate Finance Group under the Head Office of the Company since May 2003. He has
+served as an Executive Vice President of the Company since April 2019. He is concurrently the General Manager of
+Shanghai Branch of the Company and the Chairman of CMBFL and also serves as a member of the 13th Session of
+the Shanghai People's Political Consultative Committee.
+Mr. Zhu Jiangtao is an Executive Vice President and the Chief Risk Officer of the Company. Mr. Zhu obtained
+a master's degree in Economics and is a senior economist. He joined the Company in January 2003. He served
+as an Assistant President and Vice President of Guangzhou Branch of the Company, the President of Chongqing
+Branch, the General Manager of the Credit Risk Management Department and the General Manager of the Risk
+Management Department of the Company from December 2007 to July 2020. He has served as the Chief Risk
+Officer of the Company since July 2020 and as an Executive Vice President of the Company since September 2021.
+Mr. Xiong Kai is the Secretary of the Party Discipline Committee of the Company. Mr. Xiong graduated from
+Graduate School of Chinese Academy of Social Sciences with a doctorate degree in Legal Theory. He successively
+served as Senior Staff, Principal Staff and Deputy Director of the Ministry of Public Security of the PRC from 1994
+to 2006 and acted as the Deputy Director (Consultant), Director, Deputy Director-General and Director-General at
+the CPC General Office from 2006 to 2014. He joined the Company in July 2014 and successively served as the
+Director of Disciplinary Committee Office, General Manager of the Inspection and Security Department of the Head
+Office, the Director of General Office of Head Office, General Manager of the Asset Security Department and the
+President of Zhengzhou Branch and Beijing Branch. He has been the Secretary of the Party Discipline Committee of
+the Company since July 2021.
+Mr. Zhong Desheng is an Executive Assistant President of the Company. He obtained a master's degree in
+the History of Foreign Economic Thoughts from Huazhong University of Science and Technology and is a senior
+economist. He joined the Company in July 1993 and successively served as an Assistant President and Vice President
+of Wuhan Branch, the General Manager of International Business Department and Trade Finance Department of the
+Head Office and the General Manager of Offshore Finance Center of the Head Office, the President of Guangzhou
+Branch, the President of the General Office of Corporate Finance of the Head Office and the General Manager
+of the Strategic Customers Department. He has served as an Executive Assistant President of the Company since
+October 2021. He concurrently serves as the General Manager of the Wealth Management Platform Department of
+the Head Office of the Company.
+Mr. Wang Xiaoqing is an Executive Assistant President of the Company. He obtained a doctorate degree in Political
+Economics from Fudan University and is an economist. He worked at PICC Asset Management Company Limited
+from March 2005 to March 2020, and successively served as the Deputy General Manager of Risk Management
+Department, the Deputy General Manager and General Manager of Portfolio Management Department, Assistant
+President and Vice President. In March 2020, he joined the Company and served as the General Manager of CMFM.
+He has served as an Executive Assistant President of the Company since October 2021, and concurrently serves as
+the Chairman of CMFM, CIGNA & CMB Life Insurance and CIGNA & CMAM.
+117
+118
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+Joint company secretaries
+Mr. Wang Liang, please refer to Mr. Wang Liang's biography under the heading of "Directors" above.
+Ms. Ho Wing Tsz Wendy is a joint company secretary of the Company. Ms. Ho obtained a MBA degree from the
+Hong Kong Polytechnic University. She is a Chartered Secretary, a Chartered Governance Professional and a Fellow
+of both The Hong Kong Chartered Governance Institute (formerly known as The Hong Kong Institute of Chartered
+Secretaries) and The Chartered Governance Institute (formerly known as the Institute of Chartered Secretaries and
+Administrators in the United Kingdom) in the United Kingdom and is a council member, the Vice Chairlady of the
+Professional Development Committee and the Professional Services Group of The Hong Kong Chartered Governance
+Institute and is a holder of the Practitioner's Endorsement issued by The Hong Kong Chartered Governance Institute.
+Ms. Ho is an Executive Director of Corporate Services of Tricor Services Limited, and her professional practice area
+covers business consulting, corporate services for private, offshore and listed companies. Ms. Ho has over 20 years
+of experience in the corporate secretarial and compliance service field and is currently the company secretary or joint
+company secretary of a few listed companies on the Hong Kong Stock Exchange.
+Mr. Wang Yungui is an Executive Vice President of the Company. Mr. Wang obtained a master's degree from the
+Party School of the Central Committee of the Communist Party of China and is a senior economist. He successively
+served as the General Manager of the Department of Education and the General Manager of the Human Resources
+Department of the Industrial and Commercial Bank of China from July 2008 to December 2016, and served as the
+Secretary of the Disciplinary Committee of China Development Bank from December 2016 to March 2019. He has
+served as an Executive Vice President of the Company since June 2019.
+0.00163
+0.00095
+Zhou Song
+Board of Supervisors,
+Employee Supervisor
+Wang Wanging
+Cai Jin
+Employee Supervisor
+Employee Supervisor
+A Share
+A Share
+H Share
+Long position
+Long position
+Long position
+Beneficial owner
+181,000
+0.00088
+0.00072
+Beneficial owner
+Beneficial owner
+109,500
+0.00053
+0.00043
+4,550
+0.00010
+0.00002
+5.5 Board of Directors
+The Board of Directors is an independent policy-making body of the Company, responsible for executing resolutions
+passed by the shareholders' general meetings; formulating of the Company's major principles and policies, including
+development strategy, risk preference, internal control and internal auditing systems, remuneration regulations;
+deciding on the Company's operating plans, investment and financing proposals; preparing annual financial budgets,
+final accounts and profit appropriation plans; and appointing and evaluating members of senior management. The
+Company adopts a system in which the President assumes full responsibility under the leadership of the Board of
+Directors. The senior management team has discretionary powers in terms of operation and makes daily decisions
+on operation management within the scope of authorisation by the Board of Directors, and the Board of Directors
+would not intervene in any specific matters in the Company's daily operation and management.
+The Board of Directors of the Company facilitates scientific and reasonable decision-making through the
+establishment of a diversified directorship structure, and continues to improve the decision-making and operational
+efficiency through promoting the effective operation of special committees. The Board of Directors focuses on
+key issues, directions and strategies, and continues to strengthen the corporate philosophy of balanced, healthy
+and sustainable development. The Board of Directors ensures the Company to achieve dynamic and balanced
+development in "quality, efficiency and scale" through effective management of its strategy, risks, capital,
+remuneration, internal control and related party transactions, etc., thus providing a solid basis for the Company to
+enhance its operation and management capabilities.
+119
+Chapter V Corporate Governance
+0.00133
+0.00116
+Beneficial owner
+President and Chief
+Executive Officer
+Non-Executive Director
+A Share
+Wang Liang
+Executive Director,
+First Executive Vice
+A Share
+Long position
+Long position
+Interest of spouse
+Beneficial owner
+23,282
+0.00011
+0.00009
+250,000
+0.00121
+0.00099
+President and Chief
+Financial Officer,
+Secretary of
+the Board of Directors
+Xiong Liangjun
+Chairman of the
+A Share
+Long position
+240,000
+China Merchants Bank
+Annual Report 2021
+China Merchants Bank
+Annual Report 2021
+115
+Deputy Director (Executive) of the
+Executive Committee of the China
+Merchants Financial Group/Platform
+China Merchants Group Ltd. Deputy Director (Executive) of the
+Wang Daxiong
+Luo Sheng
+COSCO SHIPPING
+Development Co., Ltd.
+Dajia Insurance Group Co.,
+Ltd.
+Executive Committee of the China
+Merchants Financial Group/Platform
+Chairman
+Deputy General Manager
+Temporary Head
+Peng Bihong
+China Communications
+Chief Accountant
+Construction Group Co.,
+Ltd
+Guo Xikun
+Wu Heng
+Hebei Port Group Co., Ltd.
+SAIC Motor Corporation
+Limited
+From October 2018 up to
+now
+From September 2011 up
+to now
+From June 2018 up to now
+China Merchants Group Ltd. Chief Digital Officer
+From January 2019 up to
+Director (Executive) of the Executive
+Committee of the China Merchants
+Financial Group/Platform
+Zhang Jian
+110
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+5.4.3 Current positions held by Directors and Supervisors in the shareholders'
+companies
+Name
+Miao Jianmin
+Name of Company
+Fu Gangfeng
+China Merchants Group Ltd.
+China COSCO Shipping
+Major Title
+Chairman
+Term of Office
+From July 2020 up to now
+Director and General Manager
+From September 2019 up
+Corporation Limited
+to now
+Zhou Song
+China Merchants Group Ltd. Chief Accountant
+Hong Xiaoyuan
+China Merchants Group Ltd.
+Assistant General Manager
+Su Min
+116
+now
+From June 2018 up to now
+Mr. Wang Liang is an Executive Director, First Executive Vice President and Chief Financial Officer and the secretary
+of the Board of Directors of the Company. Mr. Wang obtained a master's degree in Money and Banking from
+Renmin University of China, and is a senior economist. He successively served as the Assistant General Manager, the
+Deputy General Manager and the General Manager of Beijing Branch of the Company. He served as the Executive
+Assistant President of the Company and concurrently, the General Manager of Beijing Branch since June 2012.
+He ceased to serve as the General Manager of Beijing Branch in November 2013, and has been serving as a Vice
+President of the Company since January 2015. He concurrently served as the secretary of the Board of Directors of
+the Company from November 2016 to April 2019, and has concurrently been serving as the Chief Financial Officer
+of Company since April 2019. He has served as First Executive Vice President of the Company and concurrently acted
+as the secretary of the Board of Directors, Company Secretary of the Company and the authorised representative in
+charge of matters in relation to listing in Hong Kong since August 2021. He concurrently serves as Vice President
+of Payment & Clearing Association of China, a member of the High-level Steering and Coordination Committee for
+Data Governance of China Banking and Insurance Regulatory Commission, a Director of the fourth session of the
+Professional Committee for Intermediate Business of China Banking Association and an Executive Director of the
+sixth session of the Banking Accounting Society of China.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Mr. Wong See Hong is an Independent Non-Executive Director of the Company. Mr. Wong obtained a bachelor's
+degree in Business Administration from the National University of Singapore, a master's degree in Investment
+Management from Hong Kong University of Science and Technology, and a doctorate degree in Transformational
+Leadership (DTL) from Bethel Bible Seminary. He is an Independent Director of The Frasers Hospitality Assets
+Management Pte., Ltd. (¥Â¤Â¤¥Ê¥) and EC World Asset Management Private Limited and a
+member of the Financial Management Commission of the Hong Kong Administration Society (€¥£?@!¾ÊU
+). He previously served as the Deputy Chief Executive of BOCHK, head, Managing Director and President for
+the Southeast Asia region, and the head of the Financial Market Department in Asia (±) of ABN
+AMRO Bank, a Director of Bank of China Group Insurance Company Limited, the Chairman of the Board of BOC
+Group Trustee Company Limited, the Chairman of BOCI-Prudential MPF (+), the Chairman of BOCHK
+Asset Management Limited, a member of the Board of Directors of the Civil Servants Institute of Prime Minister's
+Office Singapore (新加坡總理辦公室公務員學院), a member of the Client Consulting Commission (客戶諮詢委員會)
+of Thomson Reuters and an Independent Director of HDR Global Trading Limited.
+Mr. Li Menggang is an Independent Non-Executive Director of the Company. Mr. Li obtained a Ph.D. in Economics
+and a post-doctoral degree in both Transportation and Communication Engineering and Theoretical Economics from
+Beijing Jiaotong University. He has been serving as a professor and doctoral supervisor at Beijing Jiaotong University,
+the Dean of the National Academy of Economic Security (NAES) of Beijing Jiaotong University, the Director of
+Beijing Laboratory of National Economic Security Pre-Warning Project and the Chief Expert of Major Bidding Projects
+of the National Social Science Fund. He concurrently serves as the Vice President and the Deputy Director of the
+Expert Committee of China Human Resource Development Association, the Director of the Human Capital Institute,
+the Vice President of Guanghua Engineering Science and Technology Award Foundation (✗#INRED¥Â
+), the Deputy Director of the Independent Board Committee of China Association for Public Companies and an
+Independent Director of Huadian Power International Corporation Limited (a company listed on Hong Kong Stock
+Exchange and Shanghai Stock Exchange). He served as an Independent Director of Sichuan Golden Summit (Group)
+Joint-stock Co., Ltd. (a company listed on Shanghai Stock Exchange), an Independent Non-Executive Director of
+Yuxing InfoTech Investment Holdings Limited (a company listed on Hong Kong Stock Exchange), the Chairman of the
+Professional Committee of the Logistics Informatisation and Industrial Security System of the Institute of Electrical
+and Electronics Engineers (IEEE), the Independent Director of Hunan Copote Science & Technology Co., Ltd. (a
+company listed on Shanghai Stock Exchange) and the Independent Director of Daqin Railway Co., Ltd. (a company
+listed on Shanghai Stock Exchange).
+Mr. Liu Qiao is an Independent Non-Executive Director of the Company. Mr. Liu obtained a bachelor of science
+degree in Economics and Mathematics from Renmin University of China, a master's degree in Economics from
+the Institute of Finance of People's Bank of China and a Ph.D. in Economics from University of California, Los
+Angeles in the United States and is a distinguished professor () of Changjiang Scholars Program. He has
+been serving as the Dean at the Guanghua School of Management of Peking University, professor of Finance
+and Economics and doctoral supervisor. He is also a member of Think Tank Committee of All-China Federation
+of Industry and Commerce (£\\\\\), the Economic Research Center of Chinese Kuomintang
+Revolutionary Committee, the expert panel of the Shenzhen Stock Exchange and the Listing Committee of ChiNext
+of Shenzhen Stock Exchange; an advisor of the post-doctoral stations of the CSRC, the Shenzhen Stock Exchange,
+the China Financial Futures Exchange and China Minsheng Banking Corp., Ltd. etc., the Vice Chairman of the China
+Enterprise Reform and Development Society (+¤×¥£}£}), an Independent Non-Executive Director
+of CSC Financial Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), and an
+Independent Director of Beijing Capital Co., Ltd. (a company listed on Shanghai Stock Exchange). Mr. Liu served
+as an assistant professor at School of Economics and Finance of the University of Hong Kong, a consultant of the
+Asia-Pacific Corporate Finance & Strategy Practice of McKinsey & Company, an assistant professor and associate
+professor (with tenure) at the Faculty of Business and Economics of the University of Hong Kong and an Independent
+Non-Executive Director of Zensun Enterprises Limited (formerly known as the ZH International Holdings Limited, a
+company listed on Hong Kong Stock Exchange).
+113
+114
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Mr. Tian Hongqi is an Independent Non-Executive Director of the Company. Mr. Tian obtained a bachelor's degree
+in Finance and Accounting from the Faculty of Water Transportation Management of Shanghai Maritime University,
+and is a senior accountant. He concurrently serves as the Independent Director of Nanjing Tanker Corporation (
+a company listed on Shanghai Stock Exchange). He previously served as the Chief
+Financial Officer and Chief Information Officer of COSCO SHIPPING Bulk Co., Ltd., the General Manager of the
+Finance Department of COSCO Container Lines Co., Ltd., the Director and the General Manager of the Financial
+Department of COSCO Japan, the Chief Financial Officer of COSCO Holdings (Singapore) Pte. Ltd. (#
+)), the General Manager of the Finance Department of the COSCO Container Transportation Operation
+Headquarters (+), and the Deputy Director of the Finance Department of COSCO.
+Mr. Li Chaoxian is an Independent Non-Executive Director of the Company. Mr. Li obtained a doctorate in
+Industrial Economics and a master's degree in Statistics, respectively from Renmin University of China. He is currently
+a professor and doctoral supervisor of Beijing Technology and Business University, and concurrently serves as an
+Independent Director of China World Trade Center Company Limited (a company listed on Shanghai Stock Exchange)
+and an Independent Director of Beijing HuaDaJian Ye Engineering Management Co., Ltd. (*IH†4K
+) (a company listed on the National Equities Exchange and Quotations). He served as the Deputy Director
+and Director of the Finance Department of Beijing Business School (predecessor of Beijing Technology and Business
+University), Deputy Dean and Dean of the School of Economics of Beijing Technology and Business University,
+Chief of the Academic Affairs Office of Beijing Technology and Business University, and Vice President of Beijing
+Technology and Business University.
+Mr. Shi Yongdong is an Independent Non-Executive Director of the Company. Mr. Shi obtained a doctorate in
+Economics from Dongbei University of Finance and Economics and a master's degree in Applied Mathematics
+from Jilin University. He is currently the dean of the School of Applied Finance and Behavioral Sciences of Dongbei
+University of Finance and Economics, and concurrently serves as a council member of China Finance Society, a
+standing council member of the Chinese Finance Annual Meeting (+) and the Chinese Financial
+Projects Annual Meeting (+), and a standing council member of the International Symposium
+on Financial Systems Engineering and Risk Management (IHLAKTI!). He served as the
+Deputy Dean of the School of Finance, the Director of the Applied Finance Center, Chief of the scientific research
+department in Dongbei University of Finance and Economics, an Independent Director of Dalian Huarui Heavy
+Industry Group Co., Ltd. (a company listed on Shenzhen Stock Exchange), and an Independent Director of Bank of
+Anshan Co., Ltd..
+Supervisors
+Mr. Xiong Liangjun is the Chairman of the Board of Supervisors of the Company and an Employee Supervisor.
+He obtained a master's degree in Money and Banking from Zhongnan University of Finance and Economics and
+an EMBA degree from the Cheung Kong Graduate School of Business. He is a senior economist. He successively
+served as the Deputy Director-General of the CBRC Shenzhen Bureau, the Director-General of the CBRC Guangxi
+Bureau and the CBRC Shenzhen Bureau from September 2003 to July 2014. He served as the Secretary of the Party
+Discipline Committee of the Company since July 2014 and has become the Chairman of the Board of Supervisors
+of the Company since August 2021. He has concurrently served as a member of Shenzhen Finance Development
+Consultation Committee (深圳市金融發展諮詢委員會).
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Mr. Peng Bihong is a Shareholder Supervisor of the Company. Mr. Peng graduated from Hunan College of Finance
+and Economics () majoring in Finance and obtained a master's degree in Economics from Wuhan
+University. Mr. Peng is a non-practicing member and a lecturer of Chinese Institute of Certified Public Accountants.
+He currently serves as a Standing Committee Member of the Party Committee and Chief Accountant of China
+Communications Construction Group (Limited), and concurrently a Director of China State-owned Enterprise
+Structural Adjustment Fund Co., Ltd. (^*****ÂRSĦRA¬), the Vice Chairman of the Council
+of China Oceanic Development Foundation (+ª¤¥¤£¥), the Vice Chairman of Jiang Tai Insurance
+Brokers Co., Ltd., the Vice Chairman and a Council Member of the Communications Branch of China Institute
+of Internal Audit, the Vice Chairman of China Communications Accounting Society, a member of the Strategy
+Advisory Committee of Shanghai National Accounting Institute and an intelligent finance specialist of Shared
+Finance Special Committee of The Innovation & Entrepreneurship Education Alliance of China. He has worked for
+China Poly Group Corporation Limited (formerly known as China Poly Group Corporation (+)) for
+nearly 20 years, serving successively as the Director of the Finance Department of China Poly Group Corporation,
+the General Manager of Poly Finance Company Limited, the Chief Financial Officer of Poly Real Estate Group Co.,
+Ltd. and a Standing Committee Member of the Party Committee and the Chief Accountant of Poly Group, as well
+as the Chairman of Poly Finance Company Limited and Poly Investment Holdings Co., Ltd. respectively. He served
+as the Chief Financial Officer of China Communications Construction Company Limited from September 2018 to
+September 2019.
+Mr. Wu Heng is a Shareholder Supervisor of the Company and a postgraduate from the Department of Accounting
+of Shanghai University of Finance and Economics. Mr. Wu obtained a master's degree in Management and is a
+senior accountant. He is the General Manager of Finance Affairs Department of SAIC Motor Corporation Limited,
+the General Manager of SAIC Motor Financial Holding Management Co., Ltd., a Non-executive Director of Bank
+of Chongqing Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange) and a
+Director of Wuhan Kotei Informatics Co.,Ltd. (a company listed on Shenzhen Stock Exchange). He consecutively
+served as a Deputy Manager and Manager of Planning and Finance Department as well as a Manager of Fixed
+Income Department of Shanghai Automotive Group Finance Company, Ltd. from March 2000 to March 2005. He
+consecutively served as a Division Head, Assistant to Executive Controller and the Manager of Accounting Division
+of Finance Department of SAIC Motor Corporation Limited from March 2005 to April 2009, the Chief Financial
+Officer of Huayu Automotive Systems Co., Ltd. (a company listed on Shanghai Stock Exchange) from April 2009 to
+May 2015, and concurrently serving as the Director and General Manager of Huayu Automotive Systems (Shanghai)
+Co., Ltd. (E¾(LO)OR) during the period from May 2014 to May 2015, and the Deputy General
+Manager of the Finance Affairs Department of SAIC Motor Corporation Limited from May 2015 to August 2019.
+Mr. Guo Xikun is a Shareholder Supervisor of the Company and holds a bachelor's degree and a master's degree.
+He is a senior accountant. He is currently the Chief Accountant of Hebei Port Group Co., Ltd.
+A), the Chairman of Hebei Port Group Finance Company Limited and concurrently serves as the Chairman
+of Qinhuangdao Chief Accountants Association. He served as the Deputy Chief of the Finance Division of the
+Qinhuangdao Port Authority, Deputy Director and director of the Finance Department of Qinhuangdao Port Group
+Co., Ltd., and successively served as the head of the Finance Department, Deputy Chief Financial Officer, Chief
+Financial Officer, Deputy General Manager and Vice President of Qinhuangdao Port Co., Ltd. (a company listed on
+Hong Kong Stock Exchange and Shanghai Stock Exchange).
+Mr. Ding Huiping is an External Supervisor of the Company. Mr. Ding obtained a doctorate degree in Enterprise
+Economics from University | Linkoeping in Sweden. He is currently a professor and a tutor of doctorate candidates
+in the School of Economics and Management of Beijing Jiaotong University, the head of PRC Enterprise
+Competitiveness Research Center, and Honorary Professor in the Business School of Duquesne University. He is
+concurrently an Independent Director of Beijing Dinghan Technology Group Co., Ltd. (AÆRG¶¶&SĦE
+A) (a company listed on Shenzhen Stock Exchange), Shandong International Trust Co., Ltd. (a company listed
+on Hong Kong Stock Exchange) and China Haisum Engineering Co., Ltd. (a company listed on Shenzhen Stock
+Exchange). He consecutively served as an Independent Director of Huadian Power International Corporation Limited
+(a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), China Merchants Securities Co.,
+Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange) and Metro Land Corporation
+Ltd. (a company listed on Shanghai Stock Exchange). He served as an Independent Director of the Company from
+May 2003 to May 2006.
+Mr. Luo Sheng is a Non-Executive Director of the Company. Mr. Luo obtained a doctorate degree in corporate
+governance from the Business School of Nankai University. Mr. Luo is currently the Deputy General Manager and
+the Temporary Head of Dajia Insurance Group Co., Ltd. (REA) and a Director of Gemdale
+Corporation (a company listed on Shanghai Stock Exchange). Mr. Luo was the principal staff member of the
+Regulation Division of the Policy and Regulation Department, the principal staff member of the Market Analysis
+Division of the Development and Reform Department, the Deputy Director and Director of the Corporate Governance
+Division of the Development and Reform Department, and the Deputy Director of the Regulation Department of
+the China Insurance Regulatory Commission. He also served as an Executive Director, the Executive Vice President,
+the secretary of the Board of Directors, and General Manager of Shanghai Branch of China Insurance Information
+Technology Management Co., Ltd., and the Deputy Director of Development and Reform Department of China
+Insurance Regulatory Commission.
+From June 2018 up to now
+Mr. Wang Daxiong is a Non-Executive Director of the Company. Mr. Wang obtained a bachelor's degree in
+Shipping Finance and Accounting from the Department of Marine Transportation Management of Shanghai Maritime
+University and a master's degree in Business Administration for Senior Management from Shanghai University of
+Finance and Economics, and is a senior accountant. He is the Chairman of COSCO SHIPPING Development Co.,
+Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange). He concurrently serves as a
+Director of China Merchants Securities Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai
+Stock Exchange). He served as a Director of China Merchants Bank from March 1998 to March 2014. He also served
+as the Vice President and Chief Accountant of China Shipping (Group) Company, Deputy General Manager of China
+Shipping (Group) Company, the Chairman of China Shipping (HK) Holdings Limited and the Chairman of COSCO
+SHIPPING Investment Holdings Co., Ltd. (RKERĦRA¬).
+the Chairman of the Board of Directors of China Merchants China Direct Investments Limited, a Director of China
+Merchants Capital Investments Co., Ltd., a Director of China Great Bay Area Fund Management Co., Limited, a
+Director of China Merchants Capital Holdings (International) Limited, the Vice Chairman of China Merchants Capital
+Management Co. Ltd., the Vice Chairman of China Merchants Capital Holdings Co. Ltd. and a Director of China
+Merchants United Development Company Limited.
+From July 2019 up to now
+From September 2020 up
+to now
+From September 2021 up
+to now
+From September 2019 up
+to now
+From April 2021 up to now
+From August 2019 up to
+now
+5.4.4 Biography and positions of Directors, supervisors and senior management
+Directors
+Mr. Miao Jianmin is the Chairman and Non-Executive Director of the Company. Mr. Miao obtained a doctorate
+degree in Economics from Central University of Finance and Economics and is a senior economist. He is an alternate
+member of the nineteenth Central Committee of the Communist Party of China. Mr. Miao is the Chairman of China
+Merchants Group Ltd. and concurrently serves as the Chairman of China Merchants RenHe Life Insurance Co.,
+Ltd.. Mr. Miao was the Vice Chairman and President of China Life Insurance (Group) Company, the Vice Chairman,
+President and Chairman of The People's Insurance Company (Group) of China Limited, the Chairman of PICC
+Property and Casualty Company Limited, the Chairman of PICC Asset Management Company Limited, the Chairman
+of PICC Health Insurance Company Limited, the Chairman of The People's Insurance Company of China (Hong
+Kong), Limited, the Chairman of PICC Capital Investment Management Company Limited, the Chairman of PICC
+Pension Company Limited and the Chairman of PICC Life Insurance Company Limited.
+Mr. Fu Gangfeng is the Vice Chairman and Non-Executive Director of the Company. Mr. Fu obtained a bachelor's
+degree in Finance and a master's degree in Management Engineering from Xi'an Highway College and is a senior
+accountant. He is the Director and General Manager of China COSCO Shipping Corporation Limited. He serves as
+a member and standing committee member of the 13th Session of the Shanghai People's Political Consultative
+Committee. He was the Deputy Director of the Shekou ZhongHua Certified Public Accountants, the Director of
+the Chief Accountant Office, Deputy Chief Accountant and the Chief Financial Officer of China Merchants Shekou
+Industrial Zone Co., Ltd., the Chief Financial Officer of China Merchants Shekou Holdings Co., Ltd., the General
+Manager of the Finance Division, the Chief Financial Officer and Chief Accountant of China Merchants Group Ltd.,
+the Director and General Manager of China Merchants Group Ltd., the Chairman of China Merchants Port Group
+Co., Ltd. (a company listed on Shenzhen Stock Exchange), the Executive Director and Chairman of the Board of
+Directors of China Merchants Port Holdings Company Limited (a company listed on Hong Kong Stock Exchange), and
+the Chairman of the Board of Supervisors of China Merchants RenHe Life Insurance Co., Ltd..
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Mr. Tian Huiyu is an Executive Director, President and Chief Executive Officer of the Company. Mr. Tian obtained
+a bachelor's degree in Infrastructure Finance and Credit from Shanghai University of Finance and Economics and
+a master's degree in Public Administration from Columbia University. He is a senior economist. He was the Vice
+President of Trust Investment Branch of China Cinda Asset Management Co., Ltd. from July 1998 to July 2003, and
+the Vice President of Bank of Shanghai from July 2003 to December 2006. He consecutively served as the Deputy
+General Manager of Shanghai Branch, the head of Shenzhen Branch, and the General Manager of Shenzhen Branch
+of China Construction Bank ("CCB", a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange)
+from December 2006 to March 2011. He acted as the Business Executive of retail banking at the Head Office and
+the Head and General Manager of Beijing Branch of CCB from March 2011 to May 2013. He joined the Company in
+May 2013 and has served as the President of the Company since September 2013. He is concurrently the Chairman
+of CMBIC, the Chairman of CMB International Capital Corporation Limited, the Vice Chairman of Merchants
+Union Consumer Finance Company Limited, a consultant of Shenzhen Strategic Advisory Committee for Enhancing
+Enterprise Competitiveness (+£ƒÂ¤&¥/HKXNERA), the Vice President of China Chamber of
+International Commerce, a member of High Level Guidance and Management Committee of Information Technology
+Risk in the Banking Industry (¬¤Â&#⠀ªÞ¥¤Ã¢¤¥£¦) and a Director of National Internet Finance
+Association of China.
+Mr. Zhou Song is a Non-Executive Director of the Company. Mr. Zhou obtained a master's degree of World
+Economics from Wuhan University. Mr. Zhou is the Chief Accountant of China Merchants Group Ltd., the Chairman
+of Shenzhen China Merchants Ping An Asset Management Co., Ltd. (¤à¥£¤à¤¶¶¶2¬), the
+Chairman of China Merchants Finance Co., Ltd. (VRA), the Chairman of China Merchants
+Investment Development Co., Ltd. (and the Chairman of the Board of Supervisors of China
+Merchants Shekou Industrial Zone Holdings Co., Ltd. (a company listed on the Shenzhen Stock Exchange). He was
+the Deputy General Manager of the Planning and Finance Department of the Head Office of China Merchants Bank,
+the Vice General Manager of Wuhan Branch, the Deputy General Manager (in charge of work) and General Manager
+of the Planning and Finance Department of the Head Office, the Employee Supervisor of China Merchants Bank, the
+Business Director and General Manager of the Assets and Liabilities Management Department of the Head Office,
+the President of Interbank Financial Department, the General Manager of the Assets Management Department of
+the Head Office and the Business Director of the Head Office, the President of Investment Banking and Financial
+Market Department, the General Manager of the Assets Management Department of the Head Office and the
+Business Director of the Head Office.
+Mr. Hong Xiaoyuan is a Non-Executive Director of the Company. Mr. Hong obtained a master's degree in
+Economics from Peking University and a master's degree in Science from Australian National University. He is a
+senior economist. He serves as the Director of China Merchants Holdings (Hong Kong) Company Limited and the
+Assistant General Manager of China Merchants Group Ltd., the Director (Executive) of the Executive Committee of
+the China Merchants Financial Group/Platform and the Chairman of China Merchants Finance Holdings Company
+Limited. He concurrently serves as the Chairman of China Merchants Finance Investment Holdings Co., Ltd., China
+Merchants Capital Investments Co., Ltd., China Merchants United Development Company Limited and China
+Merchants Innovative Investment Management Co., Ltd., and the Director of China Merchants RenHe Life Insurance
+Co., Ltd. and CNIC Corporation Limited. He served as the Director of China Merchants Securities Co., Ltd. (a
+company then listed on Shanghai Stock Exchange), the Chairman of the Board of Directors of China Merchants
+China Direct Investments Limited (a company listed on Hong Kong Stock Exchange), the Chief Executive Officer of
+China Merchants Finance Holdings Company Limited and the Chairman of Shenzhen CMB Qianhai Financial Asset
+Exchange Co., Ltd..
+Mr. Zhang Jian is a Non-Executive Director of the Company. Mr. Zhang obtained a bachelor's degree in Economics
+and Management from the Department of Economics of Nanjing University and a master's degree in Econometrics
+from the Business School of Nanjing University, and is a senior economist. He is the Chief Digital Officer of China
+Merchants Group Ltd., the Director of the Digital Center, the Deputy Director (Executive) of the Executive Committee
+of the China Merchants Financial Group/Platform and a Director of China Merchants Finance Holdings Company
+Limited. He concurrently serves as the Chairman of China Merchants Commerce Financial Leasing Co., Ltd. (¯Ð
+商融資租賃有限公司), the Chairman of China Merchants Financial Technology Co., Ltd. (招商局金融科技有限公司), a
+Director of China Merchants Innovative Investment Management Co., Ltd., a Director of China Merchants Innovative
+Investment (International) Co., Ltd. (¾£Â(@A)ĦR), a Director of China Merchants Innovation
+Investment General Partnership (International) Co., Ltd. (¥£¤#BAB(IA)ĦƑÂƑ), a Director of Shi
+Jin Shi Credit Service Co., Ltd. (£¯à¤¾®) and a Director of Four Rivers Investment Management Co.,
+Ltd. (RATURA). He served as a Director of China Merchants RenHe Life Insurance Company
+Limited, a Director of China Merchants Insurance Holdings Co., Ltd. (ƑÂƑ), a Director of China
+Merchants Ping An Asset Management Co., Ltd., Deputy General Manager of China Merchants Finance Holdings
+Co., Ltd., a Director of Shenzhen CMB Qianhai Financial Asset Exchange Co., Ltd., General Manager of Finance
+Department of China Merchants Group Ltd., the Vice Chairman of China Merchants Capital Investments Co., Ltd.,
+111
+112
+Chapter V Corporate Governance
+Ms. Su Min is a Non-Executive Director of the Company. Ms. Su obtained a bachelor's degree in Finance from
+Shanghai University of Finance and Economics and a master's degree in Business Administration from China
+University of Technology, and is a senior accountant, a non-practicing member of Chinese Institute of Certified
+Public Accountants and a non-practicing member of China Appraisal Society. She is the Deputy Director (Executive)
+of the Executive Committee of the China Merchants Financial Group/Platform. She concurrently serves as a Director
+of Bosera Asset Management Co., Limited, a Director of China Merchants Securities Co., Ltd. (a company listed
+on Hong Kong Stock Exchange and Shanghai Stock Exchange) and a Director of China Great Wall Securities Co.,
+Ltd. (). She successively served as the Deputy Director of Property Office of the State-owned
+Assets Supervision and Administration Commission of Anhui Province, a Director of Huishang Bank, the Deputy
+General Manager and Chief Accountant of Anhui Energy Group Co., Ltd., the Chief Accountant and a member of
+the Communist Party of China of China Shipping (Group) Company, the Chairman of China Shipping Finance Co.,
+Ltd., the Chairman of COSCO SHIPPING Leasing Co., Ltd. (TUR2), a Director of Bank of Kunlun,
+and a Director of China Shipping Development Co., Ltd. (a company listed on Hong Kong Stock Exchange and
+Shanghai Stock Exchange) and China Shipping Container Lines Company Limited (a company listed on Hong Kong
+Stock Exchange and Shanghai Stock Exchange). She served as a Director of China Merchants Innovation Investment
+Management Co., Ltd. (¥£¤¥£¬®), a Supervisor of China Merchants Capital Investments
+Co., Ltd. and the General Manager of China Merchants Finance Holdings Co., Limited.
+Chief Accountant
+General Manager of Finance Affairs
+Department
+The majority of members of the Audit Committee are Independent Non-Executive Directors, and the committee
+was chaired by an Independent Non-Executive Director. The members of the Audit Committee are Tian Hongqi
+(Chairman), Wong See Hong, Li Menggang, Shi Yongdong (all being Independent Non-Executive Directors) and Zhou
+Song (a Non-Executive Director). None of the above persons has ever served as a partner of the incumbent auditors
+of the Company. The Audit Committee is mainly responsible for examining the accounting policies and financial
+position of the Company; and is responsible for the annual audit work of the Company, proposing the appointment
+or replacement of external auditors and examining the status of the internal audit and internal control of the
+Company.
+In 2021, the Nomination Committee under the Board of Supervisors held three meetings at which it reviewed and
+considered the report of the Board of Supervisors on the duty performance of the Board of Directors, the Board of
+Supervisors and the senior management and their members in 2020, reviewed the qualification of Mr. Guo Xikun to
+serve as a Shareholder Supervisor, and formulated the "Measures for the Performance Evaluation of Directors and
+Supervisors of CMB" (TKT[$\ŒÌ».
+Independent Non-
+Executive Directors
+Wong See Hong
+14/14
+Li Menggang
+14/14
+Liu Qiao
+14/14
+བུ་བུ
+4/4
+7/7
+3/3
+1/1
+4/4
+4/4
+1/1
+7/7
+1/1
+1/1
+1/1
+1/1
+1/1
+ངངངངངངངང
+1/1
+Executive Directors
+Tian Huiyu
+14/14
+7/7
+4/4
+Wang Liang
+14/14
+5/5
+Liu Jianjun (resigned)
+4/4
+➢=>
+1/1
+4/4
+4/4
+10/10
+1/1
+6/6
+2/2
+1/1
+ངང
+Notes:
+(1)
+(2)
+During the reporting period, the Board of Directors of the Company held a total of 14 meetings, and the special committees under
+the Board of Directors held a total of 30 meetings.
+During the reporting period, Mr. Leung Kam Chung, Antony attended 9 meetings of the Board of Directors, 1 meeting of the special
+committees under the Board of Directors and 1 shareholders' general meeting in person, and attended 1 meeting of the Board of
+Directors by proxy. Other than above-mentioned, the remaining directors attended the relevant meetings set forth in the above table
+in person.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.5.6 Performance of duties by Independent Non-Executive Directors
+The Board of Directors of the Company currently has six Independent Non-Executive Directors, which meets the
+requirement that at least one third of the total Directors of the Company shall be Independent Directors. The
+qualification, number and proportion of Independent Non-Executive Directors are in compliance with the relevant
+requirements of the CBIRC, the CSRC, Shanghai Stock Exchange and the Hong Kong Listing Rules. All the six
+Independent Non-Executive Directors of the Company are not involved in the circumstances set out in Rule 3.13
+of the Hong Kong Listing Rules which would cause doubt on their independence. The Company has received
+from the Independent Non-Executive Directors their respective annual confirmation of independence which was
+made in accordance with Rule 3.13 of the Hong Kong Listing Rules. Therefore, the Company is of the opinion
+that all the Independent Non-Executive Directors have complied with the requirement of independence set out
+in the Hong Kong Listing Rules. The majority of members of the Nomination Committee, the Remuneration and
+Appraisal Committee, the Audit Committee and the Related Party Transactions Management and Consumer Rights
+Protection Committee under the Board of Directors of the Company are Independent Non-Executive Directors, and
+all of such committees are chaired by an Independent Non-Executive Director. During the reporting period, the six
+Independent Non-Executive Directors maintained communication with the Company through personal attendance
+at the meetings, on-site visits, research and investigations and conferences. They effectively performed their roles
+as Independent Non-Executive Directors by diligently attending the meetings held by the Board of Directors and
+its various special committees, actively expressing their opinions and suggestions and attending to the interests
+and requests of minority shareholders. For details of the attendance of Independent Non-Executive Directors at the
+meetings convened by the Board of Directors and its special committees, please refer to "Attendance of Directors at
+relevant meetings" in this report.
+Zhao Jun (resigned)
+1/1
+9/10
+Antony (resigned)
+5/5
+1/1
+Tian Hongqi
+14/14
+7/7
+3/3
+1/1
+3/3
+Li Chaoxian
+3/3
+1/1
+Shi Yongdong
+4/4
+1/1
+ངངངང➢ ➢
+Leung Kam Chung,
+4/4
+During the reporting period, the Independent Non-Executive Directors of the Company expressed their independent
+opinions on significant matters such as the profit appropriation plan, nomination and election of directors,
+engagement of accounting firms and related party transactions. They made no objection to the resolutions of the
+Board of Directors and others of the Company in the year.
+5/5
+4/4
+121
+122
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+5.5.5 Attendance of Directors at relevant meetings
+The following table sets forth the records of attendance of each Director at the meetings convened by the Board
+of Directors and the special committees under the Board of Directors and at the shareholders' general meeting
+during the reporting period. All Directors performed due diligence in their duties, capitalised on opportunities,
+tackled challenges and used their professional specialties and extensive experience to contribute their valuable
+intelligence and strength to the operation and development of the Company. The Company has adopted the
+constructive opinions and suggestions raised by each of the Directors in aspects including strategy guideline, wealth
+management, Fintech, risk control and management, internal control and compliance, anti-money laundering,
+green finance development, inclusive finance development, related party transactions management, protection of
+consumer rights and improvement of incentive and restrictive mechanisms, and no objection has been raised by any
+of the Directors on the matters reviewed.
+Directors
+Non-Executive
+Directors
+Special committees under the Board of Directors
+Related Party
+Transactions
+Management
+Risk and
+and Consumer
+The Chairman of the Board of Directors and the President of the Company has been served by different persons
+and their duties have been clearly defined in accordance with the requirements of the Hong Kong Listing Rules. Mr.
+Miao Jianmin serves as the Chairman of the Board of Directors and is responsible for leading the Board of Directors,
+ensuring that all the Directors are updated regarding issues arising at board meetings, managing the operation of
+the Board of Directors, and ensuring that all major issues are discussed by the Board of Directors in a constructive
+and timely manner. In order to enable the Board of Directors to discuss all major and relevant matters in time, the
+Chairman of the Board of Directors worked together with senior management to ensure that the Directors duly
+receive appropriate, complete and reliable information for their reference and review. Mr. Tian Huiyu serves as the
+President and is responsible for the business operation of the Company and implementation of its strategies and
+business plans.
+Remuneration
+5.5.4 Chairman of the Board of Directors and the President
+The Company attached great importance to the continuous training of Directors, so as to ensure that they have
+a proper understanding of the operations and businesses of the Company, and that they are fully aware of their
+responsibilities under the relevant laws, regulations and systems, the regulatory requirements of the CBIRC, the
+CSRC, Shanghai Stock Exchange and Hong Kong Stock Exchange and the requirements of the Articles of Association
+of the Company. The Company has renewed the "Insurance for Liabilities of Directors, Supervisors and Senior
+Management" for all its Directors.
+Chapter V Corporate Governance
+5.5.1 Composition of the Board of Directors
+At present, the Board of Directors of the Company has sixteen members, including eight Non-Executive Directors,
+two Executive Directors, and six Independent Non-Executive Directors. All the eight Non-Executive Directors
+are from large-state-owned enterprises where they hold key positions such as the Chairman of the Board of
+Directors, General Manager, Deputy General Manager or Chief Financial Officer. They have extensive experience in
+corporate management, finance and accounting fields. The two Executive Directors have been engaged in financial
+management for a long time with extensive professional experience. Among the six Independent Non-Executive
+Directors, there are renowned experts in accounting and finance, financial experts and university professors with
+international vision, and they all have in-depth knowledge about the development of the banking industry at home
+and abroad. One Independent Non-Executive Director from Hong Kong is proficient in international accounting
+standards and the requirements of Hong Kong capital market. The Board of Directors of the Company has one
+female Director who, together with other Directors of the Company, offers professional opinions to the Company
+in their respective fields. Such diversified composition of the Board of Directors of the Company has brought about
+a wide spectrum of vision and highly professional experience, and also has maintained strong independence which
+enables the Board of Directors to make independent judgments and scientific decisions effectively when studying
+and considering important issues.
+The Company greatly values the diversity of the members of the Board of Directors, and has formulated the relevant
+policies requiring that the Nomination Committee under the Board of Directors shall review the structure, number
+of Directors and composition (including their skills, knowledge and experience) of the Board of Directors at least
+once a year according to the Company's business operation, asset scale and shareholding structure, and put forward
+proposals in respect of any intended changes to the Board of Directors in line with the strategies of the Company.
+The list of Directors of the Company is set out in "Directors, Supervisors and Senior Management" in this report. To
+comply with the Hong Kong Listing Rules, the Independent Non-Executive Directors have been clearly identified in all
+the corporate communication documents of the Company which disclose their names.
+5.5.2 Appointment, re-election and removal of Directors
+In accordance with the Articles of Association of the Company, the Directors of the Company shall be elected or
+replaced by the shareholders at the shareholders' general meetings, and the term of office for the Directors shall
+be three years commencing from the date on which the approval from the PRC banking regulatory authority is
+obtained. A Director is eligible for re-election upon the expiry of his/her current term of office. The term of office for
+a Director shall not be terminated without any justification at a shareholders' general meeting before expiry of his/
+her term.
+A Director may be removed by an ordinary resolution at a shareholders' general meeting before the expiry of his/
+her term of office in accordance with relevant laws and regulations (however, any claim made in accordance with
+contract shall not be affected).
+The term of office for the Independent Non-Executive Directors of the Company shall be the same as that for other
+Directors of the Company. The term of office for the Independent Non-Executive Directors of the Company shall
+comply with the relevant laws and the requirements of the governing authority.
+The procedures for appointment, re-election and removal of Directors, candidates' qualification and other
+requirements of the Company are set out in the Articles of Association and the implementation rules of the
+Nomination Committee of the Company. The Nomination Committee under the Board of Directors of the Company
+shall carefully consider the qualifications and experience of every candidate for a Director and recommends suitable
+candidates to the Board of Directors. Upon passing the candidate nomination proposal, the Board of Directors shall
+propose election of the related candidates at a shareholders' general meeting and submit the relevant resolution at
+a shareholders' general meeting for consideration and approval.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.5.3 Responsibilities of Directors
+During the reporting period, all Directors of the Company cautiously, earnestly and diligently exercised their rights
+under the Articles of Association of the Company and the domestic and overseas regulatory rules, devoted sufficient
+time and attention to the business of the Company, ensured that the business practices of the Company were fully
+compliant with the requirements of the laws and administrative regulations and economic policies of the country,
+gave all shareholders fair treatment, readily reviewed the business operation and management of the Company, and
+fulfilled the responsibilities stipulated under the laws and administrative regulations, departmental regulations and
+the Articles of Association of the Company. All Directors of the Company were aware of their joint and individual
+responsibilities towards shareholders. During the year, the average attendance rate of Directors at meetings of the
+Board of Directors and the special committees under the Board of Directors was 99.73%.
+The Independent Non-Executive Directors of the Company have presented their professional opinions on the
+resolutions reviewed by the Board of Directors, including offering independent written opinions on significant
+matters such as the profit appropriation plan, nomination and election of directors, engagement of accounting
+firms and related party transactions. In addition, the Independent Non-Executive Directors of the Company also
+gave full play to their professional advantages in the relevant special committees under the Board of Directors, and
+provided professional and independent opinions regarding corporate governance and operation management of the
+Company, thereby providing effective guarantee on the scientific decision-making of the Board of Directors.
+The Board of Directors of the Company reviewed its work during the reporting period, believing that it has
+effectively performed its duties and safeguarded the interests of the Company and its shareholders. The Company is
+of the opinion that all the Directors have devoted sufficient time to perform their duties.
+During the reporting period, the Board of Supervisors of the Company made an appraisal on the annual duty
+performance of the Directors, and the annual duty performance and cross-appraisal of the Independent Non
+Executive Directors, and reported the appraisal results to the shareholders' general meeting.
+Capital
+Rights Shareholders'
+Nomination and Appraisal
+14/14
+Zhang Jian
+14/14
+Su Min
+14/14
+Wang Daxiong
+14/14
+Luo Sheng
+14/14
+7/7
+7/7
+4/4
+5/5
+5/5
+/
+Hong Xiaoyuan
+14/14
+Zhou Song
+7/7
+Committee Committee Committee
+Actual times of attendance/Required times of attendance (2)
+Management
+Audit
+Committee
+Protection
+Committee
+General
+5/5
+Meeting
+Strategy
+Committee
+Miao Jianmin
+14/14
+7/7
+4/4
+Fu Gangfeng
+14/14
+Board of
+Directors(1)
+According to the "Rules Governing Independent Directors' Work on Annual Reports" of the Company, the
+Independent Non-Executive Directors of the Company listened to the reports on the operation of the Company in
+2021, believing that such reports had fully and objectively reflected the operation of the Company as well as the
+progress of significant matters in 2021. They recognised and were satisfied with the work performed and the results
+achieved in 2021. They also reviewed the unaudited financial statements of the Company, and discussed with the
+certified public accountants in charge of annual audit in respect of major matters and formed their written opinions;
+they reviewed the procedures for convening board meetings in the year, the decision-making procedures for matters
+on the agenda and the adequacy of information about such meetings; they reviewed the continuing connected
+transactions of the Company and made confirmations as required by the Hong Kong Listing Rules.
+5.5.7 Corporate governance functions
+During the reporting period, the Board of Directors has performed the following duties on corporate governance:
+Formulate and evaluate the policies and practices on corporate governance of the Company and make certain
+amendments as it deems necessary, so as to ensure the validity of those policies and practices;
+8.
+Coordinate the communication between internal auditors and external auditors;
+Audit the financial information of the Company and disclosure of such information, and is responsible for
+the annual audit work of the Company, including issue of a conclusive report on the truthfulness, accuracy,
+completeness and timeliness of the information contained in the audited financial statements, and submit the
+same to the Board of Directors for consideration;
+Examine the internal control system of the Company, and put forward the advices to improve the internal
+control of the Company;
+Review and supervise the mechanism for the Company's employees to whistle blow any misconduct in
+respect of financial statements, internal control or otherwise, so as to ensure that the Company always
+handles the whistle blowing issues in a fair and independent manner and takes appropriate actions;
+Examine the accounting policies, financial reporting procedures and financial position of the Company; and
+Any other task delegated by the Board of Directors.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+In 2021, the Audit Committee of the Eleventh Session of the Board of Directors of the Company held the 10th
+meeting (on 11 March), the 11th meeting (on 16 March), the 12th meeting (on 2 April), the 13th meeting (on 22
+April), the 14th meeting (on 12 May), the 15th meeting (on 11 August) and the 16th meeting (on 20 October).
+Based on the quarterly regular meeting system, the Audit Committee mainly reviewed the regular reports and internal
+and external audit reports, and reviewed and approved the annual report, interim report and quarterly report,
+supervised and verified the truthfulness, accuracy and timeliness of information set out in the financial statements,
+reviewed and approved the annual, interim and quarterly internal audit plans and work reports, proposals for
+engaging accounting firms and changes to accounting estimates, and listened to external auditors' audit plans,
+audit results, management suggestions and other reports. The Company obtained the findings of internal audits in
+a timely manner and strengthened bank-wide self-examination and the rectification of and the accountability for
+the problems concerned by relevant regulators, promoted an effective communication mechanism between internal
+and external audits by constantly enhancing the communication with internal and external auditors, attached great
+importance to the construction of a digital, intelligent and remote auditing system, carried out special research on
+the auditing work to grasp a comprehensive understanding of the application of the audit model across the whole
+bank and continued to push forward the improvement of auditing techniques. The Audit Committee gave full play
+to its important role in monitoring operation management, disclosing risks and issues and improving management
+levels, and effectively discharged relevant functions.
+According to "Work Procedures on Annual Reports for Audit Committee of the Board of Directors" (
+£Q@F*I adopted by the Company, the Audit Committee of the Board of Directors of the Company
+performed the following duties in preparing and reviewing the annual report for 2021:
+1. The Audit Committee considered and discussed the accounting firm's audit plan for 2021 and the unaudited
+financial statements of the Company;
+2.
+3.
+In the course of annual audit and after the issue of a preliminary audit opinion by the auditors in charge
+of annual audit, the Audit Committee reviewed the report on the operation of the Company for 2021,
+exchanged opinions on the significant matters and audit progress with the auditors in charge of annual audit,
+reviewed the financial statements of the Company, and then formed written opinions on the above issues;
+Before the convening of the annual meeting of the Board of Directors, the Audit Committee reviewed and
+prepared a resolution on the Company's Annual Report for 2021 which was submitted to the Board of
+Directors for consideration and approval. Moreover, the Audit Committee reviewed and submitted to the
+Board of Directors the conclusion report prepared by the auditors in charge of annual audit in respect of the
+audit work of the Company in 2021.
+Related Party Transactions Management and Consumer Rights Protection Committee
+7.
+The majority of members of the Related Party Transactions Management and Consumer Rights Protection Committee
+are Independent Non-Executive Directors, and the committee was chaired by an Independent Non-Executive Director.
+The members of the Related Party Transactions Management and Consumer Rights Protection Committee are Li
+Chaoxian (Chairman), Wong See Hong and Tian Hongqi (all being Independent Non-Executive Directors) and Su Min
+(a Non-Executive Director). The Related Party Transactions Management and Consumer Rights Protection Committee
+is mainly responsible for inspection, supervision and review of related party transactions of the Company and
+protection of the legitimate rights and interests of consumers.
+6.
+4.
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+5.
+6.
+Arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
+and
+Any other task delegated by the Board of Directors.
+In 2021, the Risk and Capital Management Committee of the Eleventh Session of the Board of Directors of the
+Company held the 13th meeting (on 12 March), the 14th meeting (on 15 March) and the 15th meeting (on 8
+June), the 16th meeting (on 3 August) and the 17th meeting (on 11 November). The Risk and Capital Management
+Committee continued to implement the Board of Director's strategic principles of "quality first, efficiency in priority,
+risk controllable, and moderate scale", adhered to the long-term and prudent risk management philosophy, and
+always maintained a strategic focus on risk management. It assisted the Board of Directors in strengthening the
+management of major asset allocation, green finance, impact of pandemic, capital management, comprehensive risk
+management under the extensive wealth management business model and other areas and actively implemented
+the Board of Directors' target requirements of "outrunning the market and outperforming the peers". The Risk and
+Capital Management Committee adhered to the quarterly meeting mechanism, assisted the Board of Directors to
+continuously strengthen the comprehensive risk management function, pointed out that under the business model of
+extensive wealth management, risk management shall be viewed from the perspective of the Bank Group, with the
+concept of "large assets, large liabilities, large off-balance sheet, and large revenue", formulated the "Guideline for
+the Five-Year Plan of China Merchants Bank in Risk Management Capacity Building (2021-2025)" (HÀ£íƒªÞ¥
+(2021-2025)»), revised the risk appetite of the Bank Group in a timely manner in accordance
+with the transformation of China's economic growth drivers and the strategic vision and strategic positioning
+of China Merchants Bank; paid close attention to the impact of real estate market fluctuations, the COVID-19
+epidemic, and the "3060" dual carbon objectives on asset quality, stress testing and major asset allocation, and
+emphasised maintenance of strategic focus under the new situation; kept a watchful eye on the impact brought by
+Sino-US relationship to the operation and development of the Company in all aspects, and performed regular review
+on the working report on compliance of institutions in the United States; reviewed and heard the interim planning
+for capital management, internal capital adequacy assessment, risk appetite implementation, consolidated statement
+management and other reports, earnestly pursued the sound and prudent risk management culture and assisted the
+Board of Directors in further enhancing its risk management capabilities.
+Audit Committee
+Main authorities and duties:
+1.
+Propose the appointment or replacement of external auditors;
+2.
+Monitor the internal audit system of the Company and its implementation, and evaluate the work procedures
+and work effectiveness of the internal audit department;
+3.
+5.
+Main authorities and duties:
+1.
+Identify related parties of the Company pursuant to relevant laws and regulations;
+The Board of Supervisors is a supervisory body of the Company and is accountable to the shareholders' general
+meetings, and effectively oversees the strategic management, financial activities, internal control, risk management,
+legal operation, corporate governance, as well as the duty performance of the Board of Directors and senior
+management with an aim to protect the legitimate rights and interests of the Company, its shareholders, employees,
+creditors and other stakeholders.
+5.6.1 Composition of the Board of Supervisors
+As of the end of reporting period, the Board of Supervisors of the Company consists of nine members, including
+three Shareholder Supervisors, three Employee Supervisors and three External Supervisors. The proportion of
+Employee Supervisors and External Supervisors in the members of the Board of Supervisors each meets the regulatory
+requirements. The three Shareholder Supervisors are from large state-owned enterprises where they serve
+important posts and have extensive experiences in business management and professional knowledge in finance and
+accounting; the three Employee Supervisors have long participated in banking operation and management, and thus
+accumulated rich professional experience in finance; and the three External Supervisors have professional expertise
+and rich practical experience in economic management and research, accounting, corporate governance and other
+areas. Members of the Board of Supervisors of the Company have professional ethics and professional competence
+required for their performance of duties which ensures the effective supervision by the Board of Supervisors.
+A Nomination Committee and a Supervisory Committee are established under the Board of Supervisors.
+5.6.2 How the Board of Supervisors performs its supervisory duties
+The Board of Supervisors performs its supervisory duties primarily by: holding regular meetings of Board of
+Supervisors and its special committees, attending shareholders' general meetings, board meetings and its special
+committee meetings, attending various meetings on operation and management held by the senior management;
+reviewing various documents of the Company, reviewing work reports and specific reports of the senior
+management, conducting opinion exchanges and discussions, carrying out special investigations and surveys at
+domestic and overseas branches of the Company on a collective or separate basis and having talks with Directors
+and the senior management over their duty performance in the year, communicating with external auditors
+regularly, etc. By doing so, the Board of Supervisors comprehensively monitors the development strategy, operation
+and management status, risk management status and internal control and compliance status of the Company as well
+as duty performance of the Directors and the senior management, and puts forward the constructive and targeted
+operation and management advice and supervision opinions.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.6.3 Duty performance of the Board of Supervisors during the reporting period
+During the reporting period, the Board of Supervisors convened a total of fourteen meetings, of which four were
+on-site meetings and ten were meetings convened in the form of written resolutions. 36 proposals regarding
+development strategies, business operation, financial activities, internal control, risk management, internal audit,
+related party transactions, corporate governance, data governance, social responsibilities, anti-money laundering
+work, evaluation of the duty performance of Directors, Supervisors and senior management and audit on the
+resignation of senior management were considered, and 26 special reports involving implementation of risk appetite,
+disposal of non-performing assets, capital adequacy ratio, consolidated management, prevention and control of
+crimes, green finance, consumer rights protection were delivered or reviewed at those meetings.
+In 2021, the Company convened 1 shareholders' general meeting and 6 on-site board meetings. Supervisors
+attended the shareholders' general meeting and were present at all the on-site board meetings and supervised
+the legitimacy and compliance of convening the shareholders' general meeting and the board meetings, voting
+procedures, the Directors' attendance at those meetings, expression of opinions and voting details.
+During the reporting period, all the three External Supervisors were able to perform their supervisory duties
+independently. The External Supervisors discharged their supervisory duties by attending meetings of the Board
+of Supervisors, convening special committee meetings of the Board of Supervisors, participating in shareholders'
+general meeting and meetings of the Board of Directors or any of its special committees, participating in the Board
+of Supervisors' investigations and surveys conducted at branch level on a collective or separate basis, proactively
+familiarising themselves with the operation and management and the implementation of strategies of the Company,
+and actively participating in studies and reviews on significant matters. During the adjournment of the meetings
+of the Board of Directors and the Board of Supervisors, the External Supervisors reviewed various documents and
+reports of the Company, and exchange opinions with the Board of Directors and senior management in respect of
+the problems concerned in a timely manner, thereby playing an active role in enabling the Board of Supervisors to
+perform their supervisory duties.
+During the reporting period, the Board of Supervisors of the Company had no objection to each of the supervisory
+matters.
+5.6.4 Operation of the special committees under the Board of Supervisors
+The Nomination Committee and the Supervisory Committee are established under the Board of Supervisors, each
+consisting of four Supervisors, and those committees were chaired by an External Supervisor.
+The Nomination Committee under the Board of Supervisors
+The members of the Nomination Committee under the Board of Supervisors included Ding Huiping (Chairman), Peng
+Bihong, Guo Xikun and Cai Jin. The major duties of the Nomination Committee are as follows: to make proposals
+to the Board of Supervisors on the size and composition of the Board of Supervisors; to study the standards and
+procedures for the election of Supervisors and propose the same to the Board of Supervisors; to conduct extensive
+searches for qualified candidates for Supervisors; to undertake preliminary examination on the qualifications of the
+candidates for Supervisors nominated by Shareholders and provide relevant recommendations; to supervise the
+procedures for election of Directors; to evaluate the Board of Directors, Board of Supervisors and senior management
+and the duty performance of their members, and submit reports to the Board of Supervisors; to supervise whether
+the remuneration management system and policies of the whole Bank and the remuneration package for its senior
+management are scientific and reasonable.
+5.6 Board of Supervisors
+In 2021, the Related Party Transactions Management and Consumer Rights Protection Committee of the Eleventh
+Session of the Board of Directors of the Company held the 7th meeting (on 4 March), the 8th meeting (on 2 June)
+and the 9th meeting (on 14 October), reviewed the fairness of the related party transactions, assisted the Board of
+Directors to ensure the legitimacy and compliance of related party transactions, carried out relevant responsibilities
+of consumer right protection in accordance with the regulatory requirements, reviewed and approved various
+resolutions on, among others, the 2020 Annual Related Party Transaction Report and the List of Related Parties in
+2021, reviewed and approved the related party transactions of the Company with China Merchants Group Ltd. and
+its subsidiaries, China COSCO Shipping Corporation Limited and its subsidiaries, CMB Financial Leasing, Merchants
+Union Consumer Finance, CSC Financial Co., Ltd., Gemdale Corporation and other related parties, reviewed and
+approved the "Work Report on Consumer Rights Protection for 2020" and the "Bank-wide Customer Complaint
+Analysis Report for 2020" and other matters, and the Committee reviewed the regulatory policy documents on
+consumer rights protection in recent years and the main consumer rights protection system of the Company.
+Annual Report 2021
+Chapter V Corporate Governance
+2.
+3.
+Inspect, supervise and review the major related party transactions and continuing connected transactions,
+and control the risks associated with related party transactions;
+Review the administrative measures on related party transactions of the Company, and monitor the
+establishment and improvement of the related party transactions management system of the Company;
+4.
+Review the announcements on related party transactions of the Company;
+5.
+126
+6.
+Review the strategies, policies and objectives of the consumer rights protection work of the Company;
+Regularly listen to the report on the implementation of the consumer rights protection work of the Company
+and the relevant resolution, and make recommendations to the Board of Directors in respect of the relevant
+work;
+Supervise and evaluate the comprehensiveness, timeliness and effectiveness of the consumer rights protection
+work of the Company, the duty performance of senior management in the protection of consumer rights,
+and the information disclosure of consumer rights protection work; and
+8.
+Any other task delegated by the Board of Directors.
+127
+128
+China Merchants Bank
+7.
+125
+Submit proposals on perfecting the management of risks and capital of the Company;
+4.
+Strategy Committee
+The members of the Strategy Committee are Miao Jianmin (Chairman), Fu Gangfeng, Luo Sheng, all being
+Non-Executive Directors, and Tian Huiyu (an Executive Director). The Strategy Committee is mainly responsible for
+formulating the operation and management goals and the medium-to-long term development strategies of the
+Company, as well as supervising and examining the implementation of its annual operation plan and investment
+plan.
+Main authorities and duties:
+1.
+Formulate the operational goals and the medium-to-long term development strategies of the Company, and
+make an overall assessment on strategic risks;
+2.
+Consider material investment and financing plans and make proposals to the Board of Directors;
+3.
+Supervise and review the implementation of the annual operational and investment plans;
+4.
+5.
+6.
+Evaluate and monitor the implementation of the Board resolutions;
+Make recommendations and proposals on important issues for discussion and determination by the Board of
+Directors;
+Any other task delegated by the Board of Directors.
+The composition and duties of the six special committees under the Board of Directors of the Company as well as
+their work in 2021 are summarised as follows.
+There are six special committees under the Board of Directors of the Company, namely the Strategy Committee, the
+Nomination Committee, the Remuneration and Appraisal Committee, the Risk and Capital Management Committee,
+the Audit Committee and the Related Party Transactions Management and Consumer Rights Protection Committee.
+In 2021, all the special committees under the Board of Directors of the Company gave full play to their professional
+advantages and earnestly performed various duties, actively offering advices to the Board of Directors on strategic
+guidance, Fintech, risk management, internal control and compliance, inclusive finance, green finance, related
+party transactions management, consumer rights protection, incentive and restrictive mechanisms and construction
+of the Board of Directors. During the year, these committees held a total of 30 meetings to study and review 139
+significant issues, and reported their review opinions and advices to the Board of Directors by submitting meeting
+minutes and holding on-site meetings, hence fully playing its role in assisting the Board of Directors to make
+scientific decisions.
+5.5.9 Special committees under the Board of Directors
+Chapter V Corporate Governance
+1.
+2.
+3.
+4.
+5.
+6.
+Evaluate and supervise the trainings and the improvement of professional competence of Directors and senior
+management;
+In 2021, the Strategy Committee of the Eleventh Session of the Board of Directors of the Company held the 6th
+meeting (on 25 February), the 7th meeting (on 2 April), the 8th meeting (on 8 May), the 9th meeting (on 24
+June), the 10th meeting (on 5 August), the 11th meeting (on 6 August) and the 12th meeting (on 14 December),
+focusing on reviewing the Company's "14th Five-Year" strategic plan, the development guideline for the five years
+of extensive wealth management, the development guideline for the five years of the Fintech, the development of
+inclusive finance and annual working programs, the management of human resources and the implementation of the
+talent strategy, the use of the Fintech Innovation Project Fund, the introduction of strategic investors by CMB Wealth
+Management, the annual financial budget and final accounts report, the annual profit appropriation plan, the
+implementation of the business plan, the authorisation and issuance of financial bonds and certificates of deposit,
+the redemption of capital bonds and other proposals. Therefore, the Bank further clarified the strategic direction
+and strategic focus, promoted the accelerated development of the business model of extensive wealth management,
+the operation model of Fintech and the organisational model featuring openness and integration, made every effort
+to build a cyclic extensive wealth management value chain and the best value creation bank, incorporated green
+finance development responsibility in the function of Strategy Committee of the Board of Directors, and proposed
+to change the name of the "Strategy Committee of the Board of Directors" to the "Strategy and Sustainable
+Development Committee of the Board of Directors", so as to coordinate and perform ESG-related responsibilities,
+strictly implement the guiding spirit of the Party Central Committee, the State Council and regulatory authorities on
+green finance and promote the improvement of top-level governance structure of ESG.
+Evaluate and supervise the policies and practices of the Company for compliance with laws and regulatory
+requirements;
+Review the compliance of the Company with the Code of Corporate Governance and the disclosures in the
+Report of Corporate Governance; and
+Manage, control, monitor and assess the risks of the Company and evaluate the internal control status of the
+Company. The Board of Directors is of the opinion that the risk management and internal control systems of
+the Company are effective.
+5.5.8 Statement made by the Directors about their responsibility for the financial
+statements
+the senior management of the Company provided the Board of Directors with adequate explanation and sufficient
+information to enable the Board of Directors to make informed assessment on the financial and other information
+submitted to it for approval. The Directors of the Company acknowledged their responsibility for preparing the
+financial statements for the year ended 31 December 2021 to present a true view of the operating results of the
+Company. So far as the Directors are aware, there is no material uncertainty related to events or conditions that
+might have a significant adverse effect on the Company's ability of sustainable operation.
+123
+124
+China Merchants Bank
+Annual Report 2021
+Formulate, evaluate and supervise the Code of Conduct and the Compliance Handbook applicable to the
+Directors and employees of the Company;
+129
+Nomination Committee
+Main authorities and duties:
+3.
+4.
+Review the regulations and policies in respect of remuneration of the Bank; and
+Any other task delegated by the Board of Directors.
+In 2021, the Remuneration and Appraisal Committee of the Eleventh Session of the Board of Directors of the
+Company held the 8th meeting (on 14 July), the 9th meeting (on 29 September), the 10th meeting (on 9 October)
+and the 11th meeting (on 30 December). In order to continuously guide the cadres and employees of the Company
+to follow the strategic principle of "adhering to long-term strategies and tapping existing advantages", thoroughly
+implement the mid
+and long-term strategic goals set by the Board of Directors and promote the sustainable
+-
+and healthy development of the Company, the Remuneration and Appraisal Committee successively reviewed and
+approved the staff costs of CMB and other proposals, continuously enriched the connotation of the incentive and
+restrictive mechanism, studied and improved the incentive scheme and promoted the implementation thereof; the
+Remuneration and Appraisal Committee reviewed and approved the proposal on determination of remuneration
+for newly appointed senior management members in 2021, and steadily promoted the orderly implementation
+of remuneration management matters; pursuant to the provisions of the H Share Appreciation Rights Scheme,
+the Remuneration and Appraisal Committee conducted validity appraisal and price adjustment in respect of the
+appreciation rights granted, which ensured the continuous implementation of the medium-to-long term incentive
+mechanism of the Company.
+Risk and Capital Management Committee
+The members of the Risk and Capital Management Committee are Hong Xiaoyuan (Chairman), Zhang Jian, Wang
+Daxiong, Luo Sheng (all being Non-Executive Directors), Wang Liang (an Executive Director) and Liu Qiao, Li
+Chaoxian and Shi Yongdong (all being Independent Non-Executive Directors). The Risk and Capital Management
+Committee is mainly responsible for supervising the status of risk management by the senior management of the
+Company in relation to various major risks, making regular assessment on the risk policies, risk-withstanding ability
+and capital management status of the Company and submitting proposals on perfecting the management of risks
+and capital of the Company.
+Main authorities and duties:
+1.
+2.
+3.
+Supervise the status of risk control by the senior management of the Company in relation to credit risk,
+market risk, operational risk, liquidity risk, strategic risk, compliance risk, reputation risk, country risk and
+other risks;
+Make regular assessment on the risk policies, management status, risk-withstanding ability and capital status
+of the Bank;
+Perform relevant duties under the Advanced Measurement Approach for Capital Measurement pursuant to
+the authorisation given by the Board of Directors;
+Study and review the remuneration policies and proposals in respect of directors and senior management
+of the Bank, make recommendations to the Board of Directors and supervise the implementation of such
+proposals;
+Study the standards for assessment of Directors and senior management and make assessments and put
+forward proposals depending on the actual conditions of the Company;
+2.
+1.
+1.
+Review the structure, size and composition of the Board of Directors (including their expertise, knowledge
+and experience) at least once a year and make recommendations on any proposed changes to the Board of
+Directors to implement the strategies of the Company according to the Company's business operation, asset
+scale and shareholding structure of the Company;
+China Merchants Bank
+Annual Report 2021
+2.
+Chapter V Corporate Governance
+Study the standards and procedures for selection of directors and senior management, and make
+recommendations to the Board of Directors;
+3.
+The majority of members of the Nomination Committee are Independent Non-Executive Directors, and the committee
+was chaired by an Independent Non-Executive Director. The members of the Nomination Committee include Wong
+See Hong (Chairman), Li Menggang and Liu Qiao (all being Independent Non-Executive Directors), Miao Jianmin (a
+Non-Executive Director) and Tian Huiyu (an Executive Director). The Nomination Committee is mainly responsible
+for formulating the procedures and standards for election of the Directors and senior management, conducting
+preliminary verification on the qualification for appointment of the Directors and senior management and making
+proposals to the Board of Directors.
+Conduct extensive searches for qualified candidates for directors and senior management;
+5.
+Conduct preliminary examination on the candidates for Directors and senior management and make
+recommendations to the Board of Directors; and
+Any other task delegated by the Board of Directors.
+In 2021, the Nomination Committee of the Eleventh Session of the Board of Directors of the Company held the 5th
+meeting (on 23 February), the 6th meeting (on 14 May), the 7th meeting (on 2 August) and the 8th meeting (on 18
+August), successively reviewed and approved the proposal on nominating Mr. Li Chaoxian and Mr. Shi Yongdong as
+Independent Directors, the proposal on nominating Mr. Li Delin as an Executive Director, the proposal on appointing
+Mr. Wang Liang as the First Executive Vice President and the proposal on appointing Mr. Zhu Jiangtao as a Vice
+President. It also regularly reviewed the member composition and structure of the Board of Directors and Special
+Committees to ensure compliance with various regulatory requirements.
+Remuneration and Appraisal Committee
+The majority of members of the Remuneration and Appraisal Committee were Independent Non-Executive Directors,
+and the committee was chaired by an Independent Non-Executive Director. The members of the Remuneration
+and Appraisal Committee currently include Li Menggang (Chairman), Liu Qiao, Li Chaoxian (all being Independent
+Non-Executive Directors), Hong Xiaoyuan and Wang Daxiong (both being Non-Executive Directors). The Remuneration
+and Appraisal Committee is responsible mainly for reviewing the remuneration management system and policies of
+the Company, formulating the remuneration package for the Directors and senior management, making proposals
+to the Board of Directors and supervising the implementation of such proposals.
+Main authorities and duties:
+4.
+China Merchants Bank
+Annual Report 2021
+120
+811,862
+During the reporting period, the business activities of the Company complied with the "Company Law of the
+People's Republic of China", the "Commercial Banking Law of the People's Republic of China" and the Articles of
+Association of the Company, the internal control system was improved, and the decision-making procedures were
+lawful and valid. None of the Directors and senior management of the Company were found to have violated the
+relevant laws, regulations or the Articles of Association of the Company or had done anything detrimental to the
+interests of the Company and shareholders.
+Authenticity of Financial Statements
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu separately reviewed the
+2021 annual financial report prepared in accordance with the PRC Generally Accepted Accounting Principles and
+International Accounting Standards and have separately issued standard auditing reports with unqualified opinions.
+The financial reports truthfully, objectively and accurately reflect the financial status and operating results of the
+Company.
+Use of Proceeds
+During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in
+the Prospectus of the Company.
+Purchase and Disposal of Assets
+During the reporting period, the Company is unaware of any insider trading in its acquisition and sale of assets
+which would damage shareholders' interests or cause loss in the assets of the Company.
+Related Party Transactions
+In terms of the related party transactions during the reporting period, the Board of Supervisors was not aware of
+any conduct in contravention of the arm's length basis or were detrimental to the interests of the Company and its
+shareholders.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+Implementation of Resolutions Passed at Shareholders' General Meeting(s)
+The Board of Supervisors lodged no objections to the reports and proposals submitted by the Board of Directors to
+the shareholders' general meeting in 2021, supervised the implementation of the resolutions of the shareholder's
+general meeting(s), and concluded that the Board of Directors had duly implemented relevant resolutions passed at
+the shareholders' general meeting(s).
+Internal Control
+The Board of Supervisors had reviewed the "Report on Assessment of Internal Control of China Merchants Bank
+Co., Ltd. for 2021", and concurred with the Board of Directors' representations regarding the completeness,
+reasonableness and effectiveness of the internal control system of the Company as well as its implementation.
+5.7 Investigations/Surveys and Trainings Conducted by Directors and
+Supervisors during the Reporting Period
+Lawful Operation
+During the reporting period, the Board of Directors and the Board of Supervisors of the Company organised four
+investigations/surveys, through which the duty performance, decision-making ability and effectiveness of supervision
+of our Directors and Supervisors continued to improve.
+Independent opinions on relevant matters from the Board of Supervisors:
+5.6.5 Independent opinions from the Board of Supervisors
+35,924
+1
+56 Bohang Road, China (Shanghai) Pilot
+Free Trade Zone
+333,407
+102
+1088 Lujiazui Ring Road, Pudong New
+District, Shanghai
+342 Min' an East Road, Ningbo
+Free Trade Zone
+Branch
+Nanjing Branch
+Hangzhou Branch
+Shanghai Pilot
+Ningbo Branch
+Suzhou Branch
+130
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+The Supervisory Committee under the Board of Supervisors
+The members of the Supervisory Committee under the Board of Supervisors included Han Zirong (Chairman), Wu
+Heng, Xu Zhengjun and Wang Wanging. The major duties of the Supervisory Committee are to formulate the
+supervisory plans for performance of supervisory duties by the Board of Supervisors; to formulate the supervisory
+plans for financial activities of the Company and conduct relevant examinations; to supervise the adoption by the
+Board of Directors of prudent business philosophy and value standards and its formulation of suitable development
+strategies in line with the actual situations of the Company; to conduct supervision and assessment on the
+important financial decisions of the Board of Directors and the senior management and their implementations,
+the establishment and improvement of the internal control governance structure and the overall risk management
+governance structure and the division of duties of relevant parties and their duty performance; to formulate the
+specific plans for reviewing the operation decisions, internal control and risk management of the Company under
+the authorisation of the Board of Supervisors when necessary; to formulate the plans for conducting resignation
+audit on Directors, President and other senior management when necessary.
+In 2021, the Supervisory Committee under the Board of Supervisors convened a total of five meetings at which
+it reviewed and considered the work plan of the Board of Supervisors for 2021 and the audit on the resignation
+of senior management and other issues. In addition, members of the Supervisory Committee under the Board of
+Supervisors were also present at various on-site meetings convened by the Risk and Capital Management Committee
+and Audit Committee under the Board of Directors. They also reviewed the consideration and discussion of the
+above special committee on the financial decisions, risk management, capital management, internal control
+compliance, internal and external audit and other aspects of the Company, and offered comments and suggestions
+on some of the issues.
+During the reporting period, the Board of Supervisors has proactively and effectively carried out supervision on the
+financial activities, internal control, risk management, lawful operation as well as the duty performance of the Board
+of Directors and the senior management of the Company pursuant to the "Company Law of the People's Republic
+of China", the Articles of Association of the Company and the supervisory duties delegated by relevant supervisory
+authorities.
+199 Lushan Road, Jianye District, Nanjing
+300 Fuchun Road, Shangcheng District,
+Hangzhou
+During the reporting period, the Board of Directors of the Company organised two investigations/surveys/visits
+for the Directors, which involved visits to some tier-1 and tier-2 branches to have deep understanding of the
+operation and management of its branches and sub-branches, reviewed the report of the branches on operation and
+management, strategic transformation, risk management and control, internal control management and consumer
+rights protection and put forward targeted opinions and suggestions. The Bank conducted a special investigation on
+the application of the audit model in the whole bank, listened to the branch's proactive discovery and rectification
+of problems with the help of the audit model and the remote support of auditors, and put forward targeted
+opinions and suggestions. In addition, the Non-Executive Directors of the Company reviewed the "Report on the
+Work Progress of Digital RMB Project of China Merchants Bank”《關於招商銀行數字人民幣���目工作進展的報告》 to
+obtain an in-depth understanding of the progress of the Company's digital RMB project, guide the Company to give
+full play to its leading advantages in Fintech and strive to become a leading digital RMB operator in the market.
+During the reporting period, the Directors of the Company participated in relevant trainings or researches according
+to the requirements on duty performance, the contents of which include corporate governance, policies and
+regulations, banking operation and management and compliance in anti-money laundering and sanctions and green
+finance. The above researches and trainings helped improve the duty performance of the Directors, ensured that the
+Directors were fully aware of the information required for duty performance, and continued to make contributions
+to the Board of Directors of the Company.
+During the reporting period, all Supervisors of the Company participated in online training of "Anti-Money
+Laundering and Sanction Compliance" in accordance with regulatory requirements, systematically studied the
+construction of anti-sanction law system, the amendments to "Anti-money Laundering Law", the case studies of
+telecom and online anti-fraud and compliance to international sanctions, promoted the Board of Supervisors to grasp
+the new policies and situation in anti-money laundering and sanction compliance, and further improved the ability
+of the Board of Supervisors to perform duties in anti-money laundering and anti-terrorism financing. By participating
+in the online training course for directors, supervisors and senior management of listed companies held by the CSRC,
+Shenzhen Branch, some supervisors systematically learned about the regulatory status of listed companies, laws and
+regulations and interpretation of the latest policies, corporate governance and the responsibilities and obligations of
+directors, supervisors and senior management, financial issues and cases of violations of laws and regulations, thus
+improving the Supervisors' daily supervisory capability on the Company in a targeted manner.
+133
+134
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+The Company has established a relatively comprehensive and complete information disclosure management system.
+During the reporting period, the Company revised the "Working System for Secretary of the Board of Directors" (
+### to further consolidate the basic management of information disclosure through internalisation
+of external regulations. The Company proactively carried out daily management, strengthened compliance education,
+implemented the registration system of insiders in strict compliance with regulatory requirements and effectively
+prevented inside information leakage and insider trading risks. The Company updated and improved the scope
+and quantitative standards for reporting major and sensitive information in a timely manner in accordance with
+the regulatory requirements, and enhanced the compliance awareness of the entities responsible for information
+disclosure across the Bank by sending regular reminders.
+5.11 Shareholders' Rights
+Convening of extraordinary shareholders' general meetings
+An extraordinary shareholders' general meeting shall be convened by the Board of Directors within two months
+upon request in writing by shareholders individually or jointly holding more than 10% of the Company's voting
+shares.
+Making proposals at the shareholders' general meetings
+If the Company convenes a shareholders' general meeting, shareholders individually or jointly holding more than
+3% of the total issued voting shares of the Company may submit interim proposals in writing to the Company 15
+working days before the convening of the shareholders' general meeting and submit the same to the convenor. The
+convenor shall issue a supplemental notice to the shareholders' general meeting and announce the contents of the
+interim proposals within two working days after receiving the proposals.
+Convening of extraordinary board meeting
+An extraordinary board meeting may be held if it is requisitioned by shareholders representing more than 10% of
+the voting rights. The Chairman shall convene the extraordinary board meeting within 10 days upon receiving such
+proposal requisitioned by shareholders representing more than 10% of the voting rights.
+Making inquiries to the Board of Directors
+Shareholders are entitled to review the information on the Company (including the Articles of Association of the
+Company, the status of share capital, the minutes of the shareholders' general meeting, resolutions of board
+meetings, resolutions of meetings of the Board of Supervisors, financial and accounting reports) in accordance with
+the provisions of the Articles of Association of the Company upon the submission of written documents certifying
+the class and quantity of shares of the Company held by the shareholders, the identity of whom has been verified by
+the Company.
+Cash dividend policies
+The Company has formulated its cash dividend policies. For details, please refer to "The formulation and
+implementation of the Company's cash dividend policies" below.
+China Merchants Bank
+The information disclosure of the Company is based on its sound corporate governance, leveraged on its
+effective internal control and supported by its relatively complete information disclosure system, and thus can
+ensure investors' access to information in a timely, accurate and equal manner. The Board of Directors and the
+senior management of the Company attached great importance to information disclosure, and are committed to
+continuously improving the timeliness, effectiveness and transparency of information disclosure by focusing on
+the investors. Since the Shanghai Stock Exchange launched the annual appraisal of information disclosure of listed
+companies, as of the end of 2021, the Company has received the highest grade of "A" for eight consecutive years.
+During the Reporting Period, the Company disclosed a total of 283 documents with approximately 1.97 million
+words on the Shanghai Stock Exchange and the Hong Kong Stock Exchange. No information disclosure errors
+have occurred. Meanwhile, in terms of the timeliness, effectiveness and transparency of information disclosure,
+the Company further improved the timeliness of the disclosure of regular reports and performance bulletins.
+The Company led investors to further understand the Company's strategic plans and objectives by strengthening
+strategic publicity in regular reports, continued to optimise the disclosure of issues that investors focus on, continued
+to deepen the analysis of hot market issues in the form of special topics, comprehensively revised the disclosure
+structure of quarterly reports, enriched the disclosure content, and shortened the frequency of disclosure of key
+information that investors pay attention to from semi-annually to quarterly. By proactively disclosing information
+that is crucial for investors' decision-making, the Company has continuously improved the timeliness and quality
+of information disclosure, thus effectively protecting investors' right to information. In addition, the Company kept
+pace with the times and further innovated the visual disclosure form of the annual report. During the reporting
+period, the Company released a visual annual report "Chasing the Light" in the form of short video for the first
+time, focusing on the operational highlights and the effectiveness of the strategy implementation throughout the
+year, thus helping to improve the reading experience of investors and continuously practising the "investor-centered"
+service philosophy.
+During the reporting period, the Board of Supervisors of the Company dynamically adjusted the research
+arrangement according to the overall situation of the domestic pandemic, overcame the uncertain impact of the
+pandemic on investigation and survey plans and conducted two domestic collective investigations, involving five
+branches and sub-branches. The investigations and surveys adhered to pragmatic and efficient practice, and base on
+the full understanding of the overall operation, risk management and asset quality, internal control and compliance,
+performance rating and other information of each branch, we directly faced the difficulties and problems confronted
+by the branches, focused on the nature and crux of the problems, actively responded to the demands of branches
+and put forward suggestions to solve problems, and put forward specific supervisory opinions and suggestions in
+terms of strengthening Party building to promote business development, strategic implementation and transmission
+by the Head Office, promoting the integration and linkage of regional operations, consolidating the long-term
+mechanism of basic management and deepening team building and employee care. Through the "Work Summary of
+the Board of Supervisors (I", the Board of Supervisors conveyed the actual status of the branches
+and their appeals and suggestions to the Head Office to the Board of Directors and senior management, and
+continue to promote the implementation and resolution of problems by way of supervision.
+Information disclosure
+In 2021, the Company participated in several investment strategy meetings held by a total of 52 domestic and
+foreign investment banks and securities companies. Through over 100 discussions in "one-to-one" or "one-to-many"
+meetings, the Company has met with more than 1,000 domestic and foreign institutional investors, representing
+a further year-on-year increase in the number of investors met. The Company participated in the online collective
+reception day for investors of listed companies in Shenzhen held by Shenzhen Public Companies Association and
+p5w.net () for the first time, which further stabilised the core institutional investors' shareholding in the
+Company and enhanced their confidence in the Company's long-term strategy and stable operation. We also
+answered hundreds of phone calls from our investors and processed hundreds of messages from our investors on
+the Company's official website, investors' mailbox, and "SSE E-interaction".
+131
+132
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+5.8 Company Secretary under Hong Kong Listing Rules
+During the reporting period, Mr. Wang Liang and Ms. Ho Wing Tsz Wendy attended the relevant professional
+trainings for not less than 15 hours in compliance with the requirements of Rule 3.29 of Hong Kong Listing Rules.
+5.9 Major Amendments to the Articles of Association of the
+Company
+During the reporting period, the Company did not amend the Articles of Association of the Company.
+5.10 Communication with Shareholders
+Investor relations
+The Company has established an effective communication mechanism with investors. Through the Company's
+official website, investors' mailbox, hotline and "SSE E-interaction" platform, the Company provided communication
+channels for investors in the form of shareholders' meetings, investor briefings, road shows, investor research,
+securities analyst research, etc., which fully satisfied the needs of our investors and analysts at home and abroad to
+communicate with the Company.
+In 2021, the Company remained focus on investors, actively responded to the impact of the pandemic and continued
+to strengthen its communication with the capital market through webcasts, conference calls and other methods.
+Meanwhile, based on its thoughts about the historical phase, strategic choices and impact of the pandemic, the
+Company comprehensively and thoroughly introduced its stable fundamentals as well as the logic and strategy
+behind its differentiated development to various domestic and foreign investors and analysts, and also responded in
+a timely and efficient manner to the Company's business model for development stage 3.0, cyclic extensive wealth
+management value chain, risks in the real estate sector, the impact and effects of the pandemic and Fintech. As
+at the end of the reporting period, the valuation of the Company's A+H Shares remained at the forefront in the
+domestic banking industry.
+During the reporting period, the Company held one annual general meeting in the form of on-site + webcast,
+the whole process of which was webcast through the CMB APP for the first time; held one annual results press
+conference through webcast, and broadcast it in real time through the Shanghai Stock Exchange Roadshow Center
+and the Wind 3C conference platform for the first time; held one interim results exchange meeting and two
+quarterly results exchange meetings; approximately 6,000 investors, analysts and media reporters participated in the
+annual results press conference, representing a record high in the number of participants, and the market response
+was positive. The Company released the records of investor exchanges on its official website in a timely manner after
+the annual results press conference, interim and quarterly results exchange meetings and annual general meeting,
+and actively responded to market concerns, which helped to provide the capital market with more comprehensive
+and true information of China Merchants Bank.
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+The Company attached great importance to the management of investor relations. Chairman Miao Jianmin and
+President Tian Huiyu attended the 2020 annual general meeting and the 2020 annual results press conference,
+elaborated on building cyclic extensive wealth management value chain and promoted the transformation of the
+business model 3.0, respectively, and they gave detailed answers to other market and media concerns. Following
+the release of 2020 annual results, President Tian Huiyu and other senior management formed three teams to
+conduct road-shows, conducted sincere and full communication with nearly 200 institutional investors of A Shares
+and H Shares of the Company, objectively analysed the internal and external opportunities and challenges faced by
+the Company and unique differentiated competitive advantages, and fully expressed our determination to maintain
+long-term strategic focus. Given the increased instability in market sentiment since the pandemic outbreak, investors
+and senior management of the Company have a stronger need for communication. First Executive Vice President
+Wang Liang led the team to participate in the 2021 interim results exchange meeting, where he introduced the
+connotation of the business model 3.0 to more than 500 investors and analysts who attended the meeting, and
+conducted full and effective communication on other market concerns. At the 2021 first quarterly results exchange
+meeting and the third quarterly results exchange meeting, Vice President Liu Jianjun (resigned) and Vice President
+Zhu Jiangtao led respective teams to interact and communicate with the investors of A Shares and H Shares of
+the Company and analysts on the quarterly results, and actively responded to the capital market's concerns on the
+impact of the common prosperity policy on the extensive wealth management business, risk management in the real
+estate sector, and increase in assets under management (AUM) from retail customers and other issues.
+The Company has recorded the above-mentioned investor reception and communication activities in accordance
+with relevant regulatory requirements, and has properly kept the relevant documents.
+87
+224,246
+74
+124
+207,465
+75
+5 Huasui Road, Tianhe District, Guangzhou
+2016 Shennan Boulevard, Futian District,
+Shenzhen
+9,612
+11
+28,279
+17
+172 Zhonghua South Street, Shijiazhuang
+45 Beixin Road West, Lubei District,
+Tangshan
+Technological Development Area, Yantai
+24,552
+17
+66 Zhujiang Road, Economic &
+Guangzhou Branch
+Shenzhen Branch
+Shijiazhuang Branch
+Tangshan Branch
+Yantai Branch
+Pearl River Delta and
+West Side of Taiwan
+Strait
+483,809
+Road, High-tech Zone, Jinan
+Fuzhou Branch
+Xiamen Branch
+37
+Yangtze River Delta Shanghai Branch
+139
+74,404
+31
+12 Denghu Road East, Guicheng Street,
+Nanhai District, Foshan
+Foshan Branch
+62,499
+28
+200 Hongfu Road, Nancheng District,
+Dongguan
+Dongguan Branch
+29,529
+17
+180 Jiangbin North Road, Fengze Street,
+Quanzhou
+Quanzhou Branch
+69,621
+31
+74,831
+316 Jiangbinzhong Boulevard Road, Fuzhou
+18 Lingshiguan Road, Siming District,
+Xiamen
+104,572
+61
+Building 1, District 4, No. 7000, Jingshi
+Nantong Branch
+Wuqiao Avenue, Lucheng District,
+Wenzhou
+39,732
+15
+Block 2, 4, 5, Hongshengjin Garden,
+Wenzhou Branch
+District, Wuxi
+59,908
+20
+6-107, 6-108 1st Financial Street, Binhu
+Wuxi Branch
+136,933
+33
+36 Wansheng Street, Industrial Park,
+Suzhou
+89,859
+34
+238,073
+111 Gongnong Road, Nantong
+17
+41,251
+Bohai Rim
+Jinan Branch
+Hexi District, Tianjin
+97,668
+43
+255 Guangdong Road and 9 Qianjin Road,
+62,332
+52
+65 Hai' er Road, Laoshan District, Qingdao
+Chapter V Corporate Governance
+Qingdao Branch
+Tianjin Branch
+118
+156 Fuxingmen Nei Dajie, Xicheng District,
+Beijing
+Office
+Beijing Branch
+Xicheng District, Beijing
+1
+26/F, Building 3, No.1 Yuetan South Street,
+Representative
+Beijing
+398,580
+Annual Report 2021
+During the reporting period, Mr. Wang Liang and Ms. Ho Wing Tsz Wendy of Tricor Services Limited, an external
+services provider, are the joint company secretaries of the Company under Hong Kong Listing Rules. Mr. Wang Liang
+is the major contact person of the Company on internal issues.
+5.12.1 The profit appropriation plan for 2021
+Financial Market Department
+Asset Management Department
+Asset Custody Department
+Bills Business Department*
+Bill Brokerage Department*
+Pension Finance Department*
+Offshore Finance Center#
+Network Operation Service Center#
+Wealth Management Platform Department
+Private Banking Department
+Retail Credit Business Department
+(Inclusive Finance Service Center)
+5.12 Profit Appropriation
+Retail Strategic Alliance Department*
+Consumer Finance Center"
+Risk Management Department
+Credit Approval Department
+Asset Security Department
+Investment Banking Department
+Operation Management Department
+General Office of Retail Finance
+Sub-branches
+Human Resources Department
+Fintech Office
+Consumer Rights Protection Center
+(Customer Service Center)"
+Assets and Liabilities Management Department
+Financial Accounting Department
+Investment Management Department*
+Strategic Customers Department
+Institutional Customers Department
+Financial Institutions Department
+Small Enterprises Finance Department
+Transaction Banking Department
+Cross-border Financing Department
+General Office of Investment
+General Office of Corporate Finance
+Banking and Financial Markets
+Head Office
+Branches
+China Merchants Bank
+Information Technology Department
+Audit Department
+Inspection Department
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2021
+5.15 Head Office and Branches and Representative Offices
+Asset scale
+Regions
+Head Office
+Name of branches
+Head Office
+Credit Card Center
+Business address
+No. of
+branches
+(in millions
+of RMB)
+7088 Shennan Boulevard, Shenzhen
+686 Lai' an Road, Pudong New District,
+Shanghai
+1
+3,423,632
+1
+*independent secondary department
+Note "secondary department
+Project Management Department*
+Procurement Management Department*
+Legal Compliance Department
+CMB Research Institute
+Training Center
+Office of the Labor Union
+Administration Department
+Representative Offices (Beijing, Shanghai,
+United States of America, Taipei)
+Operational Risk Management Department*
+Market Risk Management Department*
+General Office
+Loan Approval Center"
+Retail Application R&D Center"
+Wholesale Application R&D Center"
+Infrastructure R&D Center*
+Data Asset and Platform R&D Center#
+Testing Center#
+Data Center#
+Security Department*
+Anti-money Laundering and Sanction
+Compliance Management Center*
+Operation Center*
+Office of Board of Supervisors
+Credit Card Center
+5.14 Organisational Structure of the Company
+of RMB)
+RMB)
+(%)
+2019
+2020
+2021 (note)
+1.20
+1.253
+1.522
+30,264
+91,197
+33.19
+31,601
+95,691
+33.02
+38,385
+116,309
+33.00
+Note:
+for the year
+(in millions of
+The profit appropriation plan for 2021 is subject to consideration and approval at the 2021 Annual General Meeting of the Company.
+tax, in
+millions
+Year
+Ten percent of the audited net profit of the Company for 2021 of RMB109.794 billion, equivalent to RMB10.979
+billion, was allocated to the statutory surplus reserve, while 1.5% of the amount of the increased balance of the
+Company's assets that bearing risks and losses at the end of the period, equivalent to RMB11.874 billion, was
+appropriated to the general reserve. Based on the total share capital of A Shares and H Shares on the record date
+for implementation of the profit appropriation, the Company proposed to declare a cash dividend of RMB1.522 (tax
+included) for every share to all shareholders of the Company whose names appear on the register, denominated
+and declared in Renminbi, payable in Renminbi for holders of A Shares and in Hong Kong Dollars for holders of H
+Shares. The actual appropriations amount in HKD would be calculated based on the average RMB/HKD benchmark
+rate to be released by the People's Bank of China for the previous week (including the day of the shareholders'
+general meeting) before the date of the shareholders' general meeting. The retained profits will be carried forward
+to the next year. In 2021, the Company did not transfer any capital reserve into share capital. The above profit
+appropriation plan is subject to consideration and approval at the 2021 Annual General Meeting of the Company.
+For the other information on the closing date for registration, the period for closure of register of members and
+the profit appropriation plan for the shareholders who are entitled to attend the Company's 2021 Annual General
+Meeting and those who are entitled to receive the final dividends for 2021, the Company will make further
+announcement(s) at appropriate times. The Company expects that the distribution of final dividends to the H
+Shareholders will be completed by 30 August 2022.
+5.12.2 Profit appropriation for the last three years
+Number of Cash dividend
+bonus shares
+for every share
+for every
+share held
+Office of the Board of Directors
+Number of
+shares
+issued on
+capitalisation
+of surplus
+reserve for
+every share
+held
+tax, in RMB) (No. of shares)
+Total cash
+dividends
+(inclusive of
+Net profit
+attributable
+to holders
+of ordinary
+shares in the
+consolidated
+financial
+statements
+Proportion of
+cash dividend
+to net profit
+attributable
+to holders
+of ordinary
+shares in the
+consolidated
+financial
+statements
+held
+(No. of shares)
+135
+(inclusive of
+China Merchants Bank
+Annual Report 2021
+5.13 Information on Employees
+As of 31 December 2021, the Group had 103,669 employees 27 (including dispatched employees).
+The classification of the Group's employees by profession is: 18,058 employees in corporate finance, 45,041
+employees in retail finance, 6,386 employees in risk management, 14,597 employees in operation management,
+10,043 employees in research and development, 1,212 employees in administrative and logistical support, and 8,332
+employees in general management.
+The classification of the Group's employees by educational background is: 23,737 employees with master's degrees
+and above, 65,741 employees with bachelor's degrees and 14,191 employees with junior college degrees or below.
+The distribution of the Group's employees by regions is: 25,495 employees in the Yangtze River Delta, 12,618
+employees in the Bohai Rim, 32,216 employees in the Pearl River Delta and West Side of Taiwan Strait, 5,176
+employees in the North-eastern China, 11,616 employees in the Central China, 13,366 employees in the Western
+China, and 3,182 employees outside Mainland China.
+The classification of the Group's employees in research and development by educational background is: 4,701
+employees with master's degrees and above, 5,214 employees with bachelor's degrees, and 128 employees with
+junior college degrees or below. The range of the employees by age is: 5,967 employees aged 30 and below, 3,304
+employees aged 30-40 (excluding 30 years old, including 40 years old), 658 employees aged 40-50 (excluding 40
+years old, including 50 years old) and 114 employees aged 50-60 (excluding 50 years old, including 60 years old).
+Staff remuneration policy and training
+The Company's remuneration policy is in line with its operation targets, cultural and value concepts. It aims to refine
+and improve its incentive and restrictive mechanisms, realise its corporate strategies, enhance its organisational
+performance and minimise its operating risk. The remuneration policy adheres to the remuneration management
+principles featuring "strategic orientation, performance enhancement, risk control, internal fairness and market
+adaptation" and reflects the remuneration concept of "fixing remuneration based on positions and workload".
+In order to improve the remuneration incentive and restrictive mechanism and mitigate various operating and
+management risks, the Company has established a mechanism related to remuneration deferred payment and
+performance-based remuneration recovery in accordance with regulatory requirements and operational management
+Chapter V Corporate Governance
+needs.
+For details of the Company's human resources development, please refer to section 4.3.6 "Human Resources
+Development" in this report.
+27
+Including employees of the Company, CMB Wing Lung Group, CMB Financial Leasing, CMB International Capital and its subsidiaries, CMB
+Wealth Management, China Merchants Fund and its subsidiaries, CIGNA & CMB Life Insurance, CIGNA & CMAM, Merchants Union Consumer,
+CMB Network Technology and CMB YunChuang.
+137
+China Merchants Bank
+Chapter V Corporate Governance
+136
+Annual Report 2021
+The Company has established a categorised, professional and digital talent training system, and adopts a diversified
+training method that combines online and offline training. The contents of training mainly focus on knowledge of its
+business and products, professional ethics and security, cultural values and leadership. During the reporting period,
+the completion rate of the Company's training and education programs was over 100%.
+China Merchants Bank
+138
+The Company shall disclose the implementation progress of the cash dividend policy and other
+relevant matters in its periodic reports in accordance with the applicable requirements.
+Chapter V Corporate Governance
+During the reporting period, the profit appropriation plan of the Company for 2020 was implemented in
+strict accordance with the relevant provisions of the Articles of Association of China Merchants Bank Co.,
+Ltd.. It was considered and approved by the 22nd meeting of the Eleventh Session of the Board of Directors
+of the Company and submitted for consideration and approval at the 2020 Annual General Meeting. The
+criteria and proportion of cash dividend were clear and specific, and the Board of Directors of the Company
+has implemented the profit appropriation plan. The profit appropriation plan of the Company for 2021
+will also be implemented in strict accordance with the relevant provisions of the Articles of Association of
+China Merchants Bank Co., Ltd.. It will be considered and approved by the 37th meeting of the Eleventh
+Session of the Board of Directors of the Company and submitted for consideration and approval at the 2021
+Annual General Meeting of the Company. The Independent Directors of the Company have expressed their
+independent opinions on the profit appropriation plans for 2020 and 2021 that the profit appropriation plans
+of the Company and their implementation process have provided adequate protection for the legitimate
+rights and interests of minority investors.
+5.12.3 The formulation and implementation of the Company's cash dividend policies
+As specified in the Articles of Association of China Merchants Bank Co., Ltd., the profit appropriation policies
+of the ordinary shares of the Company are:
+2.
+(1)
+Profit appropriation of the Company shall focus on reasonable returns on investment of the investors,
+and such policies shall maintain continuity and stability.
+(2)
+1.
+(4)
+The Company shall pay cash dividends and other amounts to holders of domestic shares listed
+domestically and such sums shall be calculated, declared and paid in Renminbi. The Company shall
+pay cash dividends and other amounts to holders of H Shares and such sums shall be calculated and
+declared in Renminbi and paid in Hong Kong Dollars. The foreign currencies required by the Company
+for payment of cash dividends and other sums to shareholders of overseas listed foreign shares shall
+be handled according to the relevant requirements of foreign exchange administration of the State.
+Where appropriation of the Company's fund by a shareholder, which is in violation of relevant rules,
+has been identified, the Company shall make deduction against the cash dividend to be paid to such
+shareholder, and such amount shall be used as the reimbursement of the funds appropriated.
+If the Company generated profits in the previous accounting year but the Board of Directors did
+not make any cash profit appropriation proposal after the end of the previous accounting year, the
+Company shall state the reasons for not distributing the profit and the usage of the profit retained in
+the periodic report and the Independent Directors shall give an independent opinion in such regard.
+If the Board of Directors considers that the price of the shares of the Company does not match
+the size of share capital of the Company or where the Board of Directors considers necessary, the
+Board of Directors may propose a profit appropriation plan in the form of shares and implement
+the same upon consideration and approval at a shareholders' general meeting, provided that the
+abovementioned cash profit appropriation requirements are satisfied.
+(3)
+The Company may distribute dividends in cash, shares or a combination of cash and shares, and
+it shall distribute dividends mainly in cash. Subject to compliance with prevailing laws, regulations
+and the requirements of relevant regulatory authority on the capital adequacy ratio, as well as
+the requirements of general working capital, business development and the need for substantial
+investment, merger and acquisition plans of the Company, the cash dividend to be distributed by the
+Company to shareholders of ordinary shares each year in principle shall not be less than 30% of the
+net profit after taxation attributable to shareholders of ordinary shares audited in accordance with the
+PRC accounting standards for that year. The Company may pay interim cash dividend. Unless another
+resolution is passed at the shareholders' general meeting, the Board of Directors shall be authorised
+by the shareholders at a shareholders' general meeting to approve the interim profit appropriation
+plan.
+Annual Report 2021
+(7)
+(6)
+(5)
+9 Qingyang Road, Chengguan District,
+Lanzhou
+Lanzhou Branch
+103,496
+58
+No. 1, the 3rd section of Renmin Road
+South, Wuhou District, Chengdu
+91,190
+Western China
+265 Nan Zhong Huan Road, Xiaodian
+District, Taiyuan
+North, Haikou
+20,331
+Building C, Haian Yihao, 1 Shimao Road
+38,596
+24
+Chengdu Branch
+9
+116,084
+37,192
+64,904
+52
+54
+1 Chongren Street, Wuhua District,
+Kunming
+30,051
+16
+2 Huanghe Road, Urumchi
+115,150
+50
+88 Xingguang Road, New North District,
+Chongqing
+70
+1 Gaoxin No.2 Road, Xi'an
+Urumchi Branch
+Kunming Branch
+Chongqing Branch
+Xi'an Branch
+29
+96 Nongye Road East, Zhengzhou
+49,738
+42
+54
+12 Shiyiwei Road, Heping District, Shenyang
+17 Renmin Road, Zhongshan District, Dalian
+3 Zhongyang Avenue, Daoli District, Harbin
+9999 Renmin Avenue, Nanguan District,
+Changchun
+Shenyang Branch
+Dalian Branch
+Harbin Branch
+Changchun Branch
+of RMB)
+branches
+Name of branches Business address
+50,816
+Regions
+North-eastern
+China
+No. of
+Asset scale
+Chapter V Corporate Governance
+China Merchants Bank
+Annual Report 2021
+140
+Hohhot Branch
+(in millions
+36
+39
+43,354
+169 Funan Road, Hefei
+Hefei Branch
+Zhengzhou Branch
+Taiyuan Branch
+68,512
+45
+39 Chazishan East Road, Yuelu District,
+Changsha City
+Changsha Branch
+100,309
+56
+174,371
+126
+188 Yunxia Road, Jianghan District, Wuhan
+1111 Huizhan Road, Honggutan District,
+Nanchang City
+Wuhan Branch
+Nanchang Branch
+Central China
+25,374
+24
+73,885
+9 Chilechuan Avenue, Saihan District,
+Hohhot
+Haikou Branch
+30,225
+6.17.2 Non-exempt continuing connected transactions
+As at the end of the reporting period, the Company and China Merchants Securities Co., Ltd. held 55% and 45%
+of the equity interest in CMFM, respectively. Therefore, in accordance with the Hong Kong Listing Rules, CMFM and
+its associates ("CMFM Group") are connected parties of the Company, and the fund agency sales service provided
+by the Company to CMFM Group constituted non-exempt continuing connected transactions of the Company under
+the Hong Kong Listing Rules.
+On 3 December 2019, the Company entered into a Business Co-operation Agreement with CMFM on an arm's
+length basis and on normal commercial principles for a term commencing on 1 January 2020 and expiring on 31
+December 2022. CMFM Group shall calculate fees based on the rates specified in the fund offering documents
+and/or the offering prospectuses, and shall pay agency service fees to the Company according to the agreement.
+Meanwhile, the Company has announced the annual caps of RMB1.4 billion, RMB1.6 billion and RMB1.8 billion
+for the continuing connected transactions with CMFM Group for 2020, 2021 and 2022, respectively as approved
+by the Board of Directors. The annual caps for the service fees, in respect of which the relevant percentage ratios
+calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules were not more than 5%. Therefore, these
+transactions would only be subject to the reporting, announcement and annual review requirements under the Hong
+Kong Listing Rules, and exempt from the independent shareholders' approval requirement. For details, please refer
+to the relevant announcement of the Company dated 3 December 2019.
+In 2021, the continuing connected transactions between the Company and CMFM Group amounted to RMB1,164
+million.
+28
+Both "connected transactions" and "connected parties" in this section are terms used in Hong Kong Listing Rules.
+145
+146
+China Merchants Bank
+Annual Report 2021
+Chapter VI Important Events
+6.17.3 Confirmation from the Independent Non-Executive Directors and auditors
+The Independent Non-Executive Directors of the Company have reviewed the above-mentioned non-exempt
+continuing connected transactions between the Company and CMFM Group and confirmed that:
+1. The transactions were entered into in the ordinary and usual course of business of the Company;
+2.
+The terms of the transactions are fair and reasonable, and are in the interest of the Company and its
+shareholders as a whole;
+3.
+The transactions were entered into on normal commercial terms or better terms;
+Pursuant to Chapter 14A of the Hong Kong Listing Rules, a majority of the continuing connected transactions of
+the Company met the de minimis exemption and the non-exempt continuing connected transactions fulfilled the
+reporting and announcement requirements under the Hong Kong Listing Rules.
+4.
+6.17.1 Overview of connected transactions
+According to the relevant requirements of the CSRC, the Company considered and approved the "Resolution
+Regarding the Dilution of Current Returns by the Non-public Issuance of Preference Shares and the Remedial
+Measures" at its 2016 Annual General Meeting, and formulated the remedial measures in respect of the dilution
+of current returns of the holders of ordinary shares which may be caused by the non-public issuance of preference
+shares. The measures include adhering to the strategic direction of "Light-model Bank" and the strategic positioning
+of "One Body with Two Wings", creating differentiated competitive advantages, strengthening the awareness of
+capital constraints and return on capital, striving to reduce capital consumption, improving the efficiency of capital
+utilisation, strengthening the management of asset quality, and maintaining a stable return policy for the holders
+of ordinary shares. Meanwhile, the Directors and senior management of the Company also undertook to earnestly
+implement the remedial measures. So far as the Company is aware, as at the end of the reporting period, neither
+the Company nor its Directors and senior management had breached any of the aforesaid undertakings.
+During the reporting period, the Company has complied in all material aspects with the relevant laws and
+regulations that would have a material impact on the operations of the Company.
+6.10 Directors' Interests in the Businesses Competing with Those of
+the Company
+During the reporting period, none of the Directors of the Company has any interests in the businesses which
+compete or are likely to compete, either directly or indirectly, with those of the Company.
+6.11 Financial, Business and Kinship Relations among Directors,
+Supervisors and Senior Management
+Save as disclosed herein, the Company is not aware that there has been any financial, business, kinship or other
+material or connected relations among the Directors, Supervisors and senior management of the Company.
+6.12 Contractual Rights and Service Contracts of Directors and
+Supervisors
+During the reporting period, the Directors and Supervisors of the Company have no material interests in contracts of
+significance to which the Company or any of its subsidiaries was a party. None of the Directors and Supervisors of
+the Company has entered into any service contract with the Company which is not determinable by the Company
+within one year without payment of compensation (excluding statutory compensation).
+6.13 Disciplinary Actions Imposed on the Company, Directors,
+Supervisors or Senior Management
+During the reporting period, the Company was not subject to criminal investigations for suspected crimes, and none
+of the Company's Directors, Supervisors and senior management members were subject to compulsory measures
+in accordance with the law. The Company, its Directors, Supervisors and senior management members were not
+subject to criminal punishment, or subject to investigations by the CSRC or administrative punishment by the CSRC
+for suspected violations of laws and regulations, or subject to administrative punishments by other competent
+authorities that have major impact on the operation of the Company. The Directors, Supervisors and senior
+management members of the Company were not subject to detention by the disciplinary inspection and supervision
+authorities for suspected of serious violations of laws and regulations or duty-related crimes that affected the
+performance of their duties, and not subject to compulsory measures taken by other competent authorities for
+suspected violations of laws and regulations that affected the performance of their duties.
+6.14 Explanation on the Integrity of the Company
+During the reporting period, there was no circumstance where the Company failed to fulfill any obligation under
+effective court judgments or repay any due debt of a significant amount.
+6.15 Misconduct Reporting and Monitoring
+During the reporting period, the Company had no internal cases that inflicted huge losses, or external accomplished
+cases or incidents of theft or robbery, or material safety issues.
+China Merchants Bank
+Annual Report 2021
+Chapter VI Important Events
+6.16 Undertakings
+In the course of the rights issue of A shares and H shares in 2013, each of China Merchants Group Ltd., China
+Merchants Steam Navigation Co., Ltd. (OKESĦRA) (now renamed as China Merchants Steam
+Navigation Co., Ltd. () and China Ocean Shipping (Group) Company (now renamed as China
+Ocean Shipping Company Limited) had undertaken that they would not seek for related party transactions on
+terms more favorable than those given to other shareholders; they would repay the principal and interest of the
+loans granted by the Company on time; they would not interfere with the daily operations of the Company. Upon
+expiration of the lock-up period of the allocated shares, they would not transfer their allocated shares until they
+obtain the approval from the regulatory authorities on the share transfer and the shareholder qualification of
+transferees; and upon obtaining the approval from the Board of Directors and the shareholders' general meeting
+of the Company, they would continue to support the reasonable capital needs of the Company; they would not
+impose unreasonable performance indicators on the Company. For details, please refer to the A Share Rights Issue
+Prospectus dated 22 August 2013 on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the
+Company. So far as the Company is aware, as at the end of the reporting period, the above shareholders had not
+violated the aforesaid undertakings.
+6.17 Significant Connected Transactions28
+The transactions were conducted in accordance with the terms of relevant agreements.
+Furthermore, pursuant to rule 14A.56 of the Hong Kong Listing Rules, the Company has engaged Deloitte Touche
+Tohmatsu to perform relevant assurance procedures on the continuing connected transactions of the Group in
+accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other Than
+Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter
+on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute
+of Certified Public Accountants. The Board of Directors confirmed that the auditor has reported the results of its
+performing procedures to the Board of Directors.
+Regarding the disclosed continuing connected transactions, nothing of these transactions has come to the attention
+of the auditor as the circumstances described under rule 14A.56 of the Hong Kong Listing Rules. Deloitte Touche
+Tohmatsu has issued an assurance letter in respect of the findings of the above continuing connected transactions.
+The Company has submitted a copy of the letter to the Hong Kong Stock Exchange.
+6.17.4 Significant transactions with related parties
+6.22 Explanation of Changes in Accounting Policies and Accounting
+Estimates
+During the reporting period, there was no change in the accounting policy of the Company.
+In order to increase its resilience and guard itself against losses, on 30 June 2021, the Group conducted a
+comprehensive review on the measurement system of provision for expected credit loss of financial instruments, and
+further optimised the measurement scheme in the principle of prudence and robustness. The changes in accounting
+estimates are applied prospectively for future periods, and therefore it is not necessary to adjust the financial
+reports that have already been disclosed retrospectively. The changes in accounting estimates are expected to have
+no significant impact on the net profit, total assets and net assets of the Group. For more details on the changes
+in accounting estimates of the Company during the reporting period, please refer to the relevant announcement
+published by the Company on the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and
+the Company, respectively and Note 5 "Significant accounting estimates and judgments, changes in accounting
+estimates" to the financial report.
+6.23 Review of Annual Results
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu, both being the external
+auditors of the Company, have audited the financial statements of the Company prepared in accordance with the
+PRC Generally Accepted Accounting Principles and the International Financial Reporting Standards, respectively, and
+each has issued an unqualified audit report. The Audit Committee under the Board of Directors of the Company has
+reviewed the Company's annual report for 2021.
+6.24 Annual General Meeting
+For the convening of its 2021 Annual General Meeting, the Company will make further announcement.
+No contracts concerning the management and administration of the whole or any substantial part of the business of
+the Company were entered into or existing during the reporting period.
+6.26 Permitted Indemnity Provision
+The Company has maintained appropriate insurance coverage for the liabilities of the Directors, Supervisors and
+senior management in respect of legal actions against its Directors, Supervisors and senior management arising out
+of corporate activities.
+6.27 Publication of Annual Report
+The Company prepared its annual report in both English and Chinese versions in accordance with the International
+Accounting Standards and the Hong Kong Listing Rules, which are available on the websites of Hong Kong Stock
+Exchange and the Company. In the event of any discrepancies in interpretation between the English and Chinese
+versions, the Chinese version shall prevail.
+The Company also prepared its annual report in Chinese version in accordance with the PRC Generally Accepted
+Accounting Principles and the preparation rules for annual reports, which is available on the websites of Shanghai
+Stock Exchange and the Company.
+Upgrading consumer finance
+Contributing to a better life
+18
+23
+Chapter VI Important Events
+China Merchants Bank
+Annual Report 2021
+148
+147
+The significant transactions between the Company and related parties are set out in note 61 to the financial
+statements. These transactions comprised those between the Company and its related parties in its ordinary
+course of business, including borrowings, investments, deposits, securities trading, agency services, custody
+and other fiduciary operations as well as off-balance sheet transactions. These transactions were conducted on
+normal commercial terms in the ordinary course of business of the Company. For those transactions constituted
+the connected transactions under the Hong Kong Listing Rules, all of them have complied with the applicable
+requirements thereof.
+6.18 Material Litigations and Arbitrations
+Several litigations were filed during the daily operation of the Company, most of which were filed proactively for
+the purpose of recovering non-performing loans. As at the end of the reporting period, there were 211 pending
+cases (including litigations and arbitrations) in which the Company was involved, with an aggregate of principal and
+interest of RMB1,135 million. The Company believes that none of the above litigation and arbitration cases would
+have a significant adverse impact on the financial position or operating results of the Company.
+6.19 Material Contracts and Their Performance
+Significant events in respect of holding in custody, contracting, hiring or
+leasing of assets
+During the reporting period, the Company did not have any material contract signed in connection with holding in
+custody, contracting or leasing of any assets of other companies outside the normal scope of banking businesses, or
+vice versa.
+China Merchants Bank
+Annual Report 2021
+Chapter VI Important Events
+6.9 Compliance with Laws and Regulations
+Significant guarantees
+Explanatory notes and independent opinions of the Independent Non-Executive
+Directors on the guarantees of China Merchants Bank
+In accordance with the relevant requirements of the CSRC and Shanghai Stock Exchange, the Independent
+Non-Executive Directors of the Company carried out a due diligence review of the external guarantees of the
+Company for 2021 on an open, fair and objective basis, and issued their opinions on the special review as follows:
+After review, it was ascertained that the external guarantee business of China Merchants Bank was approved by
+the CBIRC, and it was carried out in the ordinary course of business of banks as a conventional business. As at
+31 December 2021, the balance of the irrevocable guarantees of China Merchants Bank and its subsidiaries was
+RMB204.815 billion.
+China Merchants Bank emphasises the risk management of the guarantee business. It has formulated specific
+management measures and operation workflow according to the risk profile of this business. In addition, China
+Merchants Bank has enhanced risk monitoring and safeguarded this business through management means such as
+on-site and off-site inspections. During the reporting period, the guarantee business of China Merchants Bank had
+been in normal operation and there was no circumstance in which a guarantee contract was entered into in violation
+of laws, administrative regulations and the external guarantee resolution procedures stipulated by the CSRC.
+6.20 Use of Funds by Related Parties
+During the reporting period, neither the substantial shareholders of the Company nor other related parties had used
+any funds of the Company for non-operating purposes, and none of them had used the funds of the Company
+through, among others, any related transactions not entered into on an arm's length basis. Deloitte Touche
+Tohmatsu Certified Public Accountants LLP, being the auditor of the Company, has issued a special audit opinion in
+this regard.
+6.21 Appointment of Accounting Firms
+According to its resolutions passed at the 2020 Annual General Meeting, the Company engaged Deloitte Touche
+Tohmatsu Certified Public Accountants LLP as the domestic accounting firm of the Company and its domestic
+subsidiaries for 2021 and Deloitte Touche Tohmatsu as the international accounting firm of the Company and its
+overseas subsidiaries for 2021. These two accounting firms have been engaged as auditors of the Company since
+2016. Zhu Wei and Wu Lingzhi are the certified public accountants who signed the audit report on the Company's
+financial statements for 2021 prepared in accordance with the PRC Generally Accepted Accounting Principles, who
+have been serving as the public accountants signing the financial statements of the Company since 2017 and 2021,
+respectively.
+The financial statements of the Company for 2021 prepared under the PRC Generally Accepted Accounting
+Principles and the internal control of the Company as at the year end of 2021 were audited by Deloitte Touche
+Tohmatsu Certified Public Accountants LLP, and the financial statements for 2021 prepared under International
+Accounting Standards were audited by Deloitte Touche Tohmatsu. The total audit fees of the Group amounted
+to approximately RMB29.36 million, among which the audit fees for internal control was approximately RMB1.49
+million. The Company paid the total non-audit fees of approximately RMB22.51 million to Deloitte Touche Tohmatsu
+Certified Public Accountants LLP and Deloitte Touche Tohmatsu for 2021. Deloitte Touche Tohmatsu Certified Public
+Accountants LLP and Deloitte Touche Tohmatsu confirmed that the provision of such non-audit services would not
+compromise their audit independence.
+Guarantee business falls within the Company's ordinary course of business. During the reporting period, save for the
+financial guarantees entered into in our normal business scope approved by the CBIRC, the Company did not have
+any other significant discloseable guarantees, nor was the Company a party to any guarantee contract in violation of
+the resolution procedures of external guarantees as required by laws, administrative regulations and the CSRC.
+Annual Report 2021
+6.25 Management Contracts
+China Merchants Bank
+USA Representative
+Office
+535 Madison Avenue, 18th Floor, New York,
+U.S.A
+1
+New York Branch
+535 Madison Avenue, 18th Floor, New York,
+1
+70,691
+U.S.A
+Total
+Singapore Branch
+Taipei
+Representative
+Office
+Luxembourg Branch
+London Branch
+Sydney Branch
+1 Raffles Place, Tower 2, #32-61, Singapore
+333, Section 1, Jilong Road, Xinyi District,
+Taipei
+1
+10,784
+1
+92,168
+20 Boulevard Royal, L-2449, Luxembourg
+18/F, 20 Fenchurch Street, London, UK
+L39, GPT, 1 Farrer Place, Sydney, NSW
+1
+12,136
+Nanning Branch
+Chapter VI Important Events
+No. 136-5 Minzu Avenue, Qingxiu District,
+Nanning
+19
+36,515
+Guiyang Branch
+16
+27,563
+Center, Guanshanhu District, Guiyang
+Yinchuan Branch
+138 Beijingzhong Road, Jinfeng District,
+Yinchuan
+15
+16,956
+Outside Mainland
+China
+Xining Branch
+Hong Kong Branch
+4 Xinning Road, Chengxi District, Xining
+11
+31/F, Three Exchange Square, 8 Connaught
+Place, Central, Hong Kong
+1
+West 2nd Tower, International Finance
+1
+Important Events
+6.1 Principal Business Activities
+The Company is engaged in banking and related financial services.
+6.2 Financial Highlights
+Details are set out in Chapter II Summary of Accounting Data and Financial Indicators.
+6.3 Shareholders' Equity
+For details of changes in shareholders' equity of the Company, please refer to the "Statement of Changes in Equity"
+in the financial statements.
+6.4 Fixed Assets
+Changes in fixed assets of the Company as at the end of the reporting period are detailed in Note 28 to the
+financial statements.
+6.5 Purchase, Sale or Repurchase of Listed Securities of the Company
+Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
+during the reporting period.
+6.6 Pre-emptive Rights
+There is no provision for pre-emptive rights under the Articles of Association of the Company and the shareholders
+of the Company have not been granted any pre-emptive rights.
+Details about retirement welfare provided by the Company to its employees are detailed in Note 39 to the financial
+statements.
+144
+12,548
+6.8 Principal Customers
+Annual Report 2021
+143
+6.7 Retirement and Welfare
+China Merchants Bank
+10,988
+1
+Chapter VI Important Events
+13,627
+1,924
+8,700,134
+China Merchants Bank
+Annual Report 2021
+Chapter V Corporate Governance
+5.16 Internal Control
+As at the end of the reporting period, the net operating income contributed by the top 5 customers of the Company
+did not exceed 30% of the total net operating income of the Company.
+During the reporting period, the Company actively organised the "Year of Internal Control and Compliance
+Management Construction" activities in accordance with the unified deployment of the China Banking and
+Insurance Regulatory Commission. Focusing on the main points of the "Year of Internal Control and Compliance
+Management Construction" activities, the Company conducted in-depth self-examination and implemented
+comprehensive rectification for the whole Bank. The identified problems were investigated and rectified immediately,
+which eliminated the hidden risks in a timely manner, and the relevant responsible departments and persons were
+held strictly accountable. In addition to self-examination and self-correction, the Company carried out in-depth and
+extensive publicity and education on internal control and compliance management, employees' professional ethics,
+and compliance with the law across the Bank, to completely raise employees' awareness of compliance operation
+and risk prevention and control, adhere to the bottom line for risk compliance, effectively prevent all kinds of risks
+and firmly established the concept of "Priority for Internal Control and Compliance-focused"; so as to achieve the
+construction goals of improved internal control system, continuously enhanced internal control efficiency, stronger
+consciousness of compliance, and continuous cultivation of compliance culture, fostering a long-term mechanism for
+internal control and compliance management of "we dare not violate regulations, cannot violate regulations, and
+are unwilling to violate regulations". To copy with the impact of the COVID-19 pandemic on the on-site inspections,
+the Company further promoted the openness and sharing of the auditing "Hawk Eye" system to the Head Office
+business departments and the branches, organised the business lines and the branches to make full use of inspection
+tools, such as data model, audio and video recording and business image system, so as to continue to strengthen
+the off-site inspection and data verification, conscientiously perform the duty of business supervision, and effectively
+guarantee the compliance operation and the steady and healthy development of the Company's various businesses.
+During the reporting period, the Company organised evaluation campaigns on the status of internal control of the
+whole Bank in 2021. As reviewed by the Board of Directors of the Company, no significant defects in terms of
+completeness, reasonableness and effectiveness were found in the Company's internal control system. For details,
+please refer to the "Report of Assessment on Internal Control of China Merchants Bank Co., Ltd. in 2021", and
+the "Auditors' Report on Internal Control of China Merchants Bank Co., Ltd. in 2021" issued by Deloitte Touche
+Tohmatsu Certified Public Accountants LLP with standard unqualified opinions.
+Practising inclusive finance
+Supporting the development of
+small- and micro-sized enterprises
+During the reporting period, the Company has applied the principles of the Corporate Governance Code set out
+in Appendix 14 of the Hong Kong Listing Rules and has complied with all the code provisions and recommended
+practices (if applicable).
+5.18 Compliance with the Corporate Governance Code
+In 2021, the Company paid close attentions to its strategies, risks and regulatory concerns and adhered to value
+and problem orientation to carry out audit and supervision, consultation and evaluation work over strategy
+implementation, transformation and development, operational efficiency and etc.. Focusing on risk prevention and
+control in key business areas, it implemented industrial regulatory requirements, promoted the construction of
+digital auditing, vigorously practiced "openness and integration", strengthened audit rectifications, and promote
+the continuous improvement of mechanism, process and system, and effectively promote the stable and healthy
+development of the Bank's operation and management.
+141
+The Company has an independent and vertical internal audit management system. The Board of Directors shall
+assume the ultimate responsibility for the independence and effectiveness of internal audit, being responsible for
+reviewing and approving the constitutional documents of internal audit, establishing the audit organisation system,
+formulating the medium-to-long term audit plan and the annual audit plan, appointing the head officer of the
+audit department, providing necessary support to carry out internal audit work independently and objectively, and
+assessing the independence and effectiveness of internal audit work. The Head Office has an Audit Department,
+which shall be accountable to the Board of Directors and the Audit Committee under the Board of Directors and
+report its work to such Committee. It is under the guidance of the Board of Supervisors and senior management,
+which shall undertake specific internal audit duties. The Audit Department under the Head Office consists of
+nine audit divisions, which strengthens the ongoing audit and rectification following-up of regional branches and
+institutions. The Audit Department under the Head Office has nine specialised teams to strengthen off-site audit
+work such as "research, analysis, organisation and guidance" and enhanced the support and guidance to the audit
+divisions. Meanwhile, four corresponding audit teams were set up to strengthen the auditing of departments under
+Head Office, overseas institutions, anti-money laundering work and credit card business.
+5.17 Internal Audit
+-through cash settled listed derivatives
+9,261,436 H shares (long position)
+- through physically settled unlisted derivatives
+-through cash settled unlisted derivatives
+59,246,000 H shares (long position) and 562,956 H shares (short position)
+Citigroup Inc. was deemed to hold a total of 347,292,985 H shares (long position) and 13,042,714 H shares (short position) in the Company.
+by virtue of its control over a number of companies. The equity interests and short positions of Citigroup Inc. in the Company included a
+lending pool of 318,132,497 H shares. Besides, 6,351,692 H shares (long position) and 5,955,858 H shares (short position) were held through
+derivatives as follows:
+1,000,635 H shares (long position)
+532,830 H shares (long position) and 434,000 H shares (short position)
+5,762,342 H shares (long position) and 1,437,184 H shares (short position)
+- through physically settled listed derivatives
+- through physically settled unlisted derivatives
+-through cash settled unlisted derivatives
+UBS Group AG was deemed to hold a total of 271,405,001 H shares (long position) in the Company by virtue of its control over a number
+of companies. The equity interests of UBS Group AG in the Company included 10,756,859 H shares (long position) which were held through
+derivatives as follows:
+(7)
+56,520 H shares (long position) and 4,084,674 H shares (short position)
+- through physically settled listed derivatives
+2,674,500 H shares (long position) and 2,935,000 H shares (short position)
+79,500 H shares (long position) and 11,000 H shares (short position)
+(2)
+(4)
+445,091 H shares (long position)
+(5)
+(6)
+For details of China Merchants Group Ltd. and its subsidiaries' interests in the Company, please refer to section 7.3.1 "Information on the
+Company's largest shareholder".
+New China Asset Management Co., Ltd. is the trustee of all the A shares in the Company held by Hexie Health Insurance Co., Ltd. New China
+Asset Management Co., Ltd. was deemed to hold interests in all the A shares in the Company held by Hexie Health Insurance Co., Ltd.
+4,268,525 H shares (short position)
+Pagoda Tree Investment Company Limited was deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants
+Union (BVI) Limited by virtue of its wholly owned subsidiary of Compass Investment Company Limited:
+(3.2)
+China Merchants Union (BVI) Limited held 477,903,500 H shares (long position) in the Company. Verise Holdings Company Limited
+was deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants Union (BVI) Limited by virtue of
+holding the 50% interest in China Merchants Union (BVI) Limited.
+Verise Holdings Company Limited was wholly-owned by CNIC Corporation Limited. Therefore, CNIC Corporation Limited was deemed
+to hold interests in the 477,903,500 H shares in the Company which are deemed to be held by Verise Holdings Company Limited.
+Compass Investment Company Limited was deemed to hold interests in the 477,903,500 H shares in the Company which are deemed
+to be held by CNIC Corporation Limited by virtue of holding the 98.9% interest in CNIC Corporation Limited.
+The 477,903,500 H shares referred to in (3) and (3.1) to (3.3) above represented the same shares.
+JPMorgan Chase & Co. was deemed to hold a total of 366,227,879 H shares (long position) and 75,445,018 H shares (short position) in
+the Company by virtue of its control over a number of companies. The equity interests and short positions of JPMorgan Chase & Co. in the
+Company included a lending pool of 115,110,900 H shares. Besides, 62,000,000 H shares (long position) and 7,777,481 H shares (short
+position) were held through derivatives as follows:
+(3)
+(3.1)
+(3.3)
+Pursuant to the approvals by the regulatory authorities, the Company made a non-public issuance of 50,000,000
+non-cumulative perpetual offshore preference shares on 25 October 2017. The issuance price is USD20 each and the
+coupon dividend rate per annum is 4.40% (excluding tax, i.e., the actual dividend yield to be received by the holders
+of the preference shares is 4.40%). The offshore preference shares of the issuance were listed on Hong Kong Stock
+Exchange on 26 October 2017 (abbreviated name of shares: "CMB 17USDPREF"; stock code: 04614; number of
+listed shares: 50,000,000). The total proceeds from the issuance of the offshore preference shares amounted to
+USD1.0 billion and, after deduction of the expenses relating to the issuance, has fully been used to replenish the
+Company's additional Tier 1 Capital.
+- through physically settled listed derivatives
+As at the end of the reporting period, the shareholdings of the Company's top ten holders of offshore preference
+shares (or their nominees) were as follows:
+Name of
+Type of
+Type of
+No.
+shareholders
+shareholders
+sharers
+1
+The Bank of New York
+Overseas legal
+Offshore
+(1)
+Shares held
+at the end of
+the period
+(share)
+50,000,000
+Percentage of
+shareholdings
+(%)
+100
+As at the end of the previous month prior to the disclosure date of this report (i.e. 28 February 2022), the Company
+had a total of 15 holders of preference shares (or their nominees), including 1 holder of offshore preference shares
+(or its nominee) and 14 holders of domestic preference shares.
+As at the end of the reporting period, the Company had a total of 14 holders of preference shares (or their
+nominees), including 1 holder of offshore preference shares (or its nominee) and 13 holders of domestic preference
+shares.
+7.5.2 Number of shareholders of preference shares and their shareholdings
+For details, please refer to the relevant announcement(s) published by the Company on the websites of Shanghai
+Stock Exchange, Hong Kong Stock Exchange and the Company, respectively.
+- through cash settled unlisted derivatives
+- through physically settled unlisted derivatives
+-through cash settled listed derivatives
+BlackRock, Inc. was deemed to hold a total of 232,488,325 H shares (long position) and 205,000 H shares (short position) in the Company
+by virtue of its control over a number of companies. The equity interests of BlackRock, Inc. in the Company included 472,500 H shares (long
+position) and 205,000 H shares (short position) which were held through derivatives as follows:
+472,500 H shares (long position) and 205,000 H shares (short position)
+through cash settled unlisted derivatives
+Save as disclosed above, the Company is not aware of any other person (other than the Directors, Supervisors
+and chief executives (as defined in the Hong Kong Listing Rules) of the Company) who has any interests or short
+positions in the shares of the Company as at 31 December 2021 as recorded in the register required to be kept by
+the Company pursuant to Section 336 of the SFO.
+49,697 H shares (long position)
+China Merchants Bank
+Chapter VII Changes in Shares and Information on Shareholders
+7.4 Issuance and Listing of Securities
+During the reporting period, the Company did not issue any new ordinary shares. The Company did not have any
+internal staff shares. Except for the disclosure related to "Preference Shares" in this chapter, no equity-linked
+agreements of the Company were entered into during the reporting period or subsisted at the end of the reporting
+period.
+For issuance of bonds of the Company and its subsidiaries, please refer to Note 43 to the financial statements.
+7.5 Preference Shares
+7.5.1 Issuance and listing of preference shares
+Pursuant to the approvals by the regulatory authorities, the Company made a non-public issuance of 275,000,000
+domestic preference shares on 22 December 2017. The issuance price is RMB100 each and the coupon dividend rate
+per annum is 4.81% (including tax). The domestic preference shares of the issuance have been listed and traded on
+the integrated business platform of Shanghai Stock Exchange since 12 January 2018 (abbreviated name of shares:
+"Zhao Yin You 1 (1)"; stock code: 360028; number of listed shares: 275,000,000). The total proceeds from
+the issuance of the domestic preference shares amounted to RMB27.5 billion. The net proceeds after deduction of
+the expenses relating to the issuance, has fully been used to replenish the Company's additional Tier 1 Capital.
+Annual Report 2021
+Notes:
+318,132,497
+China Merchants Bank
+Annual Report 2021
+7.97
+1.45
+Short
+Interest of controlled
+75,445,018
+4
+1.64
+0.30
+corporation
+Citigroup Inc.
+H
+Long
+Interest of controlled
+29,160,488
+corporation
+4
+Long
+366,227,879
+Approved lending agent
+Interest of controlled
+Changes
+(share)
+82,232,321
+corporation
+Long
+Investment manager
+168,137,158
+Long
+Person having a security
+719,370
+interest in shares
+Long
+Trustee
+28,130
+Long
+115,110,900
+Approved lending agent
+347,292,985
+5
+Interest of controlled
+232,488,325
+7
+5.06
+0.92
+corporation
+Short
+Interest of controlled
+205,000
+7
+0.00
+0.00
+corporation
+155
+156
+Long
+H
+BlackRock, Inc.
+1.08
+7.56
+1.38
+Short
+Interest of controlled
+13,042,714
+5
+0.28
+Chapter VII Changes in Shares and Information on Shareholders
+0.05
+UBS Group AG
+H
+Long
+Interest of controlled
+corporation
+271,405,001
+6
+5.91
+corporation
+Number of
+shares subject
+to trading
+moratorium
+(share)
+6
+frozen
+Others
+China Everbright Bank - Xinyou () No.
+Domestic preference
+share
+9,000,000
+3.27
+6,000,000
+9
+2 Collective Asset Management Scheme of
+Everbright Securities Asset Management
+Everbright Securities Asset Management -
+China Everbright Bank - Xinyou ()
+Collective Asset Management Scheme of
+Everbright Securities Asset Management
+Others
+Domestic preference
+share
+8,000,000
+2.91
+3,000,000
+10
+CITIC Securities Company Limited
+Everbright Securities Asset Management -
+State-owned
+8
+legal person
+Company of China, Ltd. - traditional -
+share
+ordinary insurance products
+China National Tobacco (Anhui Province)
+Company
+State-owned
+Domestic preference
+15,000,000
+5.45
+legal person
+share
+China National Tobacco (Sichuan Province)
+Company
+State-owned
+Domestic preference
+15,000,000
+5.45
+share
+7.27
+legal person
+Others
+Dividend distribution of offshore preference shares
+In accordance with the relevant requirements under the "Resolution Regarding the Plan for the Non-public Issuance
+of Offshore Preference Shares of the Company", which was considered and approved at the 2016 annual general
+meeting, the first class meeting of the holders of A Shares for 2017 and the first class meeting of the holders of H
+Shares for 2017, the Company fully paid the dividends for offshore preference shares on 25 October 2021, which
+was in compliance with the relevant distribution conditions and distribution procedures.
+The dividends for offshore preference shares of the Company are paid once a year in cash. The offshore preference
+shares adopt non-cumulative dividend payment method. After the dividends are distributed to the holders of
+offshore preference shares in accordance with the agreed dividend rate, these shareholders will not participate in
+the remaining profit distribution with the ordinary shareholders. Pursuant to the relevant terms of the offshore
+preference shares, the dividend rate per annum of the offshore preference shares is 4.40% (excluding tax, i.e., the
+actual dividend yield to be received by the holders of the preference shares is 4.40%). According to relevant laws
+and regulations, the Company shall withhold an income tax at a rate of 10% when distributing the dividends for the
+offshore preference shares to the offshore non-resident enterprises. According to the terms and conditions of the
+offshore preference shares, the Company is responsible to pay relevant income tax. Total amount of the proceeds
+from the issuance of the Company's offshore preference shares was USD1 billion, the total amount of dividends for
+the offshore preference shares is USD48,888,888.89, comprising of USD44,000,000.00 which was actually paid to
+the holders of the offshore preference shares, and the withholding tax amounted to USD4,888,888.89.
+Dividend distribution of domestic preference shares
+In accordance with the relevant requirements under the "Resolution Regarding the Plan for the Non-public Issuance
+of Domestic Preference Shares of the Company", which was considered and approved at the 2016 annual general
+meeting, the first class meeting of the holders of A Shares for 2017 and the first class meeting of the holders of H
+Shares for 2017, the Company fully paid the dividends for domestic preference shares on 20 December 2021, which
+was in compliance with the relevant distribution conditions and distribution procedures.
+The dividends for domestic preference shares of the Company are paid once a year in cash. The domestic preference
+shares adopt non-cumulative dividend payment method. After the dividends are distributed to the holders of
+domestic preference shares in accordance with the agreed dividend rate, these shareholders will not participate in
+the remaining profit distribution with the ordinary shareholders. Pursuant to the terms of dividends payment for
+domestic preference shares, based on the dividend rate of 4.81% for domestic preference shares, the cash dividends
+per preference share paid were RMB4.81 (including tax), and based on 275 million of domestic preference shares in
+issue, the total amount of the dividends paid was RMB1,322.75 million (including tax).
+For the details of dividend distribution for domestic and offshore preference shares, please refer to the relevant
+announcements published by the Company on the websites of Shanghai Stock Exchange, Hong Kong Stock
+Exchange and the Company on 10 December 2021 and 13 October 2021, respectively.
+7.5.4 Repurchase or conversion of preference shares
+During the reporting period, there had been no repurchase and conversion of preference shares.
+7.5.5 Restored voting rights of preference shares
+During the reporting period, the voting rights of the Company's domestic and offshore preference shares in issue
+had not been restored.
+7.5.6 Accounting policies for preference shares and the reason of adoption
+The Company made accounting judgments over its preference shares then issued and outstanding in accordance
+with the requirements of the relevant accounting principles, including the "International Financial Reporting
+Standard 9 Financial Instruments" and the "International Accounting Standard 32 - Financial Instruments:
+Presentation" promulgated by International Accounting Standards Board. As the preference shares issued and
+outstanding of the Company carry no obligation to deliver cash and cash equivalents, nor have they any contractual
+obligations to deliver a variable number of its own equity instruments for settlement, they were therefore measured
+as equity instruments.
+159
+Long
+7.5.3 Dividend distribution of preference shares
+Changjiang Pension Insurance - Bank of China
+-China Pacific Life Insurance Co., Ltd.
+China National Tobacco (Liaoning Province)
+Company
+Chapter VII Changes in Shares and Information on Shareholders
+"Percentage of shareholdings" represents the percentage of the number of domestic preference shares held by the holders of preference
+shares to the total number of domestic preference shares.
+State-owned
+legal person
+Domestic preference
+share
+Domestic preference
+share
+Domestic preference
+share
+5,000,000
+1.82
+5,000,000
+5,000,000
+1.82
+5,000,000
+1.82
+Notes:
+(1)
+(2)
+The shareholdings of holders of domestic preference share are presented under separate account according to the register of members of
+preference share of the Company.
+China National Tobacco (Henan Province) Company, China National Tobacco (Anhui Province) Company, China National Tobacco (Sichuan
+Province) Company and China National Tobacco (Liaoning Province) Company are all wholly-owned subsidiaries of China National Tobacco
+Corporation; "Everbright Securities Asset Management - China Everbright Bank - Xinyou (*) No. 2 Collective Asset Management Scheme
+of Everbright Securities Asset Management" and "Everbright Securities Asset Management - China Everbright Bank - Xinyou () Collective
+Asset Management Scheme of Everbright Securities Asset Management" are all managed by Everbright Securities Asset Management Co., Ltd.
+Save for the above, the Company is not aware of any affiliated relationship or action in concert among the above holders of preference shares
+or between the above holders of preference shares and the Company's top ten holders of ordinary shares.
+China Merchants Bank
+Annual Report 2021
+20,000,000
+Domestic preference
+Others
+As at the end of the reporting period, the shareholdings of the Company's top ten holders of domestic preference
+shares were as follows:
+Shares held at
+Number of
+shares subject
+Shares
+Pledged,
+the end of the
+Percentage of
+to trading
+marked or
+Type of
+period
+shareholdings
+Changes
+moratorium
+frozen
+Annual Report 2021
+No.
+Chapter VII Changes in Shares and Information on Shareholders
+158
+(share)
+Unknown
+Depository (Nominees)
+Limited
+person
+preference share
+Notes:
+(1)
+(2)
+(3)
+(4)
+The shareholdings of holders of preference shares are calculated based on the information listed in the register of holders of preference shares
+maintained by the Company.
+As the issuance is an offshore non-public issuance, the information listed in the register of holders of preference shares is the information on
+the nominees of the placees.
+The Company is not aware of any affiliated relationship or action in concert among the above holders of preference shares and the top ten
+holders of ordinary shares.
+"Percentage of shareholdings" represents the percentage of the number of offshore preference shares held by the holders of preference
+shares to the total number of offshore preference shares.
+157
+China Merchants Bank
+Name of shareholders
+shareholders Type of Shares
+(share)
+BOC Asset Bank of China - Bank of China
+Limited, Shenzhen Branch
+Others
+Domestic preference
+25,000,000
+9.09
+share
+4
+China National Tobacco (Henan Province)
+Company
+State-owned
+Domestic preference
+20,000,000
+7.27
+legal person
+share
+Ping An Property & Casualty Insurance
+3
+Scheme of CCB Capital
+share
+40,000,000
+(%)
+(share)
+(share)
+(share)
+1
+China Mobile Communications Group Co., Ltd State-owned
+Domestic preference
+Shares
+Pledged,
+marked or
+106,000,000
+2
+CCB Capital "Qianyuan - Private" (7-
+), an open private banking RMB wealth
+management product (daily calculated) of
+China Construction Bank - Anxin Private (
+4) No.2 Special Asset Management
+legal person
+Others
+share
+Domestic preference
+40,000,000
+14.55
+38.55
+H
+(3)
+(BVI) Limited
+A Shares not subject to
+-221,101,800
+trading moratorium
+10
+COSCO Shipping (Guangzhou) Co.,
+Ltd.
+State-owned legal 696,450,214
+person
+2.76
+A Shares not subject to
+trading moratorium
+Notes:
+(1)
+3.23
+(2)
+Shares held by HKSCC Nominees Ltd. are the total shares in the accounts of holders of H Shares of China Merchants Bank trading on the
+transaction platform of HKSCC Nominees Ltd.. Hong Kong Securities Clearing Company Limited is an institution designated by others to hold
+shares on behalf of them as a nominal holder, and the shares held by it are the shares of China Merchants Bank acquired by investors through
+Shanghai-Hong Kong Stock Connect.
+As at the end of the reporting period, of the aforesaid top ten shareholders, HKSCC Nominees Ltd. is a wholly-owned subsidiary of Hong
+Kong Securities Clearing Company Limited; China Merchants Steam Navigation Co., Ltd., Shenzhen Yan Qing Investment and Development
+Company Ltd., China Merchants Finance Investment Holdings Co., Ltd. and Shenzhen Chu Yuan Investment and Development Company Ltd.
+are all subsidiaries of China Merchants Group Ltd.; and China Ocean Shipping Company Limited and COSCO Shipping (Guangzhou) Co., Ltd.
+are all subsidiaries of China COSCO Shipping Corporation Limited. The Company is not aware of any affiliated relationship or action in concert
+among other shareholders.
+The above holders of A Shares did not hold the shares of the Company through credit securities accounts, neither were there cases of proxy,
+trustee nor waiver of voting rights.
+151
+152
+China Merchants Bank
+Chapter VII Changes in Shares and Information on Shareholders
+Annual Report 2021
+7.3 Information on Substantial Ordinary Shareholders
+7.3.1 Information on the Company's largest Shareholder
+(3)
+815,030,635
+Domestic legal
+person
+Dajia Life Insurance Co., Ltd. -
+Universal products
+4.55
+A Shares not subject to
+person
+trading moratorium
+7
+Hexie Health Insurance Co., Ltd.
+-
+-
+Traditional Ordinary insurance
+Domestic legal 1,130,991,537
+person
+4.48
+A Shares not subject to
+-127,957,634
+trading moratorium
+products
+8
+Shenzhen Chu Yuan Investment and
+Development Company Ltd.
+State-owned legal 944,013,171
+person
+3.74
+A Shares not subject to
+trading moratorium
+9
+As at the end of the reporting period, China Merchants Group Ltd., through its subsidiaries, namely China
+Merchants Steam Navigation Co., Ltd., China Merchants Finance Investment Holdings Co. Ltd., Shenzhen Yan Qing
+Investment and Development Company Ltd., Shenzhen Chu Yuan Investment and Development Company Ltd.,
+China Merchants Union (BVI) Limited, Best Winner Investment Limited and China Merchants Industry Development
+(Shenzhen) Limited, indirectly held an aggregate of 29.97% shares in the Company. There was no pledge of the
+shares of the Company. Specifically, China Merchants Steam Navigation Co., Ltd. directly held 13.04% shares
+in the Company, and is the largest shareholder of the Company with a registered capital of RMB17 billion, and
+its legal representative is Miao Jianmin. It mainly engages in passenger and cargo shipping businesses; dockyard,
+warehouse and vehicle transportation; investment and management of tugboat and barge transportation business;
+repair, construction and trading of ships and offshore oil drilling equipment; sale, purchase and supply of various
+transportation equipment, spare parts and materials; ship and passenger/goods shipping agency; construction
+of water and land-based construction projects; and businesses such as investment and management of finance,
+insurance, trust, securities and futures industries.
+China Merchants Finance Investment State-owned legal 1,147,377,415
+Holdings Co., Ltd.
+As at the end of the reporting period, China Merchants Group Ltd. directly holds 100% equity interests in China
+Merchants Steam Navigation Co., Ltd. and is the controlling shareholder of the Company's largest shareholder, with
+a registered capital of RMB16.9 billion. Its legal representative is Miao Jianmin. China Merchants Group Ltd. is a
+state-owned enterprise under the direct control of State-owned Assets Supervision and Administration Commission
+of the State Council. Its predecessor, China Merchants Steam Navigation Company, was founded in 1872, when
+China was in its late Qing Dynasty and was undergoing the Westernisation Movement. It was one of the enterprises
+which played a significant role in promoting the modernisation of China's national industries and commerce
+at that time. Nowadays, it has developed into a diversified conglomerate, with its businesses focusing on three
+core industries, namely integrated transportation, featured finance and comprehensive development of cities and
+industrial zones. It is realising the transformation from three main businesses to three major platforms of industrial
+operation, financial services, investment and capital operation.
+100%
+0.22%
+13.04%
+China Merchants Bank Co., Ltd.
+China Merchants Bank
+Annual Report 2021
+Chapter VII Changes in Shares and Information on Shareholders
+7.3.2 Information on other shareholders holding more than 5% shares of the
+Company
+As at the end of the reporting period, China COSCO Shipping Corporation Limited indirectly held an aggregate of
+9.97% shares in the Company through its subsidiaries, namely China Ocean Shipping Company Limited, COSCO
+Shipping (Guangzhou) Co., Ltd., Guangzhou Haining Maritime Technology Consulting Co., Ltd. (NOFOAR
+12), COSCO Shipping (Shanghai) Co., Ltd. ((L)ĦRA), COSCO Shipping Investment
+Holdings Co., Limited (RKERĦRAĀ]) and Guangzhou Tri-Dynas Oil & Shipping Co., Ltd. (
+). There was no pledge of the shares of the Company. Specifically, China Ocean Shipping
+Company Limited held 6.24% shares in the Company. China Ocean Shipping (Group) Company (the predecessor
+of China Ocean Shipping Company Limited) was established on 22 October 1983, with a registered capital of
+RMB16.191 billion. Its legal representative is Wan Min. The scope of its businesses includes: international shipping;
+ancillary business in international maritime transportation; acceptance of space booking, voyage charter and time
+charter from cargo owners at home and abroad; leasing, construction, trading and maintenance of vessels and
+containers and manufacture of related facilities; ship escrowing business; provision of ship materials, spare parts and
+communications services relating to shipping business at home and abroad; management of enterprises engaging in
+vessel and cargo agency business and seafarer assignment business.
+China COSCO Shipping Corporation Limited held 100% equity interests in China Ocean Shipping Company Limited
+and is its controlling shareholder. Its de facto controller is the State-owned Assets Supervision and Administration
+Commission of the State Council. China COSCO Shipping Corporation Limited was established on 5 February
+2016, with a registered capital of RMB11.0 billion. Its legal representative is Wan Min. The scope of its businesses
+includes: international shipping; ancillary business in international maritime transportation; imports and exports of
+goods and technology; marine, land, aviation international freight forwarding business; ship leasing; sales of ships,
+containers and steel products; offshore engineering equipment design; terminal and port investment; communication
+equipment sales, information and technical services; warehousing (except hazardous chemicals); engaged in
+technology development, technology transfer, technical consulting, technical services and equity investment funds in
+the field of shipping and spare parts.
+7.3.3 Other substantial shareholders under the regulatory calibre
+1.53%
+1.
+3.
+4.
+As of the end of the reporting period, Dajia Life Insurance Co., Ltd. held 3.23% shares in the Company,
+and is a shareholder which has appointed a Director in the Company. There was no pledge of the shares
+of the Company. The controlling shareholder of Dajia Life Insurance Co., Ltd. is Dajia Insurance Group Co.,
+Ltd.. Dajia Insurance Group Co., Ltd. was established on 25 June 2019, with registered capital of RMB20.36
+billion, and its legal representative is He Xiaofeng. Its controlling shareholder and de facto controller is China
+Insurance Security Fund Co., Ltd..
+As at the end of the reporting period, China Communications Construction Group (Limited) through its
+subsidiaries, namely China Communications Construction Company Limited, CCCC Guangzhou Dredging Co.,
+Ltd., CCCC Fourth Harbor Engineering Co., Ltd., CCCC Shanghai Dredging Co., Ltd., Zhen Hua (Shenzhen)
+Engineering Co., Ltd. and CCCC Third Harbor Consultants Co., Ltd. indirectly held an aggregate of 1.68%
+shares in the Company, and is a shareholder which has appointed a Supervisor in the Company. There
+was no pledge of the shares of the Company. China Communications Construction Group (Limited) was
+established on 8 December 2005, with a registered capital of RMB7.274 billion, and its legal representative
+is Wang Tongzhou. Its de facto controller is the State-owned Assets Supervision and Administration
+Commission of the State Council.
+As at the end of the reporting period, SAIC Motor Corporation Limited held 1.23% shares in the Company
+and is a shareholder which has appointed a Supervisor in the Company. There was no pledge of the shares
+of the Company. SAIC Motor Corporation Limited was established on 16 April 1984, with a registered capital
+of RMB11.683 billion, and its legal representative is Chen Hong. Its de facto controller is the State-owned
+Assets Supervision and Administration Commission of Shanghai City.
+As at the end of the reporting period, Hebei Port Group Co., Ltd. held 1.17% shares in the Company and
+is a shareholder which has appointed a Supervisor in the Company. There was no pledge of the shares of
+the Company. Hebei Port Group Co., Ltd. was established on 28 August 2002, with a registered capital
+of RMB8.0 billion. Its legal representative is Cao Ziyu and its de facto controller is the State-owned Assets
+Supervision and Administration Commission of Hebei Province.
+153
+154
+China Merchants Bank
+Annual Report 2021
+Chapter VII Changes in Shares and Information on Shareholders
+2.
+4.55%
+3.74%
+4.99%
+China Merchants Holdings
+(Hong Kong) Company Limited
+50%
+China Merchants
+Union (BVI) Limited
+100%
+Shenzhen Yan Qing Investment
+and Development Company Ltd.
+China Merchants Group Ltd.
+100%
+China Merchants Steam
+Navigation Co., Ltd.
+100%
+China Merchants Finance
+Investment Holdings Co. Ltd.
+100%
+China Merchants Finance
+Holdings Co., Ltd
+50%
+50%
+100%
+Shenzhen Chu Yuan Investment
+and Development Company Ltd.
+Best Winner
+Investment Limited
+27.59%
+China Merchants China
+Direct Investments Limited
+100%
+China Merchants Industry
+Development (Shenzhen) Limited
+1.89%
+The Company did not have any controlling shareholder and de facto controller. As at the end of the reporting
+period, the equity relationship among the Company, its largest shareholder and the controlling shareholder of its
+largest shareholder is illustrated as follows (in this report, any discrepancies between the total shown and the sum
+of the amounts listed are due to rounding):
+6
+trading moratorium
+A Shares not subject to
+(2) Foreign shares listed domestically
+(3) Foreign shares listed overseas (H Shares)
+(4) Others
+4,590,901,172
+18.20
+4,590,901,172
+18.20
+3.
+Total shares
+25,219,845,601
+100.00
+JPMorgan Chase & Co.
+25,219,845,601
+As at the end of the reporting period, the Company had a total of 521,896 shareholders, including 491,920 holders
+of A Shares and 29,976 holders of H Shares. Neither the holders of A Shares nor the holders of H Shares are subject
+to trading moratorium.
+As at the end of the previous month prior to the disclosure date of this report (i.e. 28 February 2022), the Company
+had a total of 448,081 shareholders, including 418,236 holders of A Shares and 29,845 holders of H Shares. Neither
+the holders of A Shares nor the holders of H Shares are subject to trading moratorium.
+Based on the publicly available information and to the knowledge of the Directors, as at the end of the reporting
+period, the Company had maintained the public float in compliance with the requirement of the Hong Kong Listing
+Rules.
+China Merchants Bank
+Annual Report 2021
+Chapter VII Changes in Shares and Information on Shareholders
+7.2 Top Ten Holders of Ordinary Shares and Top Ten Holders of
+Ordinary Shares Whose Shareholdings Are Not Subject to Trading
+Moratorium
+Number of
+Shares held at
+the end of the
+Percentage of
+the total share
+100.00
+81.80
+20,628,944,429
+81.80
+150
+China Merchants Bank
+Chapter VII Changes in Shares and Information on Shareholders
+Annual Report 2021
+7.1 Changes in Ordinary Shares of the Company During the
+Reporting Period
+31 December 2020
+Changes in the
+No. of shares
+31 December 2021
+during the
+reporting
+No. of shares
+(share)
+Percentage
+(%)
+period
+(share)
+No. of shares
+(share)
+Percentage
+(%)
+2.
+1. Shares subject to trading moratorium
+Shares not subject to trading moratorium
+(1) Ordinary shares in RMB (A Shares)
+25,219,845,601
+100.00
+25,219,845,601
+100.00
+20,628,944,429
+Changes in
+shares subject
+Shares
+Pledged,
+the reporting
+State-owned legal 3,289,470,337
+person
+13.04
+A Shares not subject to
+trading moratorium
+3
+China Ocean Shipping Company
+Limited
+State-owned legal 1,574,729,111
+person
+6.24
+A Shares not subject to
+trading moratorium
+4
+Hong Kong Securities Clearing
+Company Limited
+Overseas legal 1,517,455,779
+6.02
+A Shares not subject to
+443,810,867
+person
+trading moratorium
+5
+Shenzhen Yan Qing Investment and
+Development Company Ltd.
+State-owned legal 1,258,542,349
+person
+4.99
+Co., Ltd.
+7.3.4 Substantial shareholders' interests and short positions in the Company under Hong Kong
+laws and regulations
+China Merchants Steam Navigation
+trading moratorium
+to trading
+marked or
+Serial No. Name of shareholders
+Type of
+shareholders
+period
+capital
+period
+moratorium
+frozen
+(share)
+(%)
+Type of shares
+(share)
+(share)
+(share)
+1
+HKSCC Nominees Ltd.
+Overseas legal
+person
+4,552,406,315
+18.05
+H Shares not subject to
+1,958,918
+Unknown
+2
+As at 31 December 2021, substantial shareholders had interests and short positions in the shares of the Company
+under Hong Kong laws and regulations as recorded in the register required to be kept by the Company pursuant to
+Section 336 of the SFO (in this report, any discrepancies between the total shown and the sum of the amounts listed
+are due to rounding) as follows:
+Changes in Shares and Information on Shareholders
+substantial
+Chapter VII Changes in Shares and Information on Shareholders
+Name of
+substantial
+Class of Long/short
+shareholder
+shares
+position
+China Ocean Shipping
+A
+Long
+Annual Report 2021
+Percentage
+of the
+relevant class
+of the
+total issued
+Capacity
+No. of
+shares
+(shares)
+of shares
+ordinary
+in issue
+shares
+Notes
+(%)
+(%)
+Percentage
+China Merchants Bank
+8.73
+10.68
+0.23
+Investment Limited
+H
+Long
+Beneficial owner
+328,776,923
+1
+7.16
+1.30
+Shenzhen Yan Qing
+A
+Long
+Beneficial owner
+1,258,542,349
+Investment and
+Long
+Interest of controlled
+944,013,171
+Development
+corporation
+Company Ltd.
+2,202,555,520
+1
+Beneficial owner
+1,574,729,111
+7.63
+6.24
+1.89
+CNIC Corporation Limited H
+Long
+Interest of controlled
+corporation
+Interest of controlled
+corporation
+477,903,500
+3
+10.41
+1.89
+Verise Holdings Company H
+Limited
+Long
+Interest of controlled
+corporation
+477,903,500
+3
+10.41
+1.89
+China Merchants Union
+H
+Long
+Beneficial Owner
+477,903,500
+3
+10.41
+10.41
+0.28
+3
+Name of
+Company Limited
+Hexie Health Insurance
+A
+Long
+Beneficial owner
+1,130,991,537
+2
+5.48
+4.48
+Co. Ltd
+Pagoda Tree Investment H
+Long
+Company Limited
+Interest of controlled
+corporation
+477,903,500
+3
+10.41
+1.89
+1.89
+Compass Investment
+H
+Long
+Company Limited
+477,903,500
+1
+(中國華馨投資有限公司)
+Beneficial owner
+806,680,423
+1
+17.57
+3.20
+corporation
+China Merchants Steam
+A
+Long
+Beneficial owner
+3,289,470,337
+Class of
+Navigation Co., Ltd.
+Interest of controlled
+3,408,080,075
+corporation
+Long
+Other
+55,196,540
+6,752,746,952
+1
+32.73
+26.78
+Long
+shareholder
+shares
+Long/short
+position
+58,147,140
+Interest of controlled
+Long
+H
+26.78
+32.73
+1
+6,752,746,952
+55,196,540
+Others
+Long
+6,697,550,412
+Interest of controlled
+corporation
+Group Ltd.
+Long
+A
+China Merchants
+(%)
+(%)
+Notes
+Percentage
+of the
+total issued
+ordinary
+shares
+Percentage
+of the
+relevant class
+of shares
+in issue
+No. of
+shares
+(shares)
+H
+Long
+Capacity
+806,680,423
+7.16
+1.30
+corporation
+CMF Holdings Limited
+A
+Long
+Interest of controlled
+58,147,140
+1
+0.28
+corporation
+H
+Long
+Interest of controlled
+328,776,923
+1
+7.16
+1.30
+corporation
+Best Winner
+A
+Interest of controlled
+Long
+1
+328,776,923
+0.23
+Long
+17.57
+1
+Interest of controlled
+3.20
+corporation
+China Merchants
+A
+Long
+1,147,377,415
+Finance Investment
+Long
+Interest of controlled
+Beneficial owner
+Holdings Co., Ltd.
+corporation
+Long
+Other
+55,196,540
+3,463,276,615
+1
+16.79
+2,260,702,660
+13.73
+H
+(27)
+133
+463
+Net fair value gain/(loss) on debt instruments measured at
+fair value through other comprehensive income
+Net changes in expected credit losses of debt instruments
+measured at fair value through other comprehensive income
+Net movement in cash flow hedge reserve
+4,156
+1,054
+3,036
+Exchange difference on translation of financial statements of
+foreign operations
+105
+97,959
+(2,729)
+120,834
+Annual Report 2021
+2021
+Note
+Items that may be reclassified subsequently to profit or loss
+Share of other comprehensive income from equity-accounted
+investees
+Other comprehensive income for the year after tax
+Profit for the year
+(Expressed in millions of Renminbi unless otherwise stated)
+For the year ended 31 December 2021
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+Chapter VIII Financial Statements
+China Merchants Bank
+3.79
+(1,574)
+4.61
+2020
+(2,483)
+127,220
+Net fair value gain on equity instruments designated at
+fair value through other comprehensive income
+Remeasurement of defined benefit scheme
+17
+169
+386
+803
+94,375
+The notes form part of these consolidated financial statements.
+Non-controlling interests
+Attributable to:
+94,761
+128,023
+(231)
+(109)
+(2,967)
+7,298
+Equity holders of the Bank
+Total comprehensive income for the year
+Non-controlling interests
+Equity holders of the Bank
+Attributable to:
+(3,198)
+7,189
+16
+Other comprehensive income for the year, net of tax
+43
+15
+481
+1,318
+Items that will not be reclassified to profit or loss
+The notes form part of these consolidated financial statements.
+(7,871)
+Earnings per share
+(393)
+Impairment losses on other assets
+(64,871)
+(65,962)
+14
+Expected credit losses
+184,584
+210,498
+(154)
+Operating profit before impairment losses and taxation
+(116,879)
+10
+Operating expenses
+287,398
+327,377
+Operating income
+(273)
+(657)
+(102,814)
+Disposal of financial instruments at amortised cost
+Share of profits of joint ventures
+2,877
+97,959
+120,834
+(24,481)
+(27,339)
+15
+122,440
+148,173
+Non-controlling interests
+25
+Equity holders of the Bank
+Profit for the year
+Income tax
+Profit before taxation
+489
+1,153
+26
+Share of profits of associates
+2,392
+Attributable to:
+22,881
+29,011
+9
+For the year ended 31 December 2021
+(Expressed in millions of Renminbi unless otherwise stated)
+Consolidated Statement of Profit or Loss
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+168
+167
+18 March 2022
+Notes
+Hong Kong
+Deloitte Touche Tohmatsu
+The engagement partner on the audit resulting in the independent auditor's report is Shi Chung Fai.
+From the matters communicated with those charged with governance, we determine those matters that were of most
+significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
+matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
+matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
+because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
+such communication.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
+regarding independence, and to communicate with them all relationships and other matters that may reasonably be
+thought to bear on our independence, and where applicable, related safeguards.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
+the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
+audit.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated financial statements. We are responsible for the
+direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
+912
+617
+Certified Public Accountants
+2021
+Interest income
+Interest expense
+Other net income
+79,486
+94,447
+Net fee and commission income
+(7,198)
+Fee and commission expense
+86,684
+102,318
+8
+185,031
+203,919
+(122,394)
+(123,137)
+7
+2020
+307,425
+327,056
+6
+Fee and commission income
+Net interest income
+Basic and diluted (RMB Yuan)
+119,922
+97,342
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
+and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
+statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
+we have performed, we conclude that there is a material misstatement of this other information, we are required to report
+that fact. We have nothing to report in this regard.
+Our audit procedures in relation to consolidation of
+structured entities included the following:
+How our audit addressed the key audit matter
+As described in Note 4(1), the consolidation of structured entities
+is determined based on control. Control is achieved when the
+investor has power over the investee, the investor is exposed,
+or has rights, to variable returns from its involvement with the
+investee; and the investor has the ability to use its power to
+affect its returns. When performing the assessment on whether
+the Group has control over the structured entities, the Group
+considers several factors including, the scope of its decision-
+making authority over the structured entities, the rights held
+by other parties, the remuneration for managing the structured
+entities and the Group's exposure to variability of returns from
+interests that it holds in the structured entities.
+The structured entities of the Group include wealth management
+products, asset management schemes, trust beneficiary rights,
+assets-backed securities and funds, as disclosed in Note 64 to
+the consolidated financial statements.
+We identified consolidation of structured entities as a key audit
+matter since significant judgement is applied by management
+to determine whether or not the Group has control over certain
+structured entities.
+Consolidation of structured entities
+Key audit matter
+DTTHK(A)(22)100027
+165
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+With the support of our internal modelling specialist, we
+assessed the key definitions and application of parameters
+and assumptions in the ECL model. This included assessing
+stage determination, probability of default, loss given
+default, exposure at default, forward-looking information
+and COVID-19 impact. We selected samples to check
+whether the calculation in the ECL model is consistent
+with the methodology. We selected samples to conduct
+credit reviews in order to assess the appropriateness of
+the significant judgements made by the management
+regarding the occurrence of SICR and credit impairment
+events, and whether the identification of such events are
+proper and timely. In addition, we selected samples and
+tested their data input into the ECL model to evaluate the
+completeness and accuracy of the data input. For loans
+and advances at amortised cost and debt investments at
+amortised cost at stage 3, we selected samples to test the
+reasonableness of future cash flows from the borrowers
+estimated by the Group, including the expected recoverable
+amount of collateral, to assess whether there were material
+misstatements in credit loss allowances.
+How our audit addressed the key audit matter
+Principal accounting policies and significant accounting
+estimates and judgement applied in determining the
+expected credit loss allowances of loans and advances to
+customers at amortised cost, debt investments at amortised
+cost and financial guarantees and loan commitments are
+set out in Notes 4(5) and 5(4) to the consolidated financial
+statements.
+Expected credit loss allowances of loans and advances
+to customers at amortised cost, debt investments at
+amortised cost, and financial guarantees and loan
+commitments
+Key audit matter
+Key Audit Matters (continued)
+DTTHK(A)(22)100027
+Chapter VIII Financial Statements
+We understood and tested the design and operating
+effectiveness of key controls over the management
+process in determining the consolidation scope for
+interests in structured entities as well as understood the
+purpose for setting up the structured entities.
+We reviewed the relevant contract terms, on a sample
+basis, and assessed the power of the Group over the
+structured entities, the rights of the Group to variable
+returns of the structured entities and the ability of
+the Group to use its power to affect its return, and
+evaluated management judgement on whether the
+Group has control over the structured entities and the
+conclusion about whether or not the consolidation
+criteria are met.
+166
+China Merchants Bank
+Annual Report 2021
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
+disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
+manner that achieves fair presentation.
+Conclude on the appropriateness of the directors of the Bank's use of the going concern basis of accounting and,
+based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
+may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
+uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
+consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
+based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions
+may cause the Group to cease to continue as a going concern.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors of the Bank.
+Obtain an understanding of internal control relevant to the audit 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
+Group's internal control.
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
+or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
+and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
+fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
+misrepresentations, or the override of internal control.
+As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
+throughout the audit. We also:
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements (continued)
+DTTHK(A)(22)100027
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+China Merchants Bank
+Annual Report 2021
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+In preparing the consolidated financial statements, the directors of the Bank are responsible for assessing the Group's ability
+to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
+basis of accounting unless the directors of the Bank either intend to liquidate the Group or to cease operations, or have no
+realistic alternative but to do so.
+The directors of the Bank are responsible for the preparation of the consolidated financial statements that give a true and
+fair view in accordance with IFRSS and the disclosure requirements of the Hong Kong Companies Ordinance, and for such
+internal control as the directors of the Bank determine is necessary to enable the preparation of consolidated financial
+statements that are free from material misstatement, whether due to fraud or error.
+Responsibilities of Directors and Those Charged with Governance for
+the Consolidated Financial Statements
+The directors of the Bank are responsible for the other information. The other information comprises the information
+included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
+of assurance conclusion thereon.
+DTTHK(A)(22)100027
+Other Information
+Chapter VIII Financial Statements
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
+free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion
+solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other
+person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an
+audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
+from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
+influence the economic decisions of users taken on the basis of these consolidated financial statements.
+164
+Key Audit Matters (continued)
+We assessed whether the ECL model applied by the
+Group has covered all the exposures that should be taken
+into consideration. In respect of different portfolios of
+loans and advances to customers at amortised cost, debt
+investments at amortised cost and financial guarantees
+and loan commitments, we involved our internal modelling
+specialist to assist us in assessing the appropriateness of
+the Group's methodology of ECL modelling. We reviewed
+relevant documents and evaluated the appropriateness and
+application of the ECL model.
+Deloitte.
+Independent Auditor's Report
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+162
+320
+168
+162
+To the shareholders of China Merchants Bank Co., Ltd.
+Unaudited Supplementary Financial Information
+(See Annexures)
+Independent Auditor's Report
+Financial Statements
+Annual Report 2021
+161
+Chapter VIII Financial Statements
+China Merchants Bank
+M
+people with financial services
+Helping in building smart cities
+Persisting in benefiting
+163
+(A joint stock company incorporated in the People's Republic of China with limited liability)
+Financial Statements and Notes Thereto
+德勤
+DTTHK(A)(22)100027
+We understood management's process and tested the
+design and operating effectiveness of key controls across the
+processes relevant to the ECL estimation of the Group. These
+controls included the development, validation and review
+of the ECL model; the controls over the model data input,
+including manual input controls and automated transmission
+controls; the automated controls over the ECL model
+calculation process; the controls over the identification of
+SICR indicators and credit impairment events.
+Our audit procedures in relation to the expected credit loss
+allowances of loans and advances to customers at amortised
+cost, debt investments at amortised cost and financial
+guarantees and loan commitments included the following:
+How our audit addressed the key audit matter
+Key judgements and estimates in respect of the
+measurement of ECLs include: the significant management
+judgement and estimates of model design and its
+application; the identification of a significant increase in
+credit risk (SICR); the identification of credit impairment
+events; the determination of inputs used in the ECL model,
+as well as the determination of the forward-looking
+information to incorporate.
+As at 31 December 2021, as set out in Note 22(a), the
+Group reported loans and advances to customers at
+amortised cost of RMB5,085,600 million and expected
+credit loss allowances of RMB245,494 million; in Note 23(b),
+the Group reported debt investments at amortised cost of
+RMB1,225,727 million and expected credit loss allowances
+of RMB39,886 million; in note 42, the Group reported the
+expected credit loss allowances of financial guarantees and
+loan commitments of RMB 12,790 million.
+Expected credit loss allowances of loans and advances
+to customers at amortised cost, debt investments at
+amortised cost, and financial guarantees and loan
+commitments
+Key audit matter
+Key Audit Matters (continued)
+DTTHK(A)(22)100027
+Annual Report 2021
+We identified expected credit loss ("ECL") allowance of
+loans and advances to customers at amortised cost, debt
+investments at amortised cost and financial guarantees
+and loan commitments as a key audit matter due to
+the materiality of these items' balance and significant
+management judgement and estimates involved in deriving
+the ECL estimates.
+China Merchants Bank
+Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
+consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
+consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
+opinion on these matters.
+Key Audit Matters
+We conducted our audit in accordance with International Standards on Auditing ("ISAS"). Our responsibilities under those
+standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+section of our report. We are independent of the Group in accordance with the International Ethics Standards Board
+for Accountants' Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical
+responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
+appropriate to provide a basis for our opinion.
+Basis for Opinion
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the
+Group as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year
+then ended in accordance with International Financial Reporting Standards ("IFRSS") and have been properly prepared in
+compliance with the disclosure requirements of Hong Kong Companies Ordinance.
+We have audited the consolidated financial statements of China Merchants Bank Co., Ltd. (the "Bank") and its subsidiaries
+(collectively referred to as the "Group") set out on pages 168 to 319, which comprise the consolidated statement of
+financial position as at 31 December 2021, and the consolidated statement of profit or loss, consolidated statement of
+profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of
+cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant
+accounting policies.
+Chapter VIII Financial Statements
+Opinion
+Amendments to IFRSS effective in the current year applied by the Group
+Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
+Amendment to IFRS 16
+Interest Rate Benchmark Reform - Phase 2
+COVID-19-Related Rent Concessions
+5,335,391
+22
+Loans and advances to customers
+524,601
+Payment for lease liabilities
+21
+194,421
+3. Application of new and amendments to IFRSS
+226,919
+286,262
+Judgements made by management in the application of IFRSS that have significant effect on the consolidated
+financial statements and estimates with a significant risk of material adjustment in the future periods are discussed
+in Note 5.
+Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
+between market participants at the measurement date, regardless of whether that price is directly observable or
+estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
+into account the characteristics of the asset or liability if market participants would take those characteristics into
+account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
+purposes in these consolidated financial statements is determined on such a basis, except for share-based payment
+transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope
+of IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as net
+realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.
+The preparation of the financial statements in conformity with IFRSS requires management to make judgements,
+estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
+income and expenses. The estimates and associated assumptions are based on historical experience and various
+other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
+making the judgements about carrying values of assets and liabilities that are not readily apparent from other
+sources. Actual results may differ from these estimates.
+Level 3 inputs are unobservable inputs for the asset or liability.
+Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
+liability, either directly or indirectly; and
+Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
+access at the measurement date;
+In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on
+the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
+the fair value measurement in its entirety, which are described as follows:
+Basis of preparation of consolidated financial statements (continued)
+(2) Basis of measurement (continued)
+Chapter VIII Financial Statements
+2.
+China Merchants Bank
+Annual Report 2021
+These financial statements are presented in Renminbi ("RMB") and unless otherwise stated, rounded to the nearest
+million. RMB is the functional currency of the domestic operations of the Group. The functional currencies of
+overseas branches and subsidiaries are determined in accordance with the primary economic environment in which
+they operate, and are translated into RMB for the preparation of these financial statements according to Note 4(16).
+The consolidated financial statements have been prepared on the historical cost basis except for financial instruments
+that are measured at fair values at the end of each reporting period and the measurement principles as explained
+below.
+(2) Basis of measurement
+20
+These consolidated financial statements have been prepared in accordance with International Financial Reporting
+Standards ("IFRSS") and its interpretations promulgated by the International Accounting Standards Board ("IASB"),
+and the disclosure requirements of the Hong Kong Companies Ordinance. These consolidated financial statements
+also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock
+Exchange of Hong Kong Limited.
+The 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 if the revision affects only that period, or in the period of
+the revision and future periods if the revision affects both current and future periods.
+103,335
+213,011
+19
+(1) Statement of compliance and basis of preparation
+For changes in the basis for determining the contractual cash flows of a financial asset or financial liability to which
+the amortised cost measurement applies as a result of interest rate benchmark reform, the Group applies the
+practical expedient to account for these changes by updating the effective interest rate, such change in effective
+interest rate normally has no significant effect on the carrying amount of the relevant financial asset or financial
+liability.
+Changes in the basis for determining the contractual cash flows as a result of interest rate benchmark
+reform
+Impacts and accounting policies on application of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
+"Interest Rate Benchmark Reform - Phase 2"
+170
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Consolidated Statement of Financial Position
+At 31 December 2021
+(Expressed in millions of Renminbi unless otherwise stated)
+Notes
+2021
+80,350
+2020
+Cash
+Precious metals
+Balances with central banks
+Balances with banks and other financial institutions
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+13,310
+13,088
+4,639
+7,970
+18
+553,898
+525,358
+Assets
+Basis of preparation of consolidated financial statements
+269,081
+The principal activities of the Bank and its subsidiaries (the "Group") are providing corporate and personal banking
+services, conducting treasury business, providing asset management and other financial services.
+Cash and cash equivalents as at 1 January
+552,790
+589,675
+Effect of foreign exchange rate changes
+(2,746)
+(5,673)
+Cash and cash equivalents as at 31 December
+55(a)
+801,754
+552,790
+Cash flows from operating activities include:
+Interest received
+177
+255,854
+111,177
+100,925
+Interest paid
+The notes form part of these consolidated financial statements.
+175
+176
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Notes to the Consolidated Financial Statements
+For the year ended 31 December 2021
+(Expressed in millions of Renminbi unless otherwise stated)
+1. Organisation and principal activities
+(31,212)
+251,710
+Net increase/(decrease) in cash and cash equivalents
+(211,787)
+(2) Principal activities
+As at 31 December 2021, apart from the Head Office, the Bank had 51 branches in Mainland China, Hong Kong,
+New York, Singapore, Luxembourg, London and Sydney. In addition, the Bank has three representative offices in
+Beijing, New York and Taipei.
+China Merchants Bank Co., Ltd. (the "Bank") is a commercial bank incorporated in Shenzhen, the People's Republic
+of China (the "PRC"). With the approval of the China Securities Regulatory Commission (the "CSRC") of the PRC,
+the A-Shares of the Bank were listed on Shanghai Stock Exchange on 9 April 2002. On 22 September 2006, the
+Bank's H-Shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "HKEX").
+Organisation
+(1)
+55(b)
+(4,835)
+(4,644)
+Distribution paid on perpetual debt capital
+(227)
+(234)
+Payment for dividends distribution
+(31,845)
+2.
+(30,436)
+(1,638)
+(1,651)
+Distribution paid on perpetual bonds
+(1,975)
+Interest paid on financing activities
+(11,398)
+(19,490)
+Payment for other financing activities
+55(b)
+(3,697)
+(867)
+Net cash generated from/(used in) financing activities
+89,359
+Distribution paid on preference shares
+178
+China Merchants Bank
+Chapter VIII Financial Statements
+12,532
+14,652
+- Share of profits of associates
+(1,153)
+(489)
+- Share of profits of joint ventures
+(2,877)
+(2,392)
+- Net gains on disposal of properties and equipment and other assets
+(113)
+(44)
+- Interest expense on lease liabilities
+555
+596
+Changes in:
+Balances with central banks
+Loans and advances to customers
+Other assets
+Deposits from customers
+12,874
+(564,924)
+(23,480)
+(649,434)
+(37,395)
+(51,843)
+(56,059)
+- Interest expense on issued debt securities
+- Interest income on investments
+Profit before taxation
+Adjustments for:
+- Impairment losses on loans and advances
+- Impairment losses on investments and other
+148,173
+122,440
+37,020
+46,882
+29,335
+18,143
+- Unwinding of discount on the allowances of loans and advances
+(247)
+(45,118)
+(186)
+8,857
+7,715
+- Depreciation of right-of-use assets
+4,259
+4,416
+- Amortisation of other assets
+1,389
+1,364
+- Net gains on debt securities and equity investments
+(15,388)
+(7,208)
+- Depreciation of property and equipment and investment properties
+Operating activities
+718,742
+Amounts due to banks and other financial institutions
+58,038
+Payment for the acquisition of subsidiaries, associates or joint ventures
+Payment for the purchases of property and equipment and other assets
+Proceeds from the disposals of property and equipment and other assets
+Proceeds from the disposals of subsidiaries, associates or joint ventures
+Net cash used in investing activities
+The notes form part of these consolidated financial statements.
+(5,342)
+(1,460)
+(24,160)
+(19,125)
+2,399
+2,354
+855
+582
+(19,697)
+(240,753)
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+Note
+2021
+2020
+Financing activities
+Proceeds from the issuance of negotiable interbank certificates of
+deposit
+55(b)
+319,707
+71,197
+1,104,070
+(1,385,212)
+(1,225,385)
+1,160,739
+73,321
+223,568
+Amounts due from banks and other financial institutions with
+original maturity over 3 months
+Borrowing from central banks
+2,160
+(170,100)
+(8,766)
+(26,909)
+Other liabilities
+16,596
+45,151
+783,914
+Cash generated from operating activities before income tax payment
+55(b)
+Income tax paid
+(35,509)
+(31,644)
+Net cash generated from operating activities
+182,048
+421,328
+Investing activities
+Payment for the purchases of investments
+Proceeds from disposals and redemptions of investments
+Investment income received
+217,557
+Proceeds from the issuance of certificates of deposit
+2020
+(Expressed in millions of Renminbi unless otherwise stated)
+Amendments to IAS 16
+Property, Plant and Equipment: Proceeds before
+Intended Use
+1 January 2022
+Amendments to IAS 37
+Amendments to IFRS Standards
+Onerous Contracts
+―
+Cost of Fulfilling a Contract
+1 January 2022
+Annual Improvements to IFRS Standards
+1 January 2022
+2018-2020
+IFRS 17
+Insurance Contracts and the related Amendments
+1 January 2023
+Amendments to IAS 1
+Classification of Liabilities as Current or
+Non-current
+1 January 2023
+Amendments to IAS 1 and
+IFRS Practice Statement 2
+Amendments to IAS 8
+Amendments to IAS 12
+Amendments to IFRS10
+and IAS 28
+Disclosure of Accounting Policies
+1 January 2022
+Reference to the Conceptual Framework
+Amendments to IFRS 3
+1 April 2021
+Annual Report 2021
+3. Application of new and amendments to IFRSS (Continued)
+Amendments to IFRSS effective in the current year applied by the Group (Continued)
+Impacts and accounting policies on application of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
+"Interest Rate Benchmark Reform - Phase 2" (Continued)
+Changes in the basis for determining the contractual cash flows as a result of interest rate benchmark
+reform (Continued)
+A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if
+and only if, both these conditions are met:
+•
+the change is necessary as a direct consequence of interest rate benchmark reform; and
+•
+the new basis for determining the contractual cash flows is economically equivalent to the previous basis (i.e.
+the basis immediately preceding the change).
+Hedge accounting
+For changes made to the hedged risk, hedged item or hedging instrument required by interest rate benchmark
+reform, the Group amends the formal designation of a hedging relationship to reflect the changes by the end of the
+reporting period during which the relevant changes were made. Such an amendment to the formal designation of
+the hedging relationship constitutes neither the discontinuation of the hedging relationship nor the designation of a
+new hedging relationship.
+Definition of Accounting Estimates
+Cash flows hedges
+Transition and summary of effects
+The Group has financial instruments linked to London Interbank Offered Rate (LIBOR) that are subject to interbank
+offered rates (IBOR) reform. These financial instruments mainly include loans and advances to customers and debt
+investments. The Group has gradually changed the interest rate benchmark for these financial instruments to other
+benchmark rates such as Sterling Overnight Index Average (SONIA) or Secured Overnight Financing Rate (SOFR)
+in 2021. In order to reflect the changes that are required by the interest rate benchmark reform, the Group has
+recalculated the effective interest rate of the financial instruments whose change of future cash flow is necessary
+as a direct consequence of interest rate benchmark reform, and used these effective interest rates as the basis of
+subsequent measurements. Such changes in effective interest rate have no significant impact on the consolidated
+financial statements.
+Impacts and accounting policies on application of Amendment to IFRS 16 "COVID-19-Related Rent
+Concessions"
+The amendment provides a practical expedient to COVID-19-related rent concessions if certain conditions are met.
+This amendment has no significant impact on the consolidated financial statements.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+3. Application of new and amendments to IFRSS (continued)
+Standards and amendments that are issued but not yet effective and have not
+been adopted by the Group
+Effective for
+annual period
+beginning on or after
+Amendment to IFRS 16
+COVID-19-Related Rent Concessions beyond
+30 June 2021
+When a hedged item in a cash flow hedge is amended to reflect the changes that are required by the interest
+rate benchmark reform, the amount accumulated in the cash flow hedge reserve is deemed to be based on the
+alternative benchmark rate on which the hedged future cash flows are determined.
+2021
+Deferred Tax related to Assets and
+Liabilities arising from a Single Transaction
+an Investor and its Associate or Joint Venture
+63,872
+55(b)
+Proceeds from the issuance of debt securities
+22,592
+14,692
+26
+At 31 December 2020
+25,220 34,065 49,989 67,523
+8,207
+(66) 71,158
+98,082 338,664
+31,601
+(693) 723,750
+2,851
+3,753 730,354
+The notes form part of these consolidated financial statements.
+173
+174
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Consolidated Statement of Cash Flows
+For the year ended 31 December 2021
+33,606
+Proceeds from the issuance of perpetual bonds
+42,989
+49,989
+1 January 2023
+1 January 2023
+1 January 2023
+the date to be
+determined
+The new and amendments to IFRSS mentioned above are not expected to have material impact on the consolidated
+financial statements in the foreseeable future.
+179
+(45,486)
+(55,771)
+55(b)
+Repayment of debt securities
+(28,992)
+Sale or Contribution of Assets between
+(21,363)
+Repayment of certificates of deposit
+(413,820)
+(226,012)
+55(b)
+Repayment of negotiable interbank certificates of deposit
+14,417
+6,860
+55(b)
+Proceeds from other financing activities
+218
+Proceeds from non-controlling interests of subsidiaries
+55(b)
+452,972
+Total equity
+Financial investments at fair value through profit or loss
+(31,845)
+(31,601)
+(31,601)
+17,206 (17,206)
+(10,979)
+10,979
+(35,685)
+(244) (227)
+(35,214)
+6,784
+10,979 17,206 (70,183)
+42,989
+42,989
+42,989
+42,989
+128,023
+110
+693
+(1,451) 127,220
+119,922
+105
+8,644
+At 31 December 2021
+(227) (227)
+income
+(38,385)
+(1,638)
+Other equity instruments
+Non-controlling interests
+Total equity attributable to equity holders of the Bank
+2020
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+The notes form part of these consolidated financial statements.
+3,300 3,636 865,681
+(2,144) 858,745
+38,385
+115,288 390,207
+82,137
+39
+15,047
+34,065 92,978 67,523
+25,220
+1,804
+(1,804)
+(1,975)
+(1,975)
+(1,975)
+(1,638)
+(1,638)
+38,385
+other comprehensive
+at fair value through
+instruments designated
+16
+income for the year
+(b) Other comprehensive
+(a) Net profit for the year
+Changes in equity for the year
+At 1 January 2021
+(117) 7,189
+8
+(1,451) 7,298
+55
+105
+8,644
+227 120,834
+685
+119,922
+119,922
+(117) 135,327
+449
+(1,451) 134,995
+6,784
+51,543
+105 10,979 17,206
+6,840
+Total comprehensive income for
+the year
+(c) Capital contribution from
+equity holders
+upon disposal of equity
+(e) Transfers within equity
+(vii) Distribution to
+perpetual bonds
+preference shares
+(vi) Dividends paid for
+for the year 2021
+(v) Proposed dividends
+62
+perpetual debt
+capital
+51
+50
+Investment
+(iv) Distribution to
+and paid for the
+(iii) Dividends declared
+general reserve
+(ii) Appropriations to
+reserve
+statutory surplus
+(i) Appropriations to
+(d) Profit appropriations
+42,989
+Issue of perpetual bonds 46(b)
+42,989
+year 2020
+3,753 730,354
+Notes
+Capital revaluation Hedging Surplus General
+8
+378
+94,375
+(2,254)
+97,342
+(27)
+(686)
+49,989
+(e) Transfers within equity
+upon disposal of equity
+instruments designated
+(vi) Dividends paid for
+preference shares
+for the year 2020
+(v) Proposed dividends
+capital
+(iv) Distribution to
+perpetual debt
+year 2019
+and paid for the
+(iii) Dividends declared
+general reserve
+(ii) Appropriations to
+reserve
+statutory surplus
+(i) Appropriations to
+(d) Profit appropriations
+94,761
+bonds
+49,989
+50,207
+(26)
+other comprehensive
+income
+at fair value through
+(1,651)
+(1,651)
+(1,651)
+31,601
+(31,601)
+.....
+.....
+62--..........- (234) (234)
+(30,436)
+(172)
+(30,264)
+(30,264)
+(31,915)
+7,931 (7,931)
+(8,867)
+8,867
+51...
+50
+46(b): 49,989 ... 8867 7.931 (5050) 1337 (1999) (172) (234) (92329)
+........218 218
+218
+(ii) Issue of perpetual
+subsidiaries
+contribution to
+non-wholly owned
+(27)
+(712)
+49,989
+3,979 617,707
+2,427
+611,301
+30,264 1,561
+90,151 291,346
+62,291
+(39)
+8,919
+67,523
+Subtotal interest capital Total
+appropriation reserve
+earnings
+reserve
+reserve
+reserve
+reserve
+reserve
+controlling debt
+Non- Perpetual
+Retained Proposed profit Exchange
+8,867
+7,931 47,318
+1,337
+(2,254)
+shareholders'
+(i) Non-controlling
+(c) Capital contribution from
+equity holders
+the year
+Total comprehensive income for
+(226) (3,198)
+(5)
+(2,967)
+(2,254)
+(27)
+(686)
+Share Preference Perpetual
+capital shares bonds
+25,220 34,065
+16
+(b) Other comprehensive
+(a) Net profit for the year
+Changes in equity for the year
+At 1 January 2020
+234 97,959
+383
+97,342
+97,342
+(226) 112,647
+424
+112,449
+income for the year
+4,804,361
+2,851
+31,601
+Share capital
+Equity
+Total liabilities
+Other liabilities
+Deferred tax liabilities
+Debt securities issued
+Provisions
+Lease liabilities
+Contract liabilities
+Tax payable
+Salaries and welfare payable
+Deposits from customers
+Amounts sold under repurchase agreements
+Derivative financial liabilities
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+Financial liabilities at fair value through profit or loss
+Borrowing from central banks
+Liabilities
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+The notes form part of these consolidated financial statements.
+8,361,448
+9,249,021
+Total assets
+Other equity instruments
+85,459
+- Preference shares
+Capital reserve
+36
+143,517
+170,650
+35
+723,402
+753,018
+34
+331,622
+159,987
+2020
+2021
+Notes
+- Perpetual debt capital
+- Non-controlling interest
+Non-controlling interests
+Total equity attributable to shareholders of the Bank
+Exchange reserve
+Proposed profit appropriation
+Retained earnings
+General reserve
+Surplus reserve
+Hedging reserve
+Investment revaluation reserve
+- Perpetual bonds
+122,521
+33
+72,893
+12,403
+14,779
+25
+Interests in joint ventures
+7,139
+6,995
+23(d)
+comprehensive income
+Equity investments designated at fair value through other
+1,049,280
+516,553
+636,038
+23(c)
+Debt investments at fair value through other comprehensive income
+1,185,841
+23(b)
+Debt investments at amortised cost
+47,272
+23,390
+60(f)
+Derivative financial assets
+495,723
+348,123
+23(a)
+Interests in associates
+Investment properties
+Property and equipment
+Right-of-use assets
+81,639
+32
+9,954
+9,954
+31
+Other assets
+Deferred tax assets
+Goodwill
+4,763
+4,066
+30
+63,761
+19,104
+29(a)
+69,470
+80,415
+28
+1,623
+1,372
+27
+2,519
+8,875
+26
+Intangible assets
+18,403
+(693) 723,750
+60,351
+27,282
+730,354
+865,681
+3,753
+3,636
+62(a)
+2,851
+3,300
+6,604
+6,936
+723,750
+858,745
+(693)
+(2,144)
+53
+31,601
+38,385
+52(b)
+338,664
+390,207
+98,082
+115,288
+51
+71,158
+9,249,021
+82,137
+8,361,448
+The notes form part of these consolidated financial statements.
+338,664
+98,082
+Non- Perpetual
+controlling debt
+capital Total
+reserve Subtotal interest
+General Retained Proposed profit Exchange
+reserve earnings appropriation
+Investment
+Capital revaluation Hedging Surplus
+reserve
+reserve reserve reserve
+8,207 (66) 71,158
+34,065 49,989 67,523
+42,989
+Share Preference Perpetual
+capital shares bonds
+25,220
+Notes
+Other equity instruments
+Non-controlling interests
+Total equity attributable to equity holders of the Bank
+2021
+For the year ended 31 December 2021
+(Expressed in millions of Renminbi unless otherwise stated)
+Consolidated Statement of Changes in Equity
+Chapter VIII Financial Statements
+China Merchants Bank
+172
+171
+Tian Huiyu
+Director
+Director
+Miao Jianmin
+Approved and authorised for issue by the Board of Directors on 18 March 2022.
+Total equity and liabilities
+50
+(66)
+39
+43
+8,229
+14,660
+42
+14,242
+13,812
+29(b)
+6,829
+7,536
+41
+18,648
+22,491
+40
+15,462
+19,761
+39(a)
+5,664,135
+6,385,154
+38
+142,927
+157,660
+37
+50,061
+446,645
+346,141
+32
+1,353
+49
+8,207
+15,047
+48
+67,523
+67,523
+47
+49,989
+92,978
+46(b)
+34,065
+60(f)
+34,065
+84,054
+127,043
+46
+25,220
+25,220
+45
+104,455
+7,631,094
+8,383,340
+139,570
+44
+1,073
+46(a)
+Annual Report 2021
+(244)
+In addition, the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria
+as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
+China Merchants Bank
+186
+185
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk
+of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on
+the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both
+quantitative and qualitative information that is reasonable and supportable, including historical experience and
+forward-looking information that is available without undue cost or effort. The assessment of whether the credit risk
+has increased significantly is detailed in Note 60(a).
+Significant increase in credit risk
+For the above financial instruments that apply the ECL model, an assessment of whether credit risk has increased
+significantly since initial recognition is performed at each reporting period by the Group to determine whether
+to recognise lifetime ECL. When the credit risk of these financial instruments does not increase significantly after
+the initial recognition, the Group makes provision for credit losses according to 12-month ECL; in the event of a
+significant increase in credit risk, the Group makes provision for the credit losses in accordance with the ECL for the
+entire duration.
+Chapter VIII Financial Statements
+The Group assesses the ECL of financial assets with forward-looking information. 12-month ECL ("12m ECL")
+represents the portion of lifetime ECL that is expected to result from default events that are possible within 12
+months after the reporting date. In contrast, lifetime ECL represents the ECL that will result from all possible default
+events over the expected life of the relevant instrument. Assessment are done based on the factors that are specific
+to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date
+as well as the forecast of future conditions.
+Impairment under ECL model
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as
+FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting
+period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or
+loss includes fair value gains or losses, any dividend or interest earned on the financial asset, and is included in
+"other net income".
+Financial assets at FVTPL
+Dividends from these investments in equity instruments are recognised in profit or loss when the Group's right
+to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the
+investment. Dividends are included in the "other net income" line item in profit or loss.
+At the date of initial application/initial recognition, the Group may make an irrevocable election (on an instrument-
+by-instrument basis) to designate investments in equity instruments which are not held for trading as at FVTOCI.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
+they are measured at fair value with gains and losses arising from changes in fair value recognised in OCI and
+accumulated in the investment revaluation reserve; and are not subject to impairment assessment. The cumulative
+gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to
+retained earnings.
+Equity instruments designated as at FVTOCI
+The Group performs impairment assessment under expected credit loss ("ECL") model on financial assets which
+are subject to impairment under IFRS 9 Financial Instruments, including financial assets at amortised cost, debt
+instrument assets at fair value through other comprehensive income, leases receivable, loan commitments and
+financial guarantee contracts. The amount of ECL is updated at each reporting date to reflect changes in credit risk
+since initial recognition.
+Annual Report 2021
+4. Principal accounting policies (continued)
+(5)
+Financial liabilities at FVTPL
+Classification and measurement of financial liabilities
+The loss allowance for loan commitments and financial guarantee contracts is recognised in profit or loss and
+accumulated in provisions. As for debt instruments measured at FVTOCI, the loss allowance is recognised in OCI and
+accumulated in the investment revaluation reserve without reducing the carrying amounts of these financial assets.
+The loss allowance for other financial assets which are subject to impairment under IFRS 9 Financial Instruments is
+recognised in profit or loss through a loss allowance account.
+the cash flows that the Group expects to receive if the loan is drawn down.
+if the holder of the loan commitments draws down the loan, and
+For undrawn loan commitments, ECL is the present value of the difference between the contractual cash flows that
+are due to the Group:
+For a financial guarantee contract, the Group is required to make payments only in the event of a default by the
+debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected credit losses is
+the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts
+that the Group expects to receive from the holder, the debtor or any other party.
+For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in
+measuring the lease receivable in accordance with IFRS 16 Leases.
+Generally, ECL is estimated as the difference between all contractual cash flows that are due to the Group in
+accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective
+interest rate determined at initial recognition.
+ECL is measured based on the probability of default, loss given default and the exposure at default. The
+measurement and recognition of ECL are detailed in Note 60(a).
+Measurement and recognition of ECL
+The Group defines whether there is credit impairment based on the internal evaluation results of the credit risk
+management system for relevant financial assets. The Group considers that financial assets have been credit impaired
+when its loan classification is substandard, doubtful or loss or is more than 90 days overdue.
+Credit-impaired financial assets
+Impairment under ECL model (continued)
+Financial instruments (continued)
+Classification and measurement of financial assets (continued)
+(5) Financial instruments (continued)
+4. Principal accounting policies (continued)
+Annual Report 2021
+The Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a
+simplified assessment of whether an acquired set of activities or assets is not a business. The concentration test is
+met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or
+group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred
+tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set
+of activities or assets is determined not to be a business and no further assessment is needed.
+Asset acquisitions
+When the Group acquires a group of assets and liabilities that do not constitute a business, the Group identifies
+and recognises the individual identifiable assets acquired and liabilities assumed by allocating the purchase price
+first to financial assets/financial liabilities at the respective fair values, the remaining balance of the purchase price
+is then allocated to the other identifiable assets and liabilities on the basis of their relative fair values at the date of
+purchase. Such a transaction does not give rise to goodwill or bargain purchase gain.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(1)
+Business combination (continued)
+Business combinations or asset acquisitions (continued)
+Business combination
+Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
+business combination is measured at fair value, which is calculated as the sum of the acquisition date fair value of
+the assets transferred by the Group, liabilities incurred or assumed by the Group, and any equity interests issued by
+the Group. Acquisition related costs are recognised in the consolidated statement of profit or loss as incurred.
+At the acquisition date, irrespective of non-controlling interests, the identifiable assets acquired and liabilities and
+contingent liabilities assumed are recognised at their fair values; except that deferred tax assets or liabilities, and
+assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS
+12 Income Taxes and IAS 19 Employee Benefits, respectively.
+Goodwill is measured as the excess of the difference between (i) the consideration transferred, the fair value of
+any non-controlling interests in the acquiree, and the fair value of the Group's previously held equity interests in
+the acquiree (if any) and (ii) the net fair value of the identifiable assets acquired and the liabilities and contingent
+liabilities incurred or assumed as at acquisition date.
+Non-controlling interests that represent ownership interests in the acquiree, and entitle their holders to a
+proportionate share of the entity's net assets in the event of liquidation are initially recognised at either fair value or
+the non-controlling interests' proportionate share in the recognised amounts of the acquiree's identifiable net assets.
+The choice of measurement basis is made on a transaction-by-transaction basis.
+(2)
+Optional concentration test
+Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) designated as at
+FVTPL.
+Business combinations or asset acquisitions
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity
+transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within
+consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain
+or loss is recognised.
+Chapter VIII Financial Statements
+China Merchants Bank
+Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a result of interest
+income calculated using the effective interest method, foreign exchange gains and losses are recognised in profit
+or loss. All other changes in the carrying amount of debt instruments are recognised in OCI and accumulated under
+the heading of investment revaluation reserve. Impairment losses are recognised in profit or loss with corresponding
+adjustment to OCI without reducing the carrying amounts of debt instruments. The amounts that are recognised
+in profit or loss are the same as the amounts that would have been recognised in profit or loss if debt instruments
+had been measured at amortised cost. When debt instruments are derecognised, the cumulative gains or losses
+previously recognised in investment revaluation reserve are reclassified to profit or loss.
+Debt instruments classified as at FVTOCI
+Financial assets measured at amortised cost are subsequently measured with the effective interest method, and the
+gains or losses arising from amortisation or impairment are recognised in profit or loss. Interest income is calculated
+by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets
+that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired,
+interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from
+the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial
+asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross
+carrying amount of the financial asset from the beginning of the reporting period following the determination that
+the asset is no longer credit-impaired.
+180
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies
+(1) Business combination
+Financial statements include financial statements of the Bank and its subsidiaries. Subsidiaries are entities controlled
+by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement
+with the entity and has the ability to affect those returns through its power over the entity. When assessing whether
+the Group has power, only substantive rights (held by the Group and other parties) are considered.
+An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control
+commences until the date that control ceases. Intra-group balances, transactions and cash flows and any profits
+arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements.
+When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
+in line with the Group's accounting policies.
+Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Bank, and
+in respect of which the Group has not agreed any additional terms with the holders of those interests which would
+result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition
+of a financial liability. Non-controlling interests are presented in the consolidated statement of financial position and
+consolidated statement of changes in equity within equity, separately from equity attributable to the equity holders
+of the Bank. Non-controlling interests in the results of the Group are presented in the consolidated statement of
+profit or loss and the consolidated statement of profit or loss and other comprehensive income as an allocation of
+the net profit or loss and total comprehensive income for the year between non-controlling interests and the equity
+holders of the Bank.
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that
+subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former
+subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value
+on initial recognition of a financial asset (see Note 4(5)) or, when appropriate, the cost on initial recognition of an
+investment in a joint venture (see Note 4(2)) or, an associate (see Note 4(3)).
+189
+A financial liability is classified as held for trading if:
+it has been acquired principally for the purpose of repurchasing it in the near term; or
+China Merchants Bank
+The difference between the purchase and resale consideration or sale and repurchase consideration is amortised
+over the period of the transaction using the effective interest method and is included in interest income or expense
+(as appropriate).
+Amounts for purchase of financial assets under resale agreements are accounted for under "amounts held under
+resale agreements". Amounts from sale of financial assets under repurchase agreements are accounted for under
+"amounts sold under repurchase agreements".
+Resale and repurchase agreements
+Banks refer to those approved by the People's Bank of China ("PBOC") and other authorities. Other financial
+institutions represent finance companies, insurance companies, investment trust companies and leasing companies
+which are registered with and under the supervision of the China Banking and Insurance Regulatory Commission (the
+"CBIRC") and securities firms and investment fund companies which are registered with and under the supervision
+of other regulatory authorities. Balances and placements with banks and other financial institutions are measured at
+amortised cost.
+Balances and placements with banks and other financial institutions
+Chapter VIII Financial Statements
+Cash equivalents comprise investments that are short term, highly liquid, readily convertible into known amounts of
+cash and subject to insignificant risk of changes in value, and unrestricted balances with the central banks, banks
+and other financial institutions, and amounts held under resale agreements, with original maturity of 3 months or
+less.
+Specific items
+In assessing the economic relationship between the hedged item and the hedging instrument, the Group assumes
+that the interest rate benchmark on which the hedged cash flows and/or the hedged risk (contractually or non-
+contractually specified) are based, or the interest rate benchmark on which the cash flows of the hedging instrument
+are based, is not altered as a result of interest rate benchmark reform.
+If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the
+risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge
+ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
+the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
+item that the Group actually hedges and the quantity of the hedging instrument that the entity actually uses
+to hedge that quantity of hedged item.
+the effect of credit risk does not dominate the value changes that result from that economic relationship;
+and
+there is an economic relationship between the hedged item and the hedging instrument;
+Cash equivalents
+Annual Report 2021
+4.
+(5)
+The consideration received from the issuance of equity instruments net of transaction costs is recognised in
+shareholders' equity. Consideration and transaction costs paid by the Group for repurchasing self-issued equity
+instruments are deducted from shareholders' equity.
+Equity instruments
+Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9 Financial
+Instruments are not separated. The entire hybrid contract is classified and subsequently measured in its entirety as
+either amortised cost or fair value as appropriate. Derivatives embedded in non-derivative host contracts that are not
+financial assets within the scope of IFRS 9 Financial Instruments are treated as separate derivatives with the same
+terms when they meet the definition of a derivative, their risks and characteristics are not closely related to those
+of the host contracts and the hybrid contracts are not measured at FVTPL. Separated embedded derivatives are
+measured at fair value, with all changes in fair value recognised in profit or loss unless they form part of a qualifying
+cash flow hedging relationship.
+Embedded derivatives
+Except for those used in cash flow hedge, derivative financial instruments are stated at fair value, with gains and
+losses arising recognised in the consolidated statement of profit or loss. For those used in cash flow hedge, the
+gains and losses arising from the effective hedging portion are recognised in other comprehensive income.
+The Group's derivative financial instruments mainly include forward, foreign currency swaps, interest rate swaps and
+option contracts undertaken in response to customers' needs or for the Group's own asset and liability management
+purposes. The Group enters into derivative contracts with other banks to hedge against risks arising from derivative
+transactions undertaken for customers.
+Derivative financial instruments
+Loans and advances to customers are classified as loans and advances to customers at fair value through profit or
+loss (loans and advances to customers at FVTPL), loans and advances to customers at amortised cost, loans and
+advances to customers at fair value through other comprehensive income (loans and advances to customers at
+FVTOCI) in accordance with the entity's business model, contractual cash flow characteristics and the fair value
+option.
+Loans and advances directly granted by the Group to customers and finance leases receivables are accounted for as
+loans and advances to customers.
+Loans and advances to customers
+Equity investments are accounted for as financial assets at fair value through profit or loss or equity investments
+designated at fair value through other comprehensive income. Debt investments are classified as financial assets at
+fair value through profit or loss, debt investments at amortised cost, debt investments at fair value through other
+comprehensive income in accordance with the entity's business model, contractual cash flow characteristics and the
+fair value option.
+Financial investments
+Specific items (continued)
+Financial instruments (continued)
+Principal accounting policies (continued)
+•
+•
+For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective in offsetting
+changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging
+relationships meet all of the following hedge effectiveness requirements:
+The Group has elected to adopt the general hedge accounting in IFRS 9 Financial Instruments. This requires the
+Group to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy
+and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness.
+it forms part of a contract containing one or more embedded derivatives, and IFRS 9 Financial Instruments
+permits the entire combined contract to be designated as at FVTPL.
+or
+the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
+and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk
+management or investment strategy, and information about the grouping is provided internally on that basis;
+such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
+otherwise arise; or
+•
+A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
+recognition if:
+Financial liabilities at FVTPL (continued)
+Classification and measurement of financial liabilities (continued)
+(5) Financial instruments (continued)
+4. Principal accounting policies (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
+hedging instrument.
+on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+Other financial liabilities
+.
+Except for financial liabilities at FVTPL, financial liabilities formed by the transfer of financial assets that do not meet
+the conditions for derecognition or by continued involvement in transferred financial assets and financial liabilities,
+and financial guarantee contract, other financial liabilities are classified as financial liabilities at amortised cost, which
+are subsequently measured at amortised cost and the gains or losses arising from derecognition or amortisation are
+included in the current profits and losses.
+The Group designates certain derivatives as hedging instruments for cash flow hedge. The Group documents
+the relationship between the hedging instruments and hedged items, as well as its risk management objective
+and strategy for undertaking the hedge, at the inception of a hedging relationship. The Group also requires
+documentation of the assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
+are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items attributable
+to the hedged risks.
+Hedge effectiveness testing
+Hedge accounting (continued)
+Financial instruments (continued)
+Principal accounting policies (continued)
+(5)
+4.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+188
+187
+For cash flow hedge of a recognised asset or liability, the associated cumulative gain or loss is reclassified from
+hedging reserve to the consolidated statement of profit or loss in the same period during which the hedged cash
+flows affect profit and loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the
+criteria for hedge accounting, any cumulative gain or loss at that time remains in hedging reserve until the forecast
+transaction is ultimately recognised in the consolidated statements of profit or loss. When a forecast transaction is
+no longer expected to occur, the cumulative gain or loss is immediately reclassified to the consolidated statement of
+profit or loss.
+The effective portions of changes in the fair value of derivatives that are designated and qualified as cash flow
+hedge are recognised in other comprehensive income and accumulated separately in hedging reserve. Any gain or
+loss relating to an ineffective portion is recognised immediately in the consolidated statement of profit or loss.
+For the purpose of reclassifying the amount of gains and losses accumulated in the cash flow hedge reserve in order
+to determine whether the hedged future cash flows are expected to occur, the Group assumes the interest rate
+benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as
+a result of interest rate benchmark reform.
+Cash flow hedge
+For the purpose of determining whether a forecast transaction (or a component thereof) is highly probable, the
+Group assumes that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually
+specified) are based is not altered as a result of interest rate benchmark reform.
+Hedge accounting
+Financial assets at amortised cost
+it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
+hedging instrument.
+Chapter VIII Financial Statements
+When the Group ceases to have joint control over a joint venture and has no significant influence on it, it is
+accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in
+the consolidated statement of profit or loss, previous other comprehensive income would be reclassified to profit
+or loss. Any interest retained in that former investee at the date when joint control is lost is recognised at fair value
+and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 4(5)).
+Associates
+Associate is an entity in which the Group has significant influence, but not control, or joint control, including
+participation in the financial and operating policy decisions.
+Significant influence is the power to participate in the financial and operating policy decisions of the investee but is
+not control or joint control of those policies.
+When judging whether there is any significant influence, the Group usually considers the following cases:
+representation on the Board of Directors or equivalent governing body of the investee;
+material transactions between the entity and its investee.
+Investments in associates are accounted for in the consolidated financial statements under the equity method.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the associates' net
+assets. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of
+the investments, is recognised immediately in profit or loss in the period in which investment is acquired.
+The consolidated statement of profit or loss includes the Group's post-tax results of the associates for the year,
+including any impairment loss on goodwill relating to the investment in the associates recognised for the year (see
+Notes 4(4) and 4(11)).
+When the Group's share of losses exceeds its interest in the associates, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the associates. For these purposes, the Group's interest in the associates
+is the carrying amount of the investment under equity method together with the Group's interests that in substance
+form part of the Group's net investment in the associates.
+Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the
+extent of the Group's interest in the associates, except where unrealised losses provide evidence of an impairment
+of the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group ceases to have significant influence over an associate entity, it is accounted for as a disposal of the
+entire interest in that investee, with a resulting gain or loss being recognised in the consolidated statement of profit
+or loss, previous other comprehensive income would be reclassified to profit or loss. Any interest retained in that
+former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded
+as the fair value on initial recognition of a financial asset (see Note 4(5)).
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Principal accounting policies (continued)
+Unrealised profits and losses resulting from transactions between the Group and its joint ventures are eliminated
+to the extent of the Group's interest in the joint ventures, except where unrealised losses provide evidence of an
+impairment of the asset transferred, in which case they are recognised immediately in profit or loss.
+(3)
+Joint ventures (continued)
+(2)
+Joint ventures
+A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net
+assets of the arrangement, rather than rights to its assets and obligation for its liabilities.
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions
+about the relevant activities require the unanimous consent of the parties sharing control.
+When judging whether there is a joint control, the Group usually considers the following cases:
+whether any party within the joint arrangement cannot control the relevant activities of the joint ventures;
+whether the decisions about the joint ventures' relevant activities require the unanimous consent of the
+parties sharing control.
+The consolidated statement of profit or loss includes the Group's share of the results of joint ventures for the
+year and the consolidated statement of financial position includes the Group's share of the net assets of the joint
+ventures.
+4.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the joint ventures' net
+assets. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of
+the investments, is recognised immediately in profit or loss in the period in which investment is acquired.
+When the Group's share of losses exceeds its interest in the joint ventures, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the joint ventures. For these purposes, the Group's interest in the joint
+ventures is the carrying amount of the investment under equity method together with the Group's interests that in
+substance form part of the Group's net investment in the joint ventures.
+181
+182
+China Merchants Bank
+Annual Report 2021
+4.
+Principal accounting policies (continued)
+The consolidated statement of profit or loss includes post-tax results of the joint ventures for the year, including any
+impairment loss on goodwill relating to the investment in the joint ventures recognised for the year (see Notes 4(4)
+and 4(11)).
+(4)
+participation in policy-making processes;
+Goodwill represents the excess of
+183
+184
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(5) Financial instruments (continued)
+Debt instruments that meet the following conditions are subsequently measured at fair value through other
+comprehensive income ("FVTOCI"):
+Classification and measurement of financial assets (continued)
+the financial asset is held within a business model whose objective is achieved by both collecting contractual
+cash flows and selling; and
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding.
+All other financial assets are subsequently measured at fair value through profit or loss ("FVTPL"), except that at
+the date of initial application/initial recognition of a financial asset the Group may irrevocably elect to present
+subsequent changes in fair value of an equity investment, which is not held for trading, in other comprehensive
+income ("OCI").
+A financial asset is classified as held for trading if:
+•
+it has been acquired principally for the purpose of selling in the near term; or
+on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+Goodwill
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding ("SPPI”).
+•
+.
+the financial asset is held within a business model whose objective is to collect contractual cash flows; and
+(5)
+(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest
+based on the fair value of net assets acquired in the acquiree and the fair value of the Group's previously
+held equity interests in the acquiree; over
+(ii)
+the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
+When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain
+purchase.
+On disposal of a CGU during the year, any attributable amount of purchased goodwill is included in the calculation
+of the profit or loss on disposal.
+Financial instruments
+Initial recognition
+Goodwill is stated at cost less accumulated impairment. Goodwill arising on a business combination is allocated
+to each cash-generating unit ("CGU") or group of CGUs, that is expected to benefit from the synergies of the
+combination and tested annually for impairment (see Note 4(11)).
+All regular way purchases or sales of financial assets are recognised or derecognised on a trade date basis. Regular
+way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
+established by regulation or convention in the market place.
+At initial recognition, financial assets and financial liabilities are initially measured at fair value except for trade
+receivables arising from contracts with customers which are initially measured in accordance with IFRS 15 Revenue
+from Contracts with Customers. Transaction costs that are directly attributable to the acquisition or issue of financial
+assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss)
+are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
+recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
+value through profit or loss are recognised immediately in profit or loss.
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability
+and of allocating interest income and interest expense over the relevant period. The effective interest rate is the
+rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or
+received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
+through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the
+net carrying amount on initial recognition. When determining the effective interest rate, the Group estimates the
+future cash flow on the basis of considering all contract terms of financial assets or financial liabilities, but does not
+consider the expected credit loss.
+Classification and measurement of financial assets
+The Group classifies its financial assets into the following measurement categories at initial recognition: financial
+assets at amortised cost, financial assets at fair value through other comprehensive income and financial assets at
+fair value through profit or loss.
+A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or
+equity instrument of another enterprise.
+Debt instruments that meet the following conditions are subsequently measured at amortised cost:
+33.11
+Cost-to-income ratio (3)
+Tian Huiyu
+President
+"I
+President's Statement
+'connect"
+33.33
+To
+China Merchants Bank
+Annual Report 2021
+Decreased by 0.22
+Measurement Approach (4)
+31 December
+2021
+31 December
+Changes over
+2020
+2020 year-end
+(%)
+Capital adequacy indicators under the Advanced
+Core Tier 1 capital adequacy ratio
+12.66
+Immanuel Kant said, "Two things awe me most, the starry sky above me and the moral law within me."
+the transformation and upgrading of the national economy with the people's desire for a better life, and to forge the
+new model of quality development, are "the starry sky" above us and "being customer-centric and creating values for
+customers" are "the moral law" within us. CMBers firmly believe that if we live up to our original aspirations, our future
+will not fail us.
+12.29
+percentage point
+35 years ago, CMB was born following the simple desire of people pursuing a well-off life. Today, we are honored to serve
+people's yearn for an even better life. Just as Su Bingtian focuses on speeding up every 0.01 second, we are also willing to
+unwaveringly help everyone grow stronger and move towards a bright future.
+38.47
+President
+Increased by 0.37
+Fax: +86 755 8319 5109
+Tel: +86 755 8319 8888
+Postcode: 518040
+7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+1.1.4 Mailing Address:
+1.1.3 Registered and Office Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+Securities Representative: Xia Yangfang
+Joint Company Secretaries: Wang Liang, Ho Wing Tsz Wendy
+Secretary of the Board of Directors: Wang Liang
+Authorised Representatives: Tian Huiyu, Wang Liang
+1.1.2 Legal Representative: Miao Jianmin
+Registered Company Name in English: China Merchants Bank Co., Ltd.
+RRSORA (Abbreviated Name in Chinese: AR15)
+1.1.1 Registered Company Name in Chinese:
+1.1 Company Profile
+Company Information
+Chapter I Company Information
+China Merchants Bank
+Annual Report 2021
+Chairman of the Board of Supervisors
+Xiong Liangjun
+11
+18 March 2022
+China Merchants Bank Co., Ltd.
+percentage point
+Net interest spread = average yield of the total interest-earning assets - average cost ratio of total interest-bearing liabilities.
+14.94
+2021
+2020
+Changes
+0.70
+0.98
+Decreased by 0.28
+percentage point
+Credit cost ratio (7)
+Notes:
+(1)
+E-mail: cmb@cmbchina.com
+(2)
+Net interest margin = net interest income/average balance of total interest-earning assets.
+(3)
+(4)
+Cost-to-income ratio = operating expenses/net operating income. The numerator does not include taxes and surcharges, provisions for
+insurance claims and the depreciation charges on fixed assets under operating lease and investment properties and others.
+As at the end of the reporting period, the Group's Core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio
+under the Weighted Approach were 11.17%, 13.19% and 14.71% respectively.
+(5)
+Allowance coverage ratio = allowances for impairment losses/balance of non-performing loans.
+(6)
+Allowance-to-loan ratio = allowances for impairment losses/total loans and advances to customers.
+(7)
+Credit cost ratio = expected credit losses of loans and advances to customers/the average of total loans and advances to customers × 100%,
+the average of total loans and advances to customers = (total loans and advances to customers at the beginning of the period + total loans
+and advances to customers at the end of the period)/2.
+19
+Decreased by 0.25
+percentage point
+Tier 1 capital adequacy ratio
+4.67
+Allowance-to-loan ratio (6)
+13.98
+Increased by 0.96
+percentage point
+Capital adequacy ratio
+17.48
+16.54
+Increased by 0.94
+percentage point
+Equity to total assets
+9.36
+8.73
+Increased by 0.63
+percentage point
+Asset quality indicators
+Non-performing loan ratio
+0.91
+1.07
+Decreased by 0.16
+Allowance coverage ratio (5)
+483.87
+437.68
+percentage point
+Increased by 46.19
+percentage points
+4.42
+Website: www.cmbchina.com
+Customer complaint hotline: 95555-7
+Credit card complaint hotline: 400 820 5555-7
+8,361,448
+10.62
+of which: total loans and advances to customers (3)
+5,570,034
+5,029,128
+10.76
+Total liabilities
+8,383,340
+7,631,094
+9.86
+of which: total deposits from customers (3)
+6,347,078
+5,628,336
+12.77
+Total equity attributable to shareholders of the Bank
+Net assets per share attributable to ordinary
+shareholders of the Bank (RMB)(2)
+858,745
+723,750
+18.65
+29.01
+9,249,021
+25.36
+Total assets
++/-%
+Net profit attributable to shareholders of the Bank
+119,922
+97,342
+23.20
+Per Share (RMB)
+Basic earnings attributable to ordinary shareholders
+of the Bank(2)
+Diluted earnings attributable to ordinary shareholders
+of the Bank
+4.61
+3.79
+21.64
+4.61
+3.79
+21.64
+(in millions of RMB, unless otherwise specified)
+31 December
+31 December
+Changes
+2021
+2020
+Volume Indicators
+21.02
+14.39
+(1)
+percentage points
+Net interest spread(¹)
+2.39
+2.40
+Decreased by 0.01
+percentage point
+Net interest margin (2)
+2.48
+2.49
+Decreased by 0.01
+percentage point
+As percentage of net operating income
+-
+Net interest income
+61.53
+63.74
+Decreased by 2.21
+percentage points
+- Net non-interest income
+shareholders of the Bank
+Notes:
+Increased by 1.23
+16.96
+(2)
+(3)
+Net operating income is the sum of net interest income, net fee and commission income, other net income as well as share of profits of joint
+ventures and associates.
+The Company issued non-cumulative preference shares in 2017, and issued perpetual bonds in July 2020 and December 2021, all of which
+were classified as other equity instruments. In addition, the Company paid dividends on the preference shares and interests on perpetual bonds
+in 2021. Therefore, when calculating the indicators such as basic earnings per share attributable to ordinary shareholders, return on average
+equity attributable to ordinary shareholders and net assets per share attributable to ordinary shareholders, dividends on the preference shares
+and interests on perpetual bonds were deducted from "net profit attributable to shareholders of the Bank", while the preference shares and
+perpetual bonds were deducted from both the "average equity" and the "net assets".
+In accordance with the "Notice on the Revision and Issuance of the Format of the Financial Statements of the Financial Enterprise for 2018"
+(2018) issued by the Ministry of Finance, the interest on financial instruments accrued
+based on the effective interest rate method shall be included in the balance of the relevant financial instruments, and shall be reflected in the
+relevant items of the financial reports, and the "interest receivable" or "interest payable" item shall no longer be listed separately. The balance
+of "interest receivable" or "interest payable" listed in the "other assets" or "other liabilities" item is only the interest receivable or payable
+where the relevant financial instruments have expired but the interest has not yet been received or paid at the balance sheet date. Since the
+2018 annual report, the Group has adjusted the financial statements and its accompanying notes in accordance with the above requirements.
+Unless otherwise stated, the balances of the relevant items herein and set out below do not include the above interest on financial instruments
+accrued based on the effective interest method.
+Chapter II Summary of Accounting Data and Financial Indicators
+China Merchants Bank
+Annual Report 2021
+2.2 Financial Ratios
+(%)
+2021
+2020
+Changes
+Profitability indicators
+Return on average assets attributable to shareholders
+of the Bank
+1.36
+1.23
+Increased by 0.13
+percentage point
+Return on average equity attributable to ordinary
+15.73
+36.26
+122,440
+Profit before tax
+Registrar for Domestic Preference Shares: China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+Registrar and Transfer Agent for Offshore Preference Shares: The Bank of New York Mellon
+SA/NV, Luxembourg Branch
+1.1.10 Newspapers and Websites Designated for Information Disclosure:
+Mainland China: "China Securities Journal" (www.cs.com.cn), "Securities Times" (www.stcn.com),
+"Shanghai Securities News" (www.cnstock.com),
+Hong Kong:
+website of Shanghai Stock Exchange (www.sse.com.cn),
+website of the Company (www.cmbchina.com)
+website of SEHK (www.hkex.com.hk), website of the Company (www.cmbchina.com)
+Place for maintenance of periodic reports: Office of the Board of Directors of the Company
+1.2 Corporate Business Overview
+Founded in 1987 with its Head Office in Shenzhen, China, the Company is a commercial bank with distinctive
+operating features and market influence in China. The Company mainly focuses on the market in China. The
+Company's distribution network primarily covers major cities in mainland China, as well as international financial
+centers such as Hong Kong, New York, London, Singapore, Luxembourg and Sydney. The Company was listed on
+Shanghai Stock Exchange in April 2002 and the SEHK in September 2006.
+The Company provides customers with various wholesale and retail banking products and services, and maintains
+treasury businesses for proprietary purpose and on behalf of customers. Many innovative products and services of
+the Company have been widely recognised by consumers in China. Retail banking services include "All-in-one Card",
+a multi-function debit card, credit cards, the "Sunflower Wealth Management" services and private banking services,
+"All-in-one Net", a comprehensive online banking service platform, CMB APP and CMB Life APP. Wholesale banking
+services include payment and settlement, investment and financing, cash management, supply chain financing
+and cross-border financing services, asset management, asset custody and investment banking. The Company
+continues to tap further into the living and business circles of customers for opportunities, and provide customers
+with customised, intelligent and comprehensive solutions for their marketing chains, industry chains and investment
+chains.
+The Company continued to deepen the "Light-model Bank" strategy and actively explore the 3.0 business model
+transformation. During the "14th Five-Year Plan" period, with the completion of the building of a well-off society,
+the constant increase in the percentage of financial assets of ordinary households, accelerated pace of industrial
+restructuring, the Company keeps up with the trend by striving to build the cyclic extensive wealth management
+value chain, linking the assets and funds of the entire society, and setting up a 3.0 business model with "extensive
+wealth management business model + digital operation model + open and integrated organisational model" as the
+core, so as to serve as a connector that links the transformation and upgrade of the national economy with the
+better life of the people.
+China Merchants Bank
+Annual Report 2021
+Chapter I Company Information
+During the reporting period, the Company adhered to the core value of "customer-centric and creating value
+for customers", maintained its strategic determination, and actively explored and improved the 3.0 model. The
+advantages of the business model of extensive wealth management were highlighted, the digital operation
+model was increasingly improved, the open and integrated organisation model continued to evolve, and the core
+competitiveness was further strengthened. At the same time, the Company actively responded to the national call
+for "peaking carbon dioxide emissions" and "carbon neutral", and for common prosperity by accelerating the
+construction of a new responsibility system of "environment, society and governance" with characteristics of China
+Merchants Bank.
+1.3 Development Strategies
+Strategic vision:
+Strategic direction:
+Strategic positioning:
+Strategic objectives:
+Core Value:
+1.1.9 Registrar for A Shares: China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+Share Register and Transfer Office as to H Shares: Computershare Hong Kong Investor Services Ltd.
+Shops 1712-1716, 17/F, Hopewell Center, 183 Queen's
+Road East, Wanchai, Hong Kong
+Adhering to our "Light-model Bank" strategic direction and strategic positioning of
+"One Body with Two Wings", we are strived to become the "Best Value Creation
+Bank" with innovation-driven development, leading model and distinguished features.
+Adhering to our "Light-model Bank" strategy, we will continue to explore the
+development path in the weak cycle by focusing on "light asset, light operation, light
+management and light culture".
+Legal Advisor as to Hong Kong Law: Herbert Smith Freehills
+Office Address: 35th Floor, One Pacific Place, 88 Queensway, Hong Kong
+1.1.5 Principal Place of Business in Hong Kong: 31/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong
+1.1.6 Share Listing:
+A Shares: Shanghai Stock Exchange
+Abbreviated Name of A Shares: CMB
+Stock Code: 600036
+H Shares: SEHK
+Abbreviated Name of H Shares: CM BANK
+Stock Code: 03968
+Domestic Preference Shares:
+Shanghai Stock Exchange
+Abbreviated Name of Shares: Zhao Yin You 1 (1)
+Stock Code: 360028
+Offshore Preference Shares: SEHK
+Abbreviated Name of Shares: CMB 17USDPREF
+Stock Code: 04614
+13
+14
+China Merchants Bank
+Chapter I Company Information
+Annual Report 2021
+1.1.7 Domestic Auditor: Deloitte Touche Tohmatsu Certified Public Accountants LLP
+Office Address: 30th Floor, Bund Center, 222 Yan'an Road East, Shanghai, China
+Certified Public Accountants for Signature: Zhu Wei, Wu Lingzhi
+International Auditor: Deloitte Touche Tohmatsu
+1.1.8 Legal Advisor as to PRC Law: Jun He Law Offices
+148,173
+Adhering to our strategic positioning of "One Body with Two Wings", we will build us
+into "a leading retail bank, a professional corporate bank, and an open interbank" to
+promote the comprehensive integration of "One Body with Two Wings", with an aim
+to improve the integrated operation mechanism, and form the flywheel effect among
+various parties.
+Development Strategies:
+Opening wealth management
+platform
+Safeguarding wealth in life
+18
+percentage points
+Chapter II Summary of Accounting Data and Financial Indicators
+Annual Report 2021
+Summary of Accounting Data
+and Financial Indicators
+2.1 Key Accounting Data and Financial Indicators
+(in millions of RMB, unless otherwise specified)
+2021
+Increased by 2.21
+Changes
++/-%
+Operating Results
+Net operating income (1)
+331,407
+290,279
+14.17
+In December 2021, the Company won "Top Three Best Employers", "Most Socially Responsible Employer"
+and "Most Admired Employer by Women" at the awards ceremony for the "Best Employer in China 2021"
+jointly organised by Zhaopin.com and Institute of Social Science Survey, Peking University.
+Relying on the 3.0 development model, we target to become the best wealth
+management bank, the best Fintech bank, the best risk management bank, the bank
+offering the best customer experience and the most socially responsible bank.
+Being customer-centric and creating values for customers.
+In October 2021, in the selection of "Dimensity Award 2021" organised by Securities Times, the Company
+won the "High-quality Development (Comprehensive Award)", "Golden Wealth Management Brand (Zhao
+Zhao Bao)" and "Outstanding Asset Custody" award.
+In September 2021, the US "Global Finance" magazine released the results of the 2021 Sustainable Finance
+Awards, and the Company won the "Outstanding Leadership in Sustainable Bonds in the Asia-Pacific Region"
+award.
+Promoting the transformation of the extensive wealth management business model with customers as the
+center. Firstly, we are to transform the business concept with the customer as the center, from the perspective of
+our own balance sheet operation to the perspective of customer balance sheet operation, from the line operation
+model to the integrated operation model, and from the independent system operation model to the open system
+operation model. Secondly, we are to innovate and develop the extensive wealth management business model. Base
+on a cyclic customer chain formed by the entire customer base, we will build a product portfolio chain based on all
+our products, consolidate the asset and capital organisation chain with the entire market as resources, and build
+a regional development chain with the goal of collaborative growth. Thirdly, we are to form a cyclic value chain
+of extensive wealth management of "wealth management asset management investment banking" through
+comprehensive business synergy and open operation to achieve the flywheel effect.
+-
+Promoting the upgrade of the operational model with comprehensive digital development. Relying on
+Fintech, focusing on online, data, smart, platform and ecological development, we will comprehensively promote the
+digital reshaping of financial infrastructure and capability system, customers and channels, businesses and products,
+management and decision-making.
+Driving evolution of organisational model with openness and integration. Firstly, we are to consolidate
+the cultural foundation of a "Light-model Bank" to create a light culture system featuring openness, integration,
+equality and tolerance. Secondly, we are to build the organisational foundation of a "Light-model Bank" to set up
+an efficient team with strong professional ability, high degree of openness and integration, and good employee
+experience, thus forging the organisational competitiveness of the 3.0 development model.
+Building a comprehensive risk and compliance management system that adapts to the 3.0 development
+model. Adhering to the customer-centric risk management concept, using Fintech as the tool, and taking a prudent
+risk appetite as a guarantee, we will create a "six all" risk management system covering all customers, all assets, all
+risks, all institutions, all processes, and all elements.
+15
+16
+China Merchants Bank
+Chapter I Company Information
+Annual Report 2021
+1.4 Honors and Awards
+In 2021, the Company received a number of honors and awards from organisations both at home and abroad,
+including:
+On the list of "The Top 500 Banking Brands 2021" released by The Banker (UK) in February 2021, the
+Company ranked 10th with a brand value of USD21.044 billion.
+In June 2021, the Company won "Overall Best National Private Bank", "Best Private Bank for Inter-
+generational Wealth Transfer", "Best Private Bank for Product Development" and "Best Private Bank for
+Family Offices" at the ceremony for the "Asia Private Banking Awards 2021 (China)" held by Asiamoney.
+In the same month, the Company was awarded the "Transaction Bank of the Year" and "Best Transaction
+Bank for International Cash Management" at the ceremony for the "Best Transaction Banks in China Awards
+2021" held by Asiamoney.
+In June 2021, the Company ranked 14th, in terms of tier 1 capital, on the list of "Top 1,000 World Banks
+2021" released by The Banker (UK), up by 3 places from the previous year and maintained in top 20 for four
+consecutive years.
+In July 2021, the Company received the award of "Best Bank in China" at the "2021 Awards for Excellence"
+ceremony staged by Euromoney for the third consecutive year, which marked the first "3 Consecutive
+Championships" in its awarding history.
+In July 2021, the list of Fortune China 500 was announced, on which the Company ranked the 37th in terms
+of operating income. The following month, the list of Fortune Global 500 was officially released, on which
+the Company appeared for 10 consecutive years, ranking the 162nd in terms of operating income, up by 27
+places from the previous year.
+In September 2021, in the "Outstanding Companies Poll" organised by Asiamoney, the Company was
+honored as the "Best Listed Company in the Banking Industry in China". In the same month, the Company
+won the "Best Corporate and Investment Bank" in a row and the "Best Domestic M&A" awards in the
+selection of the "China Corporate and Investment Banking Awards 2021" hosted by Asiamoney.
+In September 2021, in the selection of the 11th China Charity Award, the Company was selected in the
+'Commendation List for Outstanding Contributions in Fighting against the COVID-19 Pandemic" under the
+donating enterprise category.
+In October 2021, the Company won the "Best Retail Bank in China" in "Asia Trailblazer 2021" hosted by
+Retail Banker International.
+China Merchants Bank
+2020
+3 years
+For a transfer of asset that does not meet the requirements of IFRS 15 Revenue from Contracts with Customers
+to account for a sale of asset, the Group acting as a buyer-lessor does not recognise the transferred asset and
+recognises loan and advance to customers at an amount that equals the transfer proceed within the scope of IFRS 9
+Financial Instruments.
+(10) Insurance contracts
+Insurance contracts classification
+Insurance contracts are those contracts under which the Group has accepted significant insurance risk, relative to an
+insured event or occurrence. When necessary, the Group enters into reinsurance contracts to transfer insurance risks
+to reinsurer. A significant insurance risk test is performed at inception of the insurance contracts.
+Insurance income recognition
+Premiums from long-term life insurance contracts are recognised as revenue when due from policy holders.
+Premiums related to short-term non-life insurance contracts are recognised when received at the inception of the
+policy, as unearned insurance premiums in liabilities, and are amortised on a straight-line basis into the consolidated
+statement of profit or loss over the term of the policy. When the Group has transferred insurance risk through
+reinsurance contracts, the Group calculates the amount of premium ceded and the reinsurers' share of expenses
+and recognises them through the consolidated statement of profit or loss in accordance with the terms of the
+reinsurance contracts.
+Insurance contract liabilities
+Insurance contract liabilities are measured based on a reasonable estimate of the amount of payments that the
+Group will be required to make to fulfill its obligations under the insurance contracts, which represents the
+difference between expected future cash outflows and inflows related to such contracts. A reasonable estimate of
+expected future net cash flows is determined based on information currently available as at the end of the reporting
+period.
+The Group has considered the impact of time value in the liability calculation for long-term life insurance. The
+Group performs liability adequacy tests based on information currently available as at the reporting date. Additional
+insurance contract liabilities should be recorded if any deficiency exists.
+195
+196
+China Merchants Bank
+As a buyer-lessor in a sale and leaseback transactions
+Chapter VIII Financial Statements
+4. Principal accounting policies (continued)
+(11) Impairment on tangible and intangible assets other than impairment under
+ECL model
+The carrying amount of tangible and intangible assets including property and equipment, right-of-use assets,
+intangible assets, investment properties, interests in joint ventures, interests in associates, goodwill and other non-
+current assets are reviewed periodically in order to assess whether the recoverable amount has declined below the
+carrying amount. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The
+amount of impairment loss is recognised in the consolidated statement of profit or loss. The recoverable amount
+of an asset is the greater of its fair value less disposal expense and present value of future expected cash flows. In
+assessing value in use, the estimated future cash flows are discounted to their present values.
+Internal and external sources of information are reviewed at the end of the reporting period to identify any
+indications that other assets may be impaired.
+If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, intangible assets
+that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is
+estimated by the Group at the end of the reporting period whether or not there is any indication of impairment.
+Calculation of recoverable amount
+The recoverable amount of an asset or a cash-generating unit is the greater of its fair value less disposal
+expense and the present value of future cash flows. In assessing value in use, the estimated future cash flows
+are discounted to their present values using a pre-tax discount rate that reflects current market assessments
+of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows
+largely independent of those from other assets, the recoverable amount is determined for the smallest group
+of assets that generates cash inflows independently (i.e. a cash-generating unit).
+Recognition of impairment losses
+An impairment loss is recognised in the consolidated statement of profit or loss whenever the carrying
+amount of an asset, or the cash-generating unit to which it belongs exceeds its recoverable amount.
+Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
+amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the
+carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the
+carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use,
+if determinable.
+(12) Precious metals
+Precious metals that are not related to the Group's trading activities are initially measured at acquisition cost
+and subsequently measured at the lower of cost and net realisable value. Precious metals that are related to the
+Group's trading activities are initially recognised at fair value, with changes in fair value arising from remeasurement
+recognised directly in the consolidated statement of profit or loss in the period in which they arise.
+China Merchants Bank
+Annual Report 2021
+When a contract includes lease and non-lease components, the Group applies IFRS 15 Revenue from Contracts with
+Customers to allocate the consideration under the contract to each component.
+When the Group is a lessor of an operating lease, income derived from operating lease is recognised in the
+consolidated statement of profit or loss using the straight-line method over the lease term. If initial direct costs
+incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised
+in profit or loss over the lease term on the same basis as the lease income. Contingent lease income is charged to
+profit or loss in the accounting period in which it is incurred.
+Where the Group is a lessor under finance leases, an amount representing the net investment in the lease is included
+in the consolidated statement of financial position as "loans and advances to customers". Unrecognised finance
+income under finance leases are amortised using the effective interest method over the lease term. Accounting
+policy for impairment losses are disclosed in Note 4(5).
+Financial instruments (continued)
+Principal accounting policies (continued)
+(5)
+4.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+190
+Lease liability is presented as a separate line in the consolidated statement of financial position.
+Lease liability is initially measured at the present value of the lease payments that are not paid at the
+commencement date using lessee's incremental borrowing rate as the discount rate.
+Lease payments refer to the payment made by the lessee to the lessor in connection with the right to use
+the leased assets during the lease term. Lease payments included in the measurement of the lease liability
+comprise:
+fixed lease payments (including in-substance fixed payments), less any lease incentives;
+variable lease payments that depend on an index or rate, initially measured using the index or rate at
+the commencement date;
+the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
+payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to
+terminate the lease; and
+the amount expected to be payable by the lessee under remaining value guarantees.
+After the commencement date, the Group remeasures the lease liability according to the present value
+calculated by the revised lease payment amount and the revised discount rate and makes a corresponding
+adjustment to the related right-of-use asset whenever:
+the lease term has changed or there is a change in the assessment of exercise of a purchase option, in
+which case the lease liability is remeasured by discounting the revised lease payments using a revised
+discount rate; or
+the lease payments change due to changes in an index or rate or a change in expected payment
+under a guaranteed remaining value, in which cases the lease liability is remeasured by discounting
+the revised lease payments using the initial discount rate. But if the change in lease payments results
+from a change in floating interest rates, the lessee shall use a revised discount rate that reflects
+changes in the interest rate.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4.
+(9)
+Principal accounting policies (continued)
+Leases (continued)
+As a lessor
+Leases for which the Group is a lessor are classified as finance or operating leases. When the terms of the lease
+transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease.
+All other leases are classified as operating leases.
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(13) Financial guarantee issued, provisions and contingent liabilities
+the Group's performance does not create an asset with an alternative use to the Group and the Group has
+an enforceable right to payment for performance completed to date.
+Otherwise, revenue is recognised at a point in time.
+If the revenue is recognised over time, the Group recognises revenue in accordance with the progress towards
+complete satisfaction of a performance obligation. The progress towards complete satisfaction of a performance
+obligation is measured based on output method, which is to recognise revenue on the basis of direct measurements
+of the value of the goods or services transferred to the customer to date relative to the remaining goods or services
+promised under the contract, that best depicts the Group's performance in transferring control of goods or services.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(14) Income recognition (continued)
+Fee and commission income (continued)
+If revenue is recognised at a point in time, the Group recognises the revenue when the customer obtains control
+of the distinct good or service. To determine the point in time at which a customer obtains control of a promised
+service, the following indicators of the transfer of control should also be considered. They include, but are not
+limited to:
+•
+the Group has a present right to payment for the goods or services;
+•
+the Group has transferred physical possession of the goods;
+•
+the customer has the significant risks and rewards of ownership of the goods;
+•
+the customer has accepted the goods or services.
+When another party is involved in providing goods or services to a customer, the Group determines whether the
+nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a
+principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).
+The Group is a principal if it can control the goods or service before transferring it to customers. The Group is an
+agent if its performance obligation is to arrange for the provision of the specified goods or service by another party.
+In this case, the Group does not control the specified goods or service provided by another party before that goods
+or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount
+of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or
+services to be provided by the other party.
+A contract asset represents the Group's right to consideration in exchange for goods or services that the Group has
+transferred to a customer that is not yet unconditional. In contrast, a receivable represents the Group's unconditional
+right to consideration, i.e. only the passage of time is required before payment of that consideration is due.
+A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group
+has received consideration (or an amount of consideration is due) from the customer.
+(15) Taxation
+Current income tax and movements in deferred tax balances are recognised in the consolidated statement of profit
+or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
+equity.
+Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
+enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
+Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
+the consolidated financial statements and the corresponding tax base used in the computation of taxable profit.
+Deferred tax assets also arise from unused tax losses and unused tax credits. The amount of deferred tax provided is
+based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
+rates of expected returns of the assets or the repayment of the liabilities. Deferred tax assets and liabilities are not
+discounted.
+A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
+against which the asset can be utilised. Deferred tax assets are reduced by the extent that it is no longer probable
+that the related tax benefit will be realised.
+The Group shall recognise a deferred tax asset for all deductible temporary differences associated with investments
+in subsidiaries and interests in associates and joint ventures that both of the following conditions are satisfied: the
+temporary differences are likely to be reversed in the foreseeable future; and it is probably to obtain the taxable
+income used to offset the deductible temporary difference in the future. The Group shall recognise a deferred tax
+liability for all taxable temporary differences associated with investments in subsidiaries and interests in associates
+and joint ventures, except where both of the following conditions are satisfied: the investor is able to control the
+timing of the reversal of the temporary difference; and it is probable that the temporary difference will not reverse
+in the foreseeable future.
+or
+Specific items (continued)
+the Group's performance creates and enhances an asset that the customer controls as the Group performs;
+Control is transferred over time and revenue is recognised over time by reference to the progress towards complete
+satisfaction of the relevant performance obligation if one of the following criteria is met:
+Financial guarantees issued
+Financial guarantees are contracts that require the issuer (i.e. 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. The provision of financial guarantees
+issued is confirmed in the consolidated statement of financial position in accordance with accounting policy set out
+in Note 4(5).
+Provisions and contingent liabilities
+Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive
+obligation arising as a result of a past event, it is highly probable that an outflow of economic benefits will be
+required to settle the obligation and a reliable estimate can be made. Where the time value of money is material,
+provisions are stated at the present value of the expenditures expected to settle the obligation.
+Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
+reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is
+remote.
+(14) Income recognition
+Revenue is the inflow of economic benefits that the Group has formed in its daily activities that will result in an
+increase in shareholders' equity and have nothing to do with the capital invested by shareholders.
+Net interest income
+Interest income and expense for all financial instruments except for those classified as at FVTPL are recognised in
+"Interest income" and "Interest expense" in the profit or loss account using the effective interest method. Interest
+on financial instruments measured as at FVTPL is included within the fair value movement during the period, which
+is recognised in "Other net income".
+Dividend income
+Dividend income from investments is recognised when the dividend is declared and approved by the investee.
+Rental income
+Income derived from operating leases is recognised in the consolidated statement of profit or loss using the straight-
+line method over the lease term.
+Premium income
+Premium income represents gross insurance premium written less reinsurance ceded, as adjusted for unearned
+premium. Gross premiums written are recognised at date of risk inception.
+197
+198
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(14) Income recognition (continued)
+Fee and commission income
+Under IFRS 15 Revenue from Contracts with Customers, the Group recognises revenue when (or as) a performance
+obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation
+is transferred to the customer.
+A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series
+of distinct goods or services that are substantially the same. For contracts that contain more than one performance
+obligation, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling
+price basis, except for the allocation of discounts and variable consideration.
+The stand-alone selling price of the distinct goods or service underlying each performance obligation is determined
+at contract inception. It represents the price at which the Group would sell a promised goods or service separately
+to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate
+techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of
+consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services
+to the customer.
+For contracts that contain variable consideration, the Group estimates the amount of consideration to which it will
+be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method
+better predicts the amount of consideration to which the Group will be entitled. The estimated amount of variable
+consideration is included in the transaction price only to the extent that it is highly probable that such an inclusion
+will not result in a significant revenue reversal in the future when the uncertainty associated with the variable
+consideration is subsequently resolved. At the end of each reporting period, the Group updates the estimated
+transaction price (including updating its assessment of whether an estimate of variable consideration is constrained)
+to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances
+during the reporting period.
+the customer simultaneously receives and consumes the benefits provided by the Group's performance as the
+Group performs;
+Equity instruments (continued)
+A financial instrument is an equity instrument if, and only if, both conditions (i) and (ii) below are met:
+(i)
+Allocation of consideration to components of a contract
+(a)
+As a lessee
+A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
+period of time in exchange for consideration. The Group assesses whether a contract is or contains a lease based on
+the definition under IFRS 16 Leases at inception or modification date. Such contract will not be reassessed unless the
+terms and conditions of the contract are subsequently changed.
+Definition of a lease
+(9) Leases
+Both the periods and method of amortisation are reviewed annually.
+Core deposit
+28 years
+2 - 20 years
+Software and Other
+The amortisation period of intangible assets is as follows:
+Intangible assets are not amortised while their useful lives are assessed to be indefinite. The Group does not have
+intangible assets with useful lives assessed to be indefinite as at the end of the reporting period.
+Intangible assets are stated at cost less accumulated amortisation (only intangible assets with finite useful lives) and
+accumulated impairment losses (see Note 4(11)). Amortisation of intangible assets with finite useful lives is charged
+to profit or loss on a straight-line basis over the assets' estimated useful lives.
+Intangible assets
+Principal accounting policies (continued)
+(8)
+4.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+Repossessed assets of equity instruments are detailed in Note 4(5).
+In the recovery of impaired loans and advances, the Group may take possession of assets held as collateral through
+court proceedings or voluntary delivery of possession by the borrowers. Repossessed assets other than equity
+instrument are reported in "other assets".
+(7) Repossessed assets
+Profits or losses on disposal of property, equipment and investment property are determined as the difference
+between the net disposal proceeds and the carrying amount of the property, equipment and investment property,
+and are accounted for in the consolidated statement of profit or loss as they arise.
+Subsequent expenditure relating to a property, equipment and investment property is capitalised only when it is
+probable that future economic benefits associated with the property and equipment will flow to the Group. All other
+expenditure is recognised in the consolidated statement of profit or loss as an expense as incurred.
+Construction in progress represents property under construction and is stated at cost less impairment losses. Cost
+comprises the direct and indirect cost of construction. Construction in progress is transferred to an appropriate class
+of property or other asset when the asset is ready for its intended use. No depreciation is provided for construction
+in progress.
+3-5 years
+For a contract that contains a lease component and one or more additional lease or non-lease components,
+the Group allocates the consideration in the contract to each lease component on the basis of the relative
+stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
+no more than 25 years
+(b)
+The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
+arrangements in which it is the lessee, except for short-term leases (lease term of 12 months or less and
+do not contain a purchase option) and leases of low value assets (the value of assets is equivalent to below
+RMB35,000).
+For payments of a property interest which includes both leasehold land and building elements, the entire
+property is presented as property and equipment of the Group when the payments cannot be allocated
+reliably between the leasehold land and building elements, except for those that are classified and accounted
+for as investment properties.
+Leasehold land and building
+(d)
+Accounting policy for any identified right-of-use asset impairment loss are disclosed in Note 4(11).
+After the commencement date, the right-of-use assets are measured at cost (subject to certain exceptions)
+less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability.
+The Group recognises the depreciation of right-of-use assets as an operating expense on a straight-line basis.
+Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying
+asset. If a lease transfers the ownership of the underlying asset or the cost of the right-of-use asset reflects
+that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the
+useful life of the underlying asset.
+Right-of-use assets (continued)
+(c)
+As a lessee (continued)
+Leases (continued)
+Principal accounting policies (continued)
+(9)
+4.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+194
+193
+whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the
+site on which it is located or restore the underlying asset to the condition required by the terms and
+conditions of the lease, a provision is recognised and measured under IAS 37 Provisions, Contingent
+Liabilities and Contingent Assets. The costs are included in the related right-of-use asset, unless those
+costs are incurred to produce inventories.
+any lease payments made at or before the commencement date, less any lease incentives received;
+any initial direct costs incurred by the lessee; and
+•
+•
+the amount of the initial measurement lease liability;
+•
+The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
+The right-of-use asset is initially measured at cost. This cost includes:
+Right-of-use assets
+(c)
+Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-
+line basis over the lease term.
+Short-term leases and leases of low-value assets
+199
+the estimated useful lives
+20 years
+As part of its operational activities, the Group securitises credit assets, generally through the sale of these
+assets to structured entities which issue securities to investors. Interests in the securitised financial assets may
+be retained in the form of senior or junior tranches, or other residual interests (retained interests).
+When applying the policies on securitised financial assets, the Group has considered both the degree of
+transfer of risks and rewards on the transferred financial assets and the degree of control exercised by the
+Group over the transferred financial assets:
+Securitisation
+(b)
+Derecognition of financial instruments (continued)
+(5) Financial instruments (continued)
+4. Principal accounting policies (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+The Group writes off a financial asset when there is information indicating that the counterparty is in severe
+financial difficulty and there is no realistic prospect of recovery. A write-off constitutes a derecognition event.
+Any subsequent recoveries are recognised in profit or loss.
+Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
+lower of the original carrying amount of the asset and the maximum amount of consideration that the Group
+could be required to repay.
+Where the Group has transferred its rights to receive cash flows from an asset or has retained its rights
+to receive cash flows from the asset but has entered into a pass-through arrangement, and has neither
+transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the
+asset, the asset is recognised to the extent of the Group's continuing involvement in the asset.
+has retained its rights to receive cash flows from the asset but has assumed an obligation to pay them
+in full without material delay to a third party under a "pass-through" arrangement; and either the
+Group has transferred substantially all the risks and rewards of ownership of the financial asset; or
+the Group has neither transferred nor retained substantially all the risks and rewards of ownership of
+the financial asset, but has transferred control of the asset.
+the Group has transferred its rights to receive cash flows from the asset; or
+the rights to receive cash flows from the asset have expired; or
+•
+A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
+is derecognised when:
+Financial assets
+(a)
+Derecognition of financial instruments
+When the Group classifies preference shares issued as an equity instrument, fees, commissions and other transaction
+costs of preference shares issuance are deducted from equity. The dividends on preference shares are recognised as
+profit distribution at the time of declaration.
+At initial recognition of preference shares, the Group classifies the preference shares issued or their components
+as financial liabilities or equity instruments based on their contractual terms and their economic substance after
+considering the definition of financial liabilities and equity instruments.
+For perpetual bonds and perpetual debt capitals issued that classified as equity instruments, any distribution
+of interests during the instruments' duration is treated as profit appropriation. When the perpetual bonds and
+perpetual debt capitals are redeemed, the redeemed amount is charged to equity. Relevant transaction expenses are
+deducted from equity.
+At initial recognition, the Group classifies the perpetual bonds and perpetual debt capitals issued or their
+components as financial liabilities or equity instruments based on their contractual terms and their economic
+substance after considering the definition of financial liabilities and equity instruments.
+if the financial instrument will or may be settled in the Group's own equity instruments, it is a non-derivative
+instrument that includes no contractual obligations for the Group to deliver a variable number of its own
+equity instruments; or a derivative that will be settled only by the Group exchanging a fixed amount of cash
+or another financial asset for a fixed number of its own equity instruments.
+the financial instrument includes no contractual obligation to deliver cash or another financial asset to
+another entity, or to exchange financial assets or financial liabilities with another entity under conditions that
+are potentially unfavorable to the Group; and
+(ii)
+when the Group transfers substantially all the risks and rewards of ownership of the financial assets,
+the Group shall derecognise the financial assets;
+3 years
+when the Group retains substantially all the risks and rewards of ownership of the financial assets,
+the Group shall continue to recognise the financial assets; and
+When a securitisation of financial assets does not qualify for derecognition, the relevant financial assets are
+not derecognised, and the consideration collected from third parties are recorded as a financial liability.
+20 years
+Motor vehicles and other
+Aircraft, vessels and professional equipment
+Leasehold improvements (self-owned property)
+Leasehold improvements (leased property)
+Computer equipment
+Investment properties
+Land and buildings
+Depreciation is calculated to write off the cost of property, equipment and investment property over the following
+estimated useful lives, after taking into account an estimated residual value on a straight-line basis:
+Property, equipment and investment property, are stated at cost or deemed cost less accumulated depreciations and
+accumulated impairment losses. These also include land held under operating leases and buildings thereon, where
+the fair value of the leasehold interest in the land and buildings cannot be measured separately at the inception of
+the lease and the building is not clearly held under an operating lease.
+Property, equipment, investment property and depreciation
+(6)
+Principal accounting policies (continued)
+4.
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+192
+191
+Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial
+position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle
+on a net basis or realise the asset and settle the liability simultaneously.
+Offsetting financial instruments
+A financial liability (or part of it) is derecognised when the obligation under the liability (or part of it) is
+discharged, cancelled or expired.
+Financial liabilities
+(d)
+Derecognition of financial assets sold on condition of repurchase is determined by the economic substance
+of the transaction. If a financial asset is sold under an agreement to repurchase the same or substantially
+the same asset at a fixed price or at the sale price plus a reasonable return, the Group will not derecognise
+the asset. If a financial asset is sold together with an option to repurchase the financial asset at its fair value
+at the time of repurchase (in case of transferor sells such financial asset), the Group will derecognise the
+financial asset.
+Sales of assets on condition of repurchase
+(c)
+When the securitisation results in derecognition or partial derecognition of financial assets, the Group
+allocates the carrying amount of the transferred financial assets between the financial assets derecognised
+and the retained interests based on their relative fair values at the date of transfer. Gains or losses on
+securitisation, which is the difference between the consideration received and the allocated carrying amount
+of the financial assets derecognised, are recorded in "other net income". The retained interests continue to
+be recognised on the same basis before the securitisation.
+when the Group neither transfers nor retains substantially all the risks and rewards of ownership
+of the financial assets, the Group would determine whether it has retained control of the financial
+assets. If the Group has not retained control, it shall derecognise the financial assets and recognise
+separately as assets or liabilities any rights and obligations created or retained in the transfer. If the
+Group has retained control, it shall continue to recognise the financial assets to the extent of its
+continuing involvement in the financial assets.
+(e)
+Lease liabilities
+(1,660)
+208
+207
+Auditors' remuneration amounting to RMB29 million for the year ended 31 December 2021 (2020: RMB28 million) is included in other general
+and administrative expenses.
+(i)
+Note:
+102,814
+116,879
+Total
+29,389
+33,249
+Other general and administrative expenses (note (i))
+296
+China Merchants Bank
+Annual Report 2021
+311
+292
+250
+Short-term leases expense and leases of low-value assets expense
+4,416
+4,259
+Depreciation of right-of-use assets
+1,188
+1,153
+Amortisation of intangible assets
+7,715
+8,857
+Depreciation of property, equipment and investment properties
+Charge for insurance claims
+Chapter VIII Financial Statements
+11. Directors' and supervisors' emoluments
+The emoluments of the Directors and Supervisors during the year were as follows:
+Miao Jianmin
+Non-executive directors
+The executive directors' emoluments shown above were for their services in connection with the management of the
+affairs of the Bank and the Group.
+7,540
+80
+3,342
+40
+4,198
+40
+(i)
+Total
+RMB'000
+RMB'000
+scheme
+bonuses contributions
+RMB'000
+Discretionary
+Retirement
+2021
+7,460
+3,302
+4,158
+RMB'000
+in kind
+Salaries,
+allowances
+and benefits
+Directors'
+fees
+RMB'000
+Subtotal
+Wang Liang
+Tian Huiyu
+Executive directors
+2,478
+2,772
+Tax and surcharges
+7,735
+9
+50
+- other
+175
+74
+- dividend income from equity investments designated at FVTOCI
+1,660
+2,434
+- of which: gain on disposal of bills
+2,970
+3,516
+- gain on disposal of debt instruments at FVTOCI
+(273)
+(657)
+- loss on disposal of financial assets at amortised cost
+13,400
+14,839
+- financial instruments at FVTPL
+16,281
+17,822
+Investment income
+391
+(464)
+- precious metals
+48
+12
+- derivatives instruments
+Foreign exchange gain
+Fu Gangfeng
+3,351
+Other income
+6,986
+6,048
+8,011
+- Social insurance and corporate supplemental insurance
+- Other
+43,257
+51,031
+57,040
+66,028
+- Salaries and bonuses
+Staff costs
+2020
+2021
+10. Operating expenses
+22,881
+29,011
+350
+878
+430
+453
+5,278
+6,415
+5,708
+6,868
+Total
+Other
+- insurance income
+- rental income
+2,202
+Zhou Song
+Hong Xiaoyuan
+Zhang Jian
+48
+2,399
+31
+317
+317
+1,392
+19
+5,720
+634
+Subtotal
+1,979
+Liu Xiaoming (ix)
+Wen Jianguo (viii)
+2,368
+Liu Yuan (vii)
+317
+Zhao Jun (ii)
+317
+Leung Kam Chung, Antony (ii)
+1,373
+Liu Jianjun (vi)
+directors and supervisors
+(i)
+Total
+RMB'000
+Retirement
+scheme
+bonuses contributions
+RMB'000
+RMB'000
+in kind
+RMB'000
+RMB'000
+2,027
+Discretionary
+98
+The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
+directors or supervisors of the Bank.
+209
+As of 31 December 2021, the Group had offered 10 phases of H share appreciation rights under the Scheme. Details of the Scheme are set
+out in Note 39 (a)(iii).
+(x)
+In December 2021, Mr. Liu Xiaoming ceased to be the Employee Supervisor of the Bank due to change of work arrangement.
+(ix)
+(viii)
+In April 2021, Mr. Wen Jianguo ceased to be the Shareholder Supervisor of the Bank due to change of work arrangement.
+In August 2021, Mr. Liu Yuan ceased to be the Chairman of Board of Supervisors and Employee Supervisor of the Bank due to change of work
+arrangement.
+In May 2021, Mr. Liu Jianjun ceased to be the Executive Director, Executive Vice President and Secretary of the Board of Directors of the Bank
+due to change of work arrangement.
+In December 2021, Ms. Cai Jin was elected as the Employee Supervisor of the Bank at the staff congress of the Bank.
+In June 2021, according to the relevant resolutions passed at the 2020 annual general meeting of the Bank, Mr. Guo Xikun was elected as the
+Shareholder Supervisor of the Bank.
+In August 2021, Mr. Xiong Liangjun was elected as the Employee Supervisor of the Bank at the staff congress of the Bank. According to the
+resolutions passed at the 21st meeting of the 11th session of the Board of Supervisors of the Bank, Mr. Xiong Liangjun was elected as the
+Chairman of the Board of Supervisors of the Bank.
+In June 2021, according to the relevant resolutions passed at the 2020 annual general meeting of the Bank, Mr. Li Chaoxian and Mr. Shi
+Yongdong were elected as the Independent Non-Executive Directors of the Bank, whose qualifications as the Independent Non-Executive
+Directors were approved by the CBIRC in August 2021. At the same time, Mr. Leung Kam Chung, Antony and Mr. Zhao Jun ceased to be the
+Independent Non-Executive Directors of the Bank due to the expiry of their appointments.
+The total remuneration before tax for the full-time directors, supervisors and executive officers of the Group is not yet finalised. Details of their
+remaining compensation will be disclosed separately when their total remuneration is confirmed.
+(vii)
+(vi)
+(v)
+(iv)
+(iii)
+(ii)
+(i)
+Notes:
+23,736
+322
+19,214
+4,200
+Total
+6,452
+(2,099)
+and benefits
+Salaries,
+allowances
+3,212
+48
+3,164
+Xiong Liangjun (iii)
+183
+183
+Shi Yongdong (ii)
+183
+183
+Li Chaoxian (ii)
+500
+500
+500
+500
+500
+500
+Tian Hongqi
+Liu Qiao
+Li Menggang
+500
+500
+Wong See Hong
+directors and supervisors
+The non-executive directors shown above did not receive remuneration from the Bank.
+Independent non-executive
+Luo Sheng
+Subtotal
+Wang Daxiong
+Su Min
+Peng Bihong
+Directors'
+fees
+Wu Heng
+Ding Huiping
+2021
+Former executive, non-executive
+11. Directors' and supervisors' emoluments (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+The independent non-executive directors' and supervisors' emoluments shown above were for their services and
+employment as directors or supervisors of the Bank.
+9,744
+144
+6,034
+3,566
+Subtotal
+171
+48
+2,795
+48
+2,747
+123
+Cai Jin (v)
+Wang Wanqing
+400
+400
+400
+400
+Xu Zhengjun
+Han Zirong
+400
+400
+Guo Xikun (iv)
+- financial instruments at fair value through profit or loss
+Chapter VIII Financial Statements
+5. Significant accounting estimates and judgements, changes in
+accounting estimates
+Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan
+assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately
+in other comprehensive income. The Group determines the net interest expense (income) on the net defined benefit
+liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the
+beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
+in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net
+interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in the
+consolidated statement of profit or loss.
+When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
+past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains
+and losses on the settlement of a defined benefit plan when the settlement occurs.
+Share-based payment
+The Group offers H share appreciation rights to its employee, namely H Share Appreciation Rights Scheme for the
+Senior Management ("the Scheme"), which is settled in cash. Cash-settled share-based payments are measured at
+the fair value of the liabilities incurred by the Group, which are determined based on the price of the share. The
+Group recognises the services for the period as related costs or expenses, with a corresponding increase in liability,
+at an amount equal to the fair value of the liability based on the best estimate of the outcome of vesting at the end
+of each reporting period within the vesting period. Until the liability is settled, the Group remeasures the fair value
+of the liability at each reporting period end and at the date of settlement, with any changes in fair value recognised
+in profit or loss for the period.
+The fair value of the H share appreciation rights is using Black-Scholes model, taking into account the terms and
+condition upon which the H share appreciation rights were granted.
+201
+202
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(18) Related parties
+For the purposes of these consolidated financial statements, parties are considered to be related to the Group if the
+Group has the ability, directly, indirectly or jointly, to control the party or exercise significant influence over the party
+in making financial and operating decisions, or vice versa, or where the Group and the party are subject to control,
+common control or common significant influence (except that the Group and the party are subject to common
+significant influence of the other party). Related parties may be individuals (being members of key management
+personnel, significant shareholders and/or their close family members) or other entities and include entities which
+are under the significant influence of related parties of the Group where those parties are individuals, and post-
+employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related
+party of the Group.
+(19) Segmental reporting
+Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are
+identified from the financial information provided regularly to the Group's most senior executive management for
+the purposes of allocating resources to, and assessing the performance of, the Group's various lines of business and
+geographical locations. Individually material operating segments are not aggregated for financial reporting purposes
+unless the segments have similar economic characteristics and are similar in respect of the nature of products and
+services, the nature of production processes, the type or class of customers, the methods used to distribute the
+products or provide the services, and the nature of the regulatory environment. Operating segments which are not
+individually material may be aggregated if they meet most of these criteria.
+(20) Fiduciary activities
+The Group acts in a fiduciary capacity in entrusted loan and entrusted investment business. Assets held by the Group
+and the related undertakings to return such assets to customers are excluded from the consolidated statement of
+financial position as the risks and rewards of the assets reside with the customers. The Group only charges a relevant
+commission.
+(21) Dividends or profit distributions
+Dividends or profit distributions are recognised as a liability in the year in which they are approved and declared.
+(22) General reserve
+According to the relevant regulations of the Ministry of Finance, in addition to the impairment allowances, the
+Bank maintains a general reserve according to a certain proportion of the balance of risk assets to make up for
+unidentified potential losses. The general reserve is treated as profit distribution and is an integral part of equity.
+In principle, the balance of general reserve shall not be less than 1.5% of the ending balance of risk assets. The
+general reserve of the Group also includes the general reserve maintained by the subsidiaries of the Group according
+to the applicable laws and regulations of their industry or region.
+The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit
+credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to
+the present value of economic benefits available in the form of any future refunds from the plan or reductions in
+future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any
+applicable minimum funding requirements.
+China Merchants Bank
+Annual Report 2021
+The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating
+the amount of future benefit that employees have earned in the current and prior periods, discounting that amount
+and deducting the fair value of any plan assets.
+Post-employment benefits
+Annual Report 2021
+4. Principal accounting policies (continued)
+(15) Taxation (continued)
+Current tax balances and deferred tax balances, and movements therein, are presented separately from each other
+and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
+deferred tax liabilities if the Group has the legally enforceable right to set off current tax assets against current tax
+liabilities and the following additional conditions are met:
+in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise
+the asset and settle the liability simultaneously; or
+in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
+authority on either:
+the same taxable entity; or
+different taxable entities, which, in each future period in which significant amounts of deferred tax
+liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and
+settle the current tax liabilities on a net basis or realise and settle simultaneously.
+(16) Foreign currencies translations
+In preparing the financial statements of each individual group entity, transactions in currencies other than the
+entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the
+transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
+at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign
+currencies are retranslated at the rates prevailing at the date when the fair value is determined. Non-monetary items
+that are measured in terms of historical cost in a foreign currency are not retranslated.
+Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
+exchange differences on transactions entered into as part of the effective portion of a hedge on certain
+foreign currency risks; or
+exchange differences on monetary items receivable from or payable to a foreign operation for which
+settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign
+operation), which are recognised initially in other comprehensive income and reclassified from equity to profit
+or loss on repayment of the monetary items.
+For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's
+foreign operations are translated into currency units using exchange rates prevailing at the end of each reporting
+period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates
+fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used.
+Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in exchange
+reserve (and attributed to non-controlling interests as appropriate).
+On the disposal of a foreign operation, all of the exchange differences accumulated in exchange reserve in respect
+of that operation attributable to the owners of the Bank are reclassified to profit or loss.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+4. Principal accounting policies (continued)
+(17) Employee benefits
+Salaries and staff welfare
+Salaries, bonuses and other benefits are accrued in the period in which the associated services are rendered by
+employees.
+The Group participates in a number of defined contribution retirement benefit schemes managed by different
+provincial governments or independent insurance companies. Obligation for contributions to these schemes are
+jointly borne by the Group and the staff, and contributions paid by the Group are recognised as an expense in the
+consolidated statement of profit or loss as incurred.
+Chapter VIII Financial Statements
+544
+In determining the carrying amounts of some assets and liabilities, the Group makes assumptions for the effects
+of uncertain future events on the assets and liabilities at the end of the reporting period. These estimates involve
+assumptions about cash flows and the discount rates used. The Group's estimates and assumptions are based on
+historical experience and expectations of future events and are reviewed periodically. In addition to the assumptions
+and estimations of future events, judgements are also made during the process of applying the Group's accounting
+policies.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+5. Significant accounting estimates and judgements, changes in
+accounting estimates (continued)
+(5) Fair value of financial instruments
+For a number of financial instruments, no quoted prices in an active market exist. The fair value for these financial
+instruments are established by using valuation techniques. These techniques include using recent arm's length
+market transactions, reference to the current fair value of similar instruments, discounted cash flow analysis or
+option pricing models. The Group has established a process to ensure that valuation techniques are constructed by
+qualified personnel and are validated and reviewed by personnel independent of the business unit that constructed
+the valuation techniques. Valuation techniques are certified before being implemented for valuation and are
+calibrated to ensure that outputs reflect actual market conditions. Valuation models established by the Group
+make the maximum use of market inputs and rely as little as possible on the Group's specific data. However, it
+should be noted that some inputs, such as credit and counterparty risk and risk correlations, require management
+estimates. Whilst the Group considers these valuations are the best estimates, the ongoing COVID-19 pandemic has
+resulted in greater market volatility and may cause further disruptions to the investees'/issuer's businesses, which
+have led to higher degree of uncertainties in respect of the valuations in the current year. Management estimates
+and assumptions are reviewed periodically and adjusted if necessary. If the fair value is measured using third party
+information such as broker quotes or pricing services, the valuation team will evaluate the evidence obtained from
+third party to support the conclusion that the relevant valuation meets the requirements of IFRS, including the
+category of the relevant valuation at the appropriate level in the fair value hierarchy.
+(6) Income taxes
+Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The
+Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax
+treatment of such transactions is reviewed periodically to take into account all changes in tax legislations. Deferred
+tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax
+assets can only be recognised to the extent that it is probable that future taxable profit will be available against
+which the unused tax credits 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 asset to be recovered.
+(7) Impairment of goodwill
+The Group determines whether goodwill is impaired at least on an annual basis and when circumstances indicate
+that the carrying value may be impaired. This requires an estimation of the recoverable amount of the CGU or
+group of CGUS to which the goodwill is allocated. Estimating the recoverable amount requires the Group to make
+an estimate of the expected future cash flows from CGU or group of CGUS and also to choose a suitable discount
+rate in order to calculate the present value of those cash flows. Where the actual future cash flows are less than
+expected, or change in facts and circumstances which results in downward revision of future cash flows or upward
+revision of discount rate, a material impairment loss or further impairment loss may arise. Furthermore, the estimated
+cash flows and discount rate are subject to higher degree of estimation uncertainties due to the COVID-19 pandemic
+and volatility in financial markets.
+205
+206
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+6.
+Interest income
+2021
+2020
+-
+-
+Loans and advances to customers
+- Corporate loans
+In 2021, in order to increase the Group's resilience and guard itself against losses, the Group refined and optimised
+the measurement system of loss allowance for financial instruments in the principle of prudence and robustness.
+The Group made a change in ECL accounting estimate as of 30 June 2021, and such change in accounting estimate
+was mainly about enhancing the risk differentiation of the model in order to optimise the fineness and foresight
+of loss allowance for financial instruments. Among which, when determining whether there is any significant
+increase in credit risk, the application of early warning signal is further deepened; when considering forward-looking
+information, the macroeconomic index database is expanded; in terms of the classification of risk characteristics,
+the reference index of grouping is optimised. The change in accounting estimate resulted in an increase in the
+Group's loss allowance by RMB692 million as at 31 December 2021, and a decrease in the Group's profit before
+taxation by RMB692 million in 2021 compared with those under the previous ECL estimates. In 2021, the expected
+credit losses of the Group were RMB65,962 million, representing a year-on-year increase of 1.68%. The change in
+accounting estimate has no significant impact on the net profit, total assets and net assets of the Group in current
+period. The change in accounting estimate is applied prospectively for future periods, and do not require to adjust
+the announced financial reports retrospectively. Therefore, the change will not have any impact on the consolidated
+financial conditions and consolidated operating results of the Group in previous periods.
+Balances with central banks
+Loss Given Default ("LGD"): LGD is an estimate of the loss arising on default. It is based on the difference
+between the contractual cash flows due and those that the lender would expect to receive, taking into
+account cash flows from collateral and integral credit enhancements. Refer to Note 60(a)(iii) for more details.
+Due to greater financial uncertainty triggered by the COVID-19 pandemic, there is higher risk that a
+prolonged pandemic could lead to increased credit default rates. The Group considered the impact of
+COVID-19 in the ECL model which are disclosed in Note 60(a)(iv).
+Forward-looking information: When measuring ECL the Group uses reasonable and supportable forward
+looking information, which is based on assumptions for the future movement of different economic drivers
+and how these drivers will affect each other. Refer to Note 60(a)(iv) for more details.
+(1) Control over structured entity
+Where the Group acts as asset manager of structured entities, the Group makes judgement on whether it is the
+principal or an agent to assess whether the Group controls the structured entities and should consolidate them.
+When performing this assessment, the Group considers several factors including, among others, the scope of its
+decision-making authority over the structured entities, the rights held by other parties, the remuneration to which it
+is entitled in accordance with the related agreements for the assets management services, the Group's exposure to
+variability of returns from interests that it holds in the structured entities.
+(2) Classification of financial assets
+(3)
+Business model assessment: Classification and measurement of financial assets of the Group involves significant
+judgement on business model. The Group determines the business model at a level that reflects how groups of
+financial assets are managed together to achieve a particular business objective. Specific considerations include how
+the performance of the assets is evaluated and measured, the risks that affect the performance of the assets and
+how these are managed and how the managers of the assets are compensated.
+Derecognition of financial assets transferred
+In its normal course of business, the Group transfers its financial assets through various types of transactions
+including regular way sales and transfers, securitisation, financial assets sold under repurchase agreements. The
+Group applies significant judgement and estimate in assessing whether it has transferred these financial assets and
+qualified for a full derecognition.
+Where the Group enters into structured transactions by which it transfers financial assets to structured entities, the
+Group analyses whether the substance of the relationship between the Group and these structured entities indicates
+that it controls these structured entities and the Group needs to consolidate them. This will determine whether the
+following derecognition analysis should be conducted at the consolidated level or at the entity level from which the
+financial assets are transferred.
+The Group analyses the contractual rights and obligations in connection with such transfers to determine whether
+derecognition criteria are met based on the following considerations:
+whether it has transferred the rights to receive contractual cash flows from the financial assets or the transfer
+qualifies for the "pass through" of those cash flows to independent third parties;
+the extent to which the associated risks and rewards of ownership of the financial assets are transferred.
+Significant judgement and estimate is applied in the Group's estimation with regard to the cash flows before
+and after the transfers and other factors that affect the outcomes of the Group's assessment on the extent
+that risks and rewards are transferred.
+203
+204
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+5. Significant accounting estimates and judgements, changes in
+accounting estimates (continued)
+(4) Impairment under ECL model
+Significant increase in credit risk: ECL is measured as an allowance equal to 12-month ECL for stage 1 assets,
+or lifetime ECL for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased
+significantly since initial recognition. In assessing whether the credit risk of an asset has significantly
+increased, the Group takes into account qualitative and quantitative reasonable and supportable forward
+looking information. Refer to Note 60(a)(ii) for more details.
+Establishing groups of assets with similar credit risk characteristics: When ECLs are measured on a collective
+basis, the financial instruments are grouped on the basis of shared risk characteristics. Refer to Note 60(a)(v)
+for details of the characteristics considered in this judgement. The Group monitors the appropriateness of the
+credit risk characteristics on an ongoing basis to assess whether they continue to be similar. This is required
+in order to ensure that should credit risk characteristics change there is appropriate re-segmentation of the
+assets. This may result in new portfolios being created or assets moving to an existing portfolio that better
+reflects the similar credit risk characteristics of that group of assets. Assets move from 12-month to lifetime
+ECLs when there is a significant increase in credit risk, but it can also occur within portfolios that continue
+to be measured on the same basis of 12-month or lifetime ECLs but the amount of ECL changes because the
+credit risk of the portfolios differ.
+Models and assumptions used: The Group uses various models and assumptions in estimating ECL. Judgement
+is applied in identifying the most appropriate model for each type of asset, as well as for determining the
+assumptions used in these models, including assumptions that relate to key drivers of credit risk. Refer to
+Note 60(a)(iii)for more details on ECL.
+Probability of Default ("PD"): PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood
+of default over a given time horizon, the calculation of which includes historical data, assumptions and
+expectations of future conditions. Refer to Note 60(a) (iii) for more details.
+China Merchants Bank
+200
+250,662
+2020
+2021
+Total
+Other
+Commissions on custodian business
+Commissions from credit commitment and lending business
+Clearing and settlement fees
+Bank cards fees
+Commissions from asset management
+Commissions from wealth management
+Fee and commission income
+122,394
+123,137
+596
+555
+Total
+Lease liabilities
+14,652
+12,532
+Debt securities issued
+1,770
+35,841
+2,571
+27,783
+6,892
+92
+Profit/(loss) from fair value change
+2020
+2021
+9. Other net income
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+In 2021, the Group adjusted the disclosure of fee and commission income by regrouping the components that
+were previously included in "Agent service fees", "Commissions on trust and fiduciary activities" and "Other",
+and present them under the category of wealth management, asset management, custodian business and other.
+The comparative figures were restated accordingly. After the adjustments, commissions from wealth management
+contain agency funds income, agency insurance income, agency trust schemes income, agency wealth management
+income, agency securities transaction income and agency precious metal income; commissions from asset
+management contain income from issuance and management of various asset management products such as funds,
+wealth management products, asset management schemes, etc.; commissions on custodian business contain income
+obtained from providing basic services and value-added services of custody assets; other items contain bond and
+equity underwriting income, credit asset securitisation service fee income, consulting income and other intermediary
+business income.
+86,684
+102,318
+9,363
+10,588
+4,253
+5,433
+6,191
+6,321
+12,651
+13,902
+19,551
+19,377
+10,856
+Amounts sold under repurchase agreements
+3,750
+3,519
+56,059
+- Debt investments at FVTOCI
+Financial investments
+4,402
+6,115
+5,906
+5,526
+Placements with banks and other financial institutions
+1,695
+902
+Amounts held under resale agreements
+Balances with banks and other financial institutions
+7,475
+7,792
+7,825
+10,963
+147,704
+159,124
+80,575
+80,575
+236,104
+51,843
+15,875
+14,023
+- Debt investments at amortised cost
+Placements from banks and other financial institutions
+9,961
+11,993
+Deposits from banks and other financial institutions
+8,413
+7,635
+Borrowing from central banks
+83,252
+84,332
+Deposits from customers
+- Retail loans
+2020
+8.
+Interest expense
+7.
+The Group recognised an interest income of RMB12,337 million on loans and advances to customers at fair value through other comprehensive
+income (2020: RMB9, 175 million).
+Note:
+307,425
+327,056
+Total
+37,820
+40,184
+2021
+Discounted bills
+- Other financial institutions
+2,860
+(743)
+(d) Movements of allowances for impairment losses are as follows:
+2021
+2020
+Balance as at the beginning of the year
+743
+396
+Charge for the year (note 14)
+3,520
+347
+Balance as at the end of the year
+4,263
+743
+217
+218
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+22. Loans and advances to customers
+(a) Loans and advances to customers
+2021
+278,817
+2020
+2020
+Total
+(175)
+(185)
+(4,088)
+(558)
+Net carrying amount
+524,301
+286,136
+(b) Analysed by remaining maturity
+2021
+2020
+Maturing
+- Within one month (inclusive)
+524,301
+279,446
+Between one month and one year (inclusive)
+6,690
+Total
+524,301
+286,136
+(c) Analysed by underlying assets
+Bonds
+Bills
+2021
+522,202
+2,099
+524,301
+Gross amount of loans and advances to customers at amortised cost (i)
+Interest receivable
+5,075,052
+4,647,140
+524,601
+126
+300
+286,136
+(743)
+(4,263)
+286,879
+528,564
+2020
+2021
+(a) Analysed by nature of counterparties
+Total
+Interest receivable
+Subtotal
+Impairment allowances (a)(d)
+Principal (a)
+21. Amounts held under resale agreements
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+376
+286,262
+2021
+2020
+Amounts held under resale agreements in Mainland China
+- Banks
+10,548
+Subtotal
+5,085,600
+9,528
+4,656,668
+(4,263)
+Less: Impairment allowances
+286,879
+528,564
+Total
+497
+- Banks
+117
+497
+117
+Amounts held under resale agreements outside Mainland China
+257,155
+468,124
+- Other financial institutions
+29,227
+60,323
+286,382
+528,447
+- Other financial institutions
+7,319
+286,136
+37,345
+Loss allowances of interest receivable
+1,264,466
+840,254
+746,560
+Micro-finance loans
+560,657
+474,545
+Other
+173,527
+156,713
+Subtotal of retail loans and advances
+1,364,534
+2,938,972
+Gross amount of loans and advances to customers
+5,349,296
+4,768,301
+Operations outside Mainland China
+2021
+2020
+Finance
+(15)
+39,402
+Property development
+2,642,284
+327,479
+431,305
+1,798,538
+Construction
+117,453
+101,442
+Water, environment and public utilities management
+Telecommunications, software and IT services
+64,427
+52,911
+58,267
+54,491
+Finance
+57,988
+74,892
+Mining
+28,854
+31,097
+Other
+66,364
+65,330
+Subtotal of corporate loans and advances
+Discounted bills
+Residential mortgage
+Credit cards
+1,979,019
+34,062
+48,125
+Transportation, storage and postal services
+33,186
+Subtotal of corporate loans and advances
+171,919
+218,694
+Discounted bills
+Residential mortgage
+Credit cards
+Micro-finance loans
+Other
+9,872
+117
+3,257
+10,349
+127
+1,214
+1,183
+37,616
+27,217
+Subtotal of retail loans and advances
+48,819
+38,876
+Gross amount of loans and advances to customers
+220,738
+260,827
+As at 31 December 2021, over 90% of the Group's loans and advances to customers were conducted in Mainland
+China (31 December 2020: over 90%).
+219
+12,317
+132,055
+2,383
+Other
+30,526
+Manufacturing
+23,763
+26,962
+Wholesale and retail
+8,920
+17,720
+Telecommunications, software and IT services
+7,727
+9,644
+Production and supply of electric power, heating power, gas and water
+7,077
+8,636
+Mining
+5,651
+9,579
+Leasing and commercial services
+4,749
+11,223
+Construction
+3,481
+2,177
+Water, environment and public utilities management
+821
+5,137
+138,352
+Wholesale and retail
+143,805
+14
+Gross amount of loans and advances to customers at amortised cost
+5,075,052
+4,647,140
+Less: Loss allowances
+(244,523)
+(234,426)
+- Stage 1 (12-month ECL)
+(169,347)
+(159,918)
+- Stage 2 (Lifetime ECL-not credit-impaired)
+(32,007)
+(27,401)
+- Stage 3 (Lifetime ECL-credit-impaired)
+(43,169)
+(47,107)
+Net amount of loans and advances to customers at amortised cost
+4,830,529
+4,412,714
+(ii) Loans and advances to customers at FVTOCI
+Corporate loans and advances
+Discounted bills
+Loans and advances to customers at FVTOCI
+Discounted bills
+Loss allowances
+2,681,160
+Retail loans and advances
+(244,523)
+(971)
+(234,426)
+Subtotal
+Loans and advances to customers at amortised cost
+(245,494)
+(96)
+(234,522)
+4,840,106
+4,422,146
+Loans and advances to customers at FVTOCI (ii)
+Loans and advances to customers at FVTPL (iii)
+Total
+488,004
+375,359
+7,281
+6,856
+5,335,391
+4,804,361
+(i)
+Loans and advances to customers at amortised cost
+2021
+2020
+Corporate loans and advances
+2,087,247
+1,965,980
+2,987,791
+Less: Loss allowances of loans and advances to customers at amortised
+cost (i)
+- Stage 1 (12-month ECL)
+- Stage 3 (Lifetime ECL-credit-impaired)
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+22. Loans and advances to customers (continued)
+(b) Analysis of loans and advances to customers
+(i)
+Analysed by industry sector and category:
+Operations in Mainland China
+2021
+2020
+Transportation, storage and postal services
+412,417
+381,898
+Property development
+367,642
+342,667
+Manufacturing
+309,635
+256,173
+Production and supply of electric power, heating power, gas and water
+Leasing and commercial services
+187,611
+161,777
+170,009
+6,856
+- Stage 2 (Lifetime ECL-not credit-impaired)
+7,281
+6,629
+2021
+2020
+56,713
+44,623
+431,291
+330,736
+488,004
+375,359
+(1,581)
+(238)
+(1,289)
+(226)
+(292)
+(12)
+No loss allowance is recognised in the consolidated statement of financial position for loans and advances to
+customers at FVTOCI as the carrying amount is at fair value.
+(iii)
+Loans and advances to customers at FVTPL
+Corporate loans and advances
+Interest receivable
+Total
+2021
+2020
+6,978
+303
+227
+3
+524,301
+2,481
+5,856
+(4,379)
+657
+(3,722)
+- Net fair value gain/(loss) on debt
+instruments measured at FVTOCI
+5,675
+(1,519)
+4,156
+(3,717)
+988
+(2,729)
+- Net changes in expected credit losses of
+debt instruments measured at FVTOCI
+4,060
+(1,024)
+3,036
+(2,526)
+1,391
+8,382
+amount
+Note:
+(i)
+Taxation for Hong Kong and overseas operations are charged at the applicable rates of tax prevailing in relevant regions.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+16. Other comprehensive income
+(a)
+Income tax effects relating to each component of other comprehensive income
+Before-tax
+amount
+(expense)
+Net-of-tax
+amount
+Before-tax
+amount
+2020
+Tax benefit/
+(expense)
+Net-of-tax
+Items that may be reclassified to profit or loss
+24,481
+(337)
+- Net movement in cash flow hedge reserve
+(2,483)
+to profit or loss
+1,176
+157
+1,333
+677
+(153)
+524
+Net fair value gain on equity instruments
+designated at FVTOCI
+1,158
+160
+1,318
+625
+(144)
+481
+(2,483)
+1,054
+(1,574)
+Items that will not be reclassified subsequently
+88
+17
+105
+(33)
+6
+(27)
+- Share of other comprehensive income from
+equity-accounted investees
+133
+133
+463
+463
+- Exchange difference on translation
+(b)
+of financial statements of foreign
+operations
+(1,574)
+27,339
+Income tax expense
+(72)
+2,647
+1,492
+5,639
+2,147
+Other
+Total
+1,345
+168
+65,962
+64,871
+15. Income tax
+(a) Income tax in the consolidated statement of profit or loss represents:
+Current income tax expense
+- Mainland China
+– Hong Kong
+13,875
+- Overseas
+13,201
+15,367
+66
+59
+2021
+2020
+Loans and advances to customers
+37,020
+46,882
+- Loans and advances at amortised cost (Note 22(c)(i))
+- Loans and advances at FVTOCI (Note 22(c)(ii))
+Amounts due from banks and other financial institutions
+Financial investments
+35,678
+46,983
+1,342
+(101)
+6,110
+307
+15,848
+- Debt investments at amortised cost (Note 23(b)(iii))
+- Debt investments at FVTOCI (Note 23(c)(ii))
+Financial guarantees and loan commitments
+Deferred taxation
+Total
+2021
+37,043
+30,610
+- Effects of non-deductible expenses
+1,392
+914
+Effects of non-taxable income
+(12,603)
+(10,568)
+- Effects of different applicable rates in other jurisdictions
+(258)
+(458)
+- Transfer out of previously recognised deferred tax assets
+Other
+1,716
+4,055
+49
+Tax at the PRC statutory income tax rate of 25% (2020: 25%)
+Tax effects of the following items:
+122,440
+148,173
+Profit before taxation
+2020
+38,141
+31,646
+37,222
+30,574
+767
+960
+- Remeasurement of defined benefit scheme
+152
+(10,802)
+(7,165)
+27,339
+24,481
+(b) A reconciliation of income tax expense in the consolidated statement of profit
+or loss and that calculated at the applicable statutory tax rate is as follows:
+2021
+2020
+112
+54
+18
+15
+(i)
+Notes:
+Total
+Interest receivable
+Fiscal deposits
+Surplus deposit reserve (note (ii))
+Statutory deposit reserve (note (i))
+18. Balances with central banks
+The conversion feature of preference shares is considered to be contingently issuable ordinary shares. The triggering events of conversion did not occur
+as of 31 December 2021 and 2020. Therefore the conversion feature of preference shares has no effect on the diluted earnings per share calculation for
+both years.
+The Bank issued non-cumulative preference shares in 2017 and non-cumulative perpetual bonds in 2020 and 2021. For the purpose of calculating basic
+earnings per share, dividends on non-cumulative preference shares and interests on non-cumulative perpetual bonds declared during the year should be
+deducted from the amounts attributable to equity holders of the Bank.
+Note:
+Net profit attributable to holders of perpetual bonds
+Net profit attributable to ordinary shareholders of the Bank
+Weighted average number of shares in issue (in million shares)
+Basic and diluted earnings per share (in RMB Yuan)
+3.79
+4.61
+25,220
+(ii)
+25,220
+2021
+484,878
+65,819
+2,958
+243
+553,898
+240
+- Other financial institutions
+- Banks
+Balances in Mainland China
+(a) Analysed by nature of counterparties
+Total
+Interest receivable
+Subtotal
+Impairment allowances (a)(b)
+Principal (a)
+19. Balances with banks and other financial institutions
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+Surplus deposit reserve maintained with the PBOC and central banks outside the Mainland China are mainly for clearing and settlement
+purposes.
+The Group places statutory deposit reserves with the People's Bank of China ("PBOC") and overseas central banks where it has operations.
+The statutory deposit reserves are not available for the Group's daily operations. The statutory deposit reserve funds of the Bank's institutions
+located in Mainland China are calculated at 8% and 9% of eligible RMB deposits and foreign currency deposits respectively as at 31 December
+2021 (31 December 2020: 9% and 5% of eligible RMB deposits and foreign currency deposits respectively). Eligible deposits include deposits
+from government authorities and other organisations, retail deposits, corporate deposits, and net credit balances of entrusted business and
+RMB deposits placed by financial institutions outside Mainland China. The amounts of statutory deposit reserves placed with the central banks
+of overseas countries are determined by local jurisdictions.
+525,358
+2020
+472,566
+47,472
+5,080
+Balances outside Mainland China
+Banks
+95,691
+(1,975)
+(36)
+74
+Effective portion of changes in fair value of hedging instruments
+Reclassification adjustment for realised gain to profit or loss
+Net movement in hedging reserve during the year recognised in other
+comprehensive income
+Net movement in cash flow hedge reserve
+481
+1,318
+recognised in other comprehensive income
+Net movement in investment revaluation reserve during the year
+481
+1,318
+Net fair value gain on equity instruments designated at FVTOCI
+Changes in fair value recognised during the year
+1,054
+3,036
+1,054
+53
+31
+116,309
+9
+(27)
+(1,651)
+(1,638)
+Less: Net profit attributable to preference shareholders of the Bank
+97,342
+119,922
+2020
+2021
+Net profit attributable to equity holders of the Bank
+The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders of the
+Bank and the weighted average number of shares in issue for the year. As there were no diluted potential ordinary
+shares for the years of 2021 and 2020, there was no difference between basic and diluted earnings per share for
+both years.
+17. Earnings per share
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+214
+213
+105
+- Other financial institutions
+Total
+Less: Impairment allowances
+Net movement in investment revaluation reserve during the year
+recognised in other comprehensive income
+4,156
+(2,729)
+Net changes in expected credit losses of debt instruments measured at
+FVTOCI
+Changes in expected credit losses recognised during the year
+Net movement in investment revaluation reserve during the year
+recognised in other comprehensive income
+3,036
+(93)
+109
+Charge/(release) for the year (note 14)
+372
+277
+Balance as at the beginning of the year
+2020
+2021
+(2,227)
+(b) Movements of allowances for impairment losses are as follows:
+(2,637)
+Reclassification adjustments for amounts transferred to profit
+52
+43
+Other comprehensive income
+9,558
+(2,369)
+7,189
+(3,702)
+504
+(3,198)
+Movements relating to components of other comprehensive income are as
+follows:
+2021
+2020
+Net fair value gain/(loss) on debt instruments measured at FVTOCI
+Changes in fair value recognised during the year
+6,793
+(502)
+or loss upon disposal
+103,171
+80,286
+(12)
+2021
+103,335
+80,350
+164
+64
+103,171
+80,286
+(277)
+(378)
+103,448
+2020
+2021
+80,664
+Net carrying amount
+- Other financial institutions
+- Banks
+2020
+37,453
+56,811
+35,620
+(49)
+(265)
+(329)
+(277)
+(378)
+103,448
+80,664
+(3)
+695
+45,942
+41,430
+46,637
+43,211
+1,694
+1,833
+55,117
+1,781
+61
+2021
+Tax benefit/
+Maximum aggregate amount of relevant loans made by the Group
+outstanding during the year
+RMB'000
+RMB'000
+Retirement
+scheme
+contributions
+bonuses
+in kind
+Discretionary
+and benefits
+Directors'
+fees
+Salaries,
+allowances
+2020
+11. Directors' and supervisors' emoluments (continued)
+Annual Report 2021
+376
+2020
+2021
+Balance as at the end of the year
+Exchange difference
+Charge for the year (note 14)
+Balance as at the beginning of the year
+(c) Movements of allowances for impairment losses are as follows:
+226,140
+193,491
+4,169
+96,002
+125,969
+66,842
+115,906
+10,743
+2020
+2021
+226,140
+193,491
+RMB'000
+RMB'000
+Total
+RMB'000
+(i)
+Su Min
+Zhang Jian
+Hong Xiaoyuan
+Zhou Song
+277
+Miao Jianmin(ii)
+Non-executive directors
+The executive directors' emoluments shown above were for their services in connection with the management of the
+affairs of the Bank and the Group.
+14,663
+123
+4,334
+10,206
+Subtotal
+4,348
+(231)
+40
+3,024
+4,351
+43
+1,284
+3,024
+5,964
+40
+1,766
+4,158
+| | |
+Wang Liang
+Liu Jianjun
+Tian Huiyu
+Executive directors
+1,284
+Wang Daxiong
+(2,724)
+(136)
+Within one month (inclusive)
+Maturing
+(b) Analysed by remaining maturity
+Net carrying amount
+- Other financial institutions
+- Banks
+Less: Impairment allowances
+Total
+- Other financial institutions
+- Banks
+Placements outside Mainland China
+- Other financial institutions
+- Banks
+Placements in Mainland China
+(a) Analysed by nature of counterparties
+Total
+Interest receivable
+Subtotal
+Impairment allowances (a)(c)
+Principal (a)
+20. Placements with banks and other financial institutions
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+216
+Exchange difference
+(8)
+(2
+Balance as at the end of the year
+378
+- Between one month and one year (inclusive)
+Over one year
+Total
+2021
+196,351
+2020
+(376)
+(2,860)
+226,516
+196,351
+290
+89,965
+68,102
+89,965
+68,392
+108,914
+108,746
+27,637
+19,213
+136,551
+(145)
+127,959
+2021
+226,919
+194,421
+Chapter VIII Financial Statements
+China Merchants Bank
+210
+779
+930
+226,140
+14. Expected credit losses
+193,491
+(376)
+(2,860)
+226,516
+2020
+Luo Sheng
+Fu Gangfeng
+The non-executive directors shown above did not receive remuneration from the Bank.
+(i)
+4,200
+18,346
+5,779
+252
+28,577
+Notes:
+(ii)
+(iv)
+On 29 September 2021, the Board of Directors approved the discretionary bonuses of the Bank's directors, supervisors and executive officers
+for 2020.
+In September 2020, according to the relevant resolutions passed at the 2020 first extraordinary general meeting of the Bank, Mr. Miao Jianmin
+was elected as the Chairman and Non-Executive Director of the Bank, whose qualifications as the Director and the Chairman were approved by
+the CBIRC on 24 September 2020.
+In September 2020, Mr. Li Jianhong ceased to be the Chairman and Non-Executive Director of the Bank due to change of work arrangement.
+As of 31 December 2020, the Group had offered 10 phases of H share appreciation rights scheme to its senior management ("the Scheme").
+Details of the Scheme are set out in Note 39 (a)(iii).
+During the year of 2021 and 2020, no emoluments were paid by the Group to any of the persons who are directors
+or supervisors as an inducement to join or upon joining the Group or as compensation for loss of office.
+(iii)
+During the year of 2021 and 2020, there was no arrangement under which a director or a supervisor waived or
+agreed to waive any remuneration.
+Total
+Subtotal
+Li Jianhong(iii)
+Directors'
+fees
+RMB'000
+Salaries,
+allowances
+and benefits
+in kind
+RMB'000
+2020
+The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
+directors or supervisors of the Bank.
+Discretionary
+Retirement
+scheme
+contributions
+Total
+RMB'000
+RMB'000
+RMB'000
+(i)
+bonuses
+directors and supervisors
+12. Five highest paid individuals
+2021
+RMB'000
+5,000,001 - 5,500,000
+3
+During the year ended 31 December 2021, the five highest paid individuals included five persons in total, two of
+them were with the same emoluments and being the fourth highest paid individuals.
+During the year ended 31 December 2020, the five highest paid individuals included seven persons in total, two of
+them were with the same emoluments and being the third highest paid individuals, three of them were with the
+same emoluments and being the fourth highest paid individuals.
+211
+212
+4,500,001 5,000,000
+China Merchants Bank
+Annual Report 2021
+13. Loans to directors, supervisors and executive officers
+Loans to directors, supervisors and executive officers of the Group are as follows:
+2021
+2020
+Aggregate amount of relevant loans made by the Group outstanding at
+year end
+Chapter VIII Financial Statements
+Of the five highest paid individuals for the year ended 31 December 2021, three (2020: four) were directors or
+supervisors of the Bank whose emoluments were included in Note 11 above. The aggregate emolument of the
+remaining two (2020: three) highest paid individuals who were neither directors nor supervisors of the Bank is as
+follows:
+4,000,001 -4,500,000
+3,500,001 - 4,000,000
+2020
+RMB'000
+Salaries and other emoluments
+6,048
+Discretionary bonuses
+9,072
+3,852
+Contributions to defined contribution retirement schemes
+2
+Total
+123
+13,047
+The top five highest paid individuals who were neither directors nor supervisors of the Bank whose emoluments fell
+within the following bands is set out below:
+HKD
+2021
+2020
+85
+6,133
+Subtotal
+Former executive, non-executive
+Annual Report 2021
+| | | |
+500
+500
+500
+500
+500
+500
+| | | |
+500
+500
+500
+500
+500
+3,402
+1,445
+500
+| | | | |
+Subtotal
+Liu Xiaoming
+Independent non-executive
+directors and supervisors
+Leung Kam Chung, Antony
+Zhao Jun
+Wong See Hong
+Li Menggang
+Liu Qiao
+Tian Hongqi
+Liu Yuan
+Peng Bihong
+Wen Jianguo
+Wu Heng
+Ding Huiping
+Han Zirong
+Xu Zhengjun
+Wang Wanging
+43
+11. Directors' and supervisors' emoluments (continued)
+4,890
+400
+Chapter VIII Financial Statements
+China Merchants Bank
+The independent non-executive directors' and supervisors' emoluments shown above were for their services and
+employment as directors or supervisors of the Bank.
+13,914
+129
+2,039
+43
+2,785
+43
+400
+400
+400
+215
+400
+400
+2,742
+338
+1,996
+4,200
+8,140
+1,445
+(632)
+1,185,841
+348,123
+23(a)
+23(b)
+(931)
+(733)
+(859)
+48,047
+Debt investments at amortised cost
+Notes
+2021
+Financial investments at fair value through profit or loss
+2020
+495,723
+1,049,280
+65,849
+19,696
+(1,872)
+(174)
+Balance as at the end of the year
+159,918
+27,401
+47,107
+234,426
+Reconciliation of allowance for expected credit loss for loans and advances to customers measured at
+(ii)
+FVTOCI:
+Balance as at the beginning of the year
+Charge/(release) for the year (note 14)
+Exchange difference
+Balance as at the end of the year
+2021
+2020
+238
+341
+1,342
+(101)
+(50)
+1
+(24)
+Exchange difference
+(65)
+(846)
+- Stage 3
+(565)
+(10,698)
+11,263
+Charge for the year (note 14)
+Debt investments at FVTOCI
+1,652
+25,635
+46,983
+Write-offs/disposals
+(43,734)
+(43,734)
+Unwinding of discount on allowance
+(186)
+(186)
+Recovery of loans and advances written off
+8,781
+8,781
+(100)
+(1,653)
+(2)
+238
+20,865
+11,225
+15,608
+8,519
+10,720
+5,323
+8,135
+5,580
+6,280
+13,980
+18,890
+59,662
+80,498
+(8,378)
+(11,206)
+51,284
+69,292
+(3,237)
+(3,443)
+15,035
+1,581
+2020
+23. Financial investments
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+22. Loans and advances to customers (continued)
+(d)
+Finance leases receivable
+The table below provides an analysis of finance leases receivable included in loans and advances to customers for
+leases of assets in which the Group is a lessor:
+Total minimum leases receivable
+Within 1 year (inclusive)
+Over 1 year but within 2 years (inclusive)
+Over 2 years but within 3 years (inclusive)
+Over 3 years but within 4 years (inclusive)
+Over 4 years but within 5 years (inclusive)
+Over 5 years
+Subtotal
+Unearned finance income
+Present value of minimum leases receivable
+Less: Impairment allowances
+- Stage 1 (12-month ECL)
+- Stage 2 (Lifetime ECL-not credit-impaired)
+- Stage 3 (Lifetime ECL-credit-impaired)
+Net carrying amount of finance leases receivable
+2021
+220
+Beijing
+Chapter VIII Financial Statements
+Overdue
+2,972
+1 year up to
+3 years
+from
+Overdue
+2021
+10,269
+from
+3 months
+up to 1 year
+Overdue
+18,097
+3 months
+Overdue
+within
+Gross amount of loans and advances to customers
+Pledged loans
+Collateralised loans
+Guaranteed loans
+Credit loans
+330,736
+5,029,128
+4,698,392
+5,570,034
+431,305
+333,332
+5,138,729
+752,744
+2,075,639
+more than
+3 years
+Total
+overdue
+loans
+1111
+Chen Yisong
+1,398
+Limited liability
+Limited liability
+Limited liability
+Li Biao
+Wang Xiaoqing
+229
+from
+Overdue
+2020
+10,849
+791
+328,598
+3,610
+3 months
+up to 1 year
+Overdue
+from
+16,339
+687
+2,733
+2,650
+Overdue
+within 3
+months
+22,327
+473
+2,616
+1,141
+3,476
+China Merchants Bank
+Annual Report 2021
+696,634
+1,914,658
+1,977,014
+Finance leasing
+100%
+RMB12,000
+Shanghai
+CMB Financial Leasing Company
+Tian Huiyu
+Limited liability
+Investment bank
+and investment
+managements
+100%
+Analysed by overdue term:
+(iii)
+Gross amount of loans and advances to customers
+Discounted bills
+Subtotal
+Pledged loans
+Collateralised loans
+Guaranteed loans
+Credit loans
+Analysed by type of guarantees:
+(ii)
+Analysis of loans and advances to customers (continued)
+(b)
+22. Loans and advances to customers (continued)
+Limited liability
+Shi Shunhua
+Limited (note (ii))
+CMB Wing Lung Bank Limited (note (iii))
+2021
+Asset management
+(note (vii))
+RMB500
+Cigna & CMB Asset Management Company
+Limited (note (vii))
+Banking
+100%
+EUR50
+Luxembourg
+China Merchants Europe S.A. (note (vi))
+Asset management
+2020
+1,758,502
+100%
+CMB Wealth Management Co., Ltd (note (v)) Shenzhen
+Zhu Qi
+Wang Xiaoqing
+Limited liability
+Limited liability
+Fund management
+55%
+RMB1,310
+China Merchants Fund Management Co., Ltd. Shenzhen
+(note (iv))
+Banking
+100%
+HKD1,161
+Hong Kong
+RMB5,000
+(552)
+22. Loans and advances to customers (continued)
+(2,571)
+(244,523)
+(43,169)
+(32,007)
+(169,347)
+Total
+5,075,052
+50,862
+111,354
+4,912,836
+Loans and advances measured at amortised cost
+Less: Loss allowances of loans and advances to
+customers at amortised cost
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+-Stage 3
+(Lifetime
+ECL-not
+-Stage 1
+(12-month
+-Stage 2
+(Lifetime
+2021
+Analysed by ECL
+(iv)
+(b) Analysis of loans and advances to customers (continued)
+Legal
+representative
+Net amount of loans and advances to customers at
+Annual Report 2021
+amortised cost
+79,347
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+(12-month
+(Lifetime
+ECL-not
+-Stage 1
+-Stage 3
+(Lifetime
+-Stage 2
+2020
+(1,581)
+(292)
+(1,289)
+Loss allowances of loans and advances to customers
+at FVTOCI
+488,004
+2,269
+485,735
+Loans and advances to customers at FVTOCI
+4,830,529
+7,693
+4,743,489
+Chapter VIII Financial Statements
+China Merchants Bank
+177
+2,485
+688
+Pledged loans
+Collateralised loans
+Guaranteed loans
+Credit loans
+25,329
+6,165
+1,538
+11,753
+3,982
+11,350
+737
+11111
+overdue
+loans
+Total
+more than
+3 years
+Overdue
+57,426
+7,911
+5,373
+3,422
+8,670
+11,101
+2,142
+1,403
+944
+2,268
+13,152
+3,116
+3,901
+1,990
+473
+2,308
+1,517
+2020
+2021
+Total
+Collateralised loans that are overdue but not impaired
+Pledged loans that are overdue but not impaired
+Among the above-mentioned overdue loans and advances to customers, collateralised loans and pledged loans that
+are overdue but not impaired at the reporting date are as follows:
+Note: Loans are classified as overdue when the principal or interest is overdue more than one day.
+56,568
+Total
+5,399
+20,112
+15,584
+Gross amount of loans and advances to customers
+5,154
+560
+3,737
+476
+381
+12,933
+1,883
+4,033
+15,473
+Loans and advances measured at amortised cost
+Less: Loss allowances of loans and advances to
+customers at amortised cost
+4,517,239
+76,286
+(34)
+(47)
+Exchange difference
+9,893
+9,893
+Recovery of loans and advances written off
+(247)
+(247)
+Unwinding of discount on allowance
+(35,105)
+(35,105)
+Write-offs/disposals
+35,678
+16,149
+13,763
+5,766
+Charge for the year (note 14)
+5,973
+(4,972)
+(1,001)
+- Stage 3
+(455)
+1,592
+(41)
+(122)
+Balance as at the end of the year
+169,347
+2,636
+- Stage 1
+Transfer to
+Total
+222,756
+46,309
+37,644
+138,803
+Balance as at the beginning of the year
+impaired)
+impaired)
+ECL)
+(1,137)
+ECL-credit-
+(12-month
+(Lifetime
+ECL-not
+-Stage 1
+-Stage 3
+(Lifetime
+-Stage 2
+2020
+244,523
+43,169
+32,007
+credit-
+- Stage 2
+- Stage 2
+(5,743)
+China Merchants Bank
+Annual Report 2021
+222
+221
+(238)
+(12)
+(226)
+Loss allowances of loans and advances to customers
+at FVTOCI
+375,359
+559
+374,800
+Loans and advances to customers at FVTOCI
+4,412,714
+6,508
+48,885
+4,357,321
+amortised cost
+Net amount of loans and advances to customers at
+(234,426)
+(47,107)
+(27,401)
+(159,918)
+4,647,140
+53,615
+Chapter VIII Financial Statements
+22. Loans and advances to customers (continued)
+(c)
+(i)
+5,848
+- Stage 1
+Transfer to
+234,426
+47,107
+27,401
+159,918
+Balance as at the beginning of the year
+Total
+impaired)
+impaired)
+(105)
+ECL)
+credit-
+(12-month
+(Lifetime
+ECL-not
+-Stage 1
+-Stage 3
+(Lifetime
+-Stage 2
+2021
+Reconciliation of allowance for expected credit loss for loans and advances to customers measured at
+amortised cost:
+Movements of allowance for expected credit loss
+ECL-credit-
+Economic
+nature
+ECL-credit-
+% of
+ownership
+held by
+the Bank
+11,251
+10,567
+616
+2,218
+Total
+29,878
+31,257
+Classified by listing
+-
+- Listed in Mainland China
+- Listed outside Mainland China
+Total
+- Unlisted
+28,793
+1,060
+25
+29,878
+28,533
+Subtotal
+(i)
+Impairment losses of principal (i)(ii)(iii)
+Impairment losses of interest receivable
+Subtotal
+Debt investments at amortised cost (i)(ii)
+Interest receivable
+(b) Debt investments at amortised cost
+Bonds issued by commercial banks and other financial institutions
+Other debt securities
+23. Financial investments (continued)
+China Merchants Bank
+Annual Report 2021
+226
+225
+31,257
+14
+2,710
+Chapter VIII Financial Statements
+Total
+41
+18,431
+- Bonds issued by policy banks
+- Listed outside Mainland China
+- Unlisted
+Total other financial investments measured at FVTPL
+Total financial investments measured at FVTPL
+166,154
+313,935
+175,303
+4,909
+158,703
+3,410
+133,861
+1,360
+1,182
+166,154
+298
+1,063
+313,935
+62
+96
+1,118
+739
+41
+Government Bonds
+Classified by issuer
+Bonds:
+2020
+2021
+17,970
+Financial assets designated at fair value through profit or loss
+464,466
+318,245
+329,308
+183,248
+313,100
+164,974
+(ii)
+- Listed in Mainland China
+Debt investments at amortised cost:
+2020
+_
+- Unlisted
+1,068,300
+906,053
+4,740
+2,064
+5,848
+3,292
+Fair value for the listed bonds
+Other investments:
+Classified by underlying assets
+1,099,251
+916,422
+130,471
+148,978
+- Non-standard assets - Bills
+12,725
+- Unlisted
+Total
+Classified by listing
+592
+620
+- Other
+- Listed outside Mainland China
+6,400
+5,580
+- Non-standard assets - Other
+100
+- Non-standard assets - Creditor's beneficiary rights to other
+commercial banks
+123,681
+115,022
+- Non-standard assets - Loans and advances to customers
+14,729
+2021
+Listed in Mainland China
+1,078,888
+1,209,359
+16,368
+1,225,727
+1,060,387
+15,099
+1,075,486
+(39,707)
+(26,118)
+(179)
+(88)
+(39,886)
+(26,206)
+1,185,841
+1,049,280
+2021
+2020
+Bonds:
+Classified by issuer
+Government bonds
+Classified by listing
+6,529
+10,158
+Other debt securities
+28,157
+20,064
+911,409
+Bonds issued by commercial banks and other financial institutions
+280,129
+- Bonds issued by policy banks
+623,727
+768,537
+911,409
+1,078,888
+252,996
+Less: loss allowances
+Classified by listing
+Wealth management products
+- Long position in precious metal contracts
+961
+7,310
+3 years
+1,036
+Wealth management products
+2,971
+4,067
+Fund investments
+4,028
+5,205
+Classified by underlying assets
+Other investments:
+208
+234
+20,361
+15,796
+21,245
+22,636
+-
+Other debt securities
+51,965
+71,395
+Classified by listing
+Classified by listing
+131,130
+-
+- Listed in Mainland China
+113,762
+110,561
+Listed outside Mainland China
+Unlisted
+129,792
+Bonds issued by commercial banks and other financial institutions
+- Listed in Mainland China
+96
+1 year up to
+Other debt securities
+-
+8,706
+9,784
+- Bonds issued by commercial banks and other financial institutions
+-
+15,373
+17,094
+Classified by issuer
+Bonds:
+2020
+2021
+Other financial investments measured at FVTPL
+Financial investments measured at FVTPL (continued)
+(i)
+Financial investments at fair value through profit or loss (continued)
+5,205
+-
+- Listed outside Mainland China
+- Unlisted
+111
+5,094
+Total financial investments held for trading
+102
+134,997
+140
+3,888
+135,158
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+23. Financial investments (continued)
+(a)
+4,028
+Other
+4,845
+Bonds issued by policy banks
+(a) Financial investments at fair value through profit or loss
+2,068,695
+2,176,997
+Total
+7,139
+6,995
+23(d)
+Equity investments designated at FVTOCI
+516,553
+636,038
+23(c)
+6,667
+Classified by listing
+17,094
+15,373
+-
+- Listed in Mainland China
+- Fund investments
+-
+- Equity investments
+Non-standard assets - Bills
+Classified by underlying assets
+Other investments:
+Notes
+Unlisted
+373
+995
+1,333
+14,244
+15,388
+- Listed outside Mainland China
+134
+9,861
+2021
+Financial investments measured at FVTPL
+32,254
+46,721
+Government bonds
+-
+131,130
+129,792
+Classified by issuer
+Bonds:
+2020
+2021
+Financial investments held for trading
+Financial investments measured at FVTPL
+(i)
+Financial investments at fair value through profit or loss (continued)
+(a)
+23. Financial investments (continued)
+Annual Report 2021
+(i)
+318,245
+464,466
+Financial assets designated at fair value through profit or loss
+(ii)
+29,878
+2020
+31,257
+348,123
+495,723
+223
+224
+China Merchants Bank
+Chapter VIII Financial Statements
+Total
+Stage 1 (12-month ECL)
+Stage 2 (Lifetime ECL - not credit-impaired)
+Stage 3 (Lifetime ECL - credit-impaired)
+Net debt investments at amortised cost
+2021
+2020
+628,355
+510,307
+7,683
+6,246
+636,038
+516,553
+(6,622)
+(84)
+(4,014)
+(25)
+(6,706)
+(4,039)
+No impairment allowances are recognised in the consolidated statement of financial position for debt investments at
+FVTOCI as the carrying amount is at fair value.
+(i)
+Debt investments at FVTOCI:
+Bonds:
+97,487
+106,139
+Bonds issued by commercial banks and other financial institutions
+Other debt securities
+-
+71,542
+82,427
+Total
+- Bonds issued by policy banks
+390,419
+- Government bonds
+2020
+2021
+Total
+Classified by issuer
+287,007
+49,370
+Impairment losses of debt investments at FVTOCI (ii)
+Impairment losses of interest receivable
+Interest receivable
+283
+4,533
+13,995
+Transfer to:
+- Stage 1
+- Stage 2
+- Stage 3
+(204)
+204
+Charge for the year (note 14)
+2,858
+43
+33
+10,974
+Write-offs disposals
+(1,822)
+13,875
+(1,822)
+Debt investments at FVTOCI (i)
+(c) Debt investments at FVTOCI
+26,118
+13,960
+326
+11,832
+Total
+Balance as at the end of the year
+(9)
+(1)
+Exchange difference
+80
+80
+Recovery of debt previously written off
+(10)
+9,179
+54,271
+510,307
+6,622
+4,014
+2021
+2020
+901
+899
+6,094
+6,240
+6,995
+7,139
+Total
+Classified by listing
+- Listed in Mainland China
+- Listed outside Mainland China
+- Unlisted
+Total
+65
+52
+Particulars of
+the issued and
+paid up capital
+(in millions)
+HKD4,129
+Hong Kong
+CMB International Capital Holdings
+Corporation Limited (note (i))
+Place of
+incorporation
+and operation
+Name of company
+The following list contains particulars of subsidiaries which principally affected the financial results, assets or
+liabilities of the Group. Unless otherwise stated, the class of all shares held is ordinary. All of these companies are
+subsidiaries as defined under Note 4(1) and have been included in the scope of the consolidated financial statements
+of the Group.
+(78)
+24. Particulars of principal subsidiaries of the bank
+7,139
+6,995
+5,064
+4,726
+2,023
+2,204
+During the year ended 31 December 2021, the Group disposed of part of the equity investments designated at
+FVTOCI. The fair value of the equity investments disposed of at the date of derecognition was RMB2, 186 million
+(2020: RMB433 million). The cumulative net of tax gain on disposal of RMB1,804 million (2020: cumulative net of
+tax gain of RMB26 million) was transferred from investment revaluation reserve to retained earnings on disposal,
+among which RMB1,796 million was due to the completion of the stake acquisition of Bank of Taizhou Co., Ltd. in
+2021. The investment in Bank of Taizhou Co., Ltd. was converted from equity investments designated at FVTOCI to
+interests in associates, refer to Note 26 for details.
+628,355
+(39)
+2,647
+Classified by listing
+-
+- Listed in Mainland China
+-
+- Listed outside Mainland China
+Unlisted
+Total
+522,889
+400,456
+65,439
+64,191
+40,027
+45,660
+628,355
+510,307
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+2,600
+4,014
+2020
+2021
+Other
+Repossessed equity instruments
+1,492
+(d) Equity investments designated at FVTOCI
+Exchange difference
+Charge for the year (note 14)
+Balance as at the beginning of the year
+(ii)
+(c) Debt investments at FVTOCI (continued)
+Movements of allowances for expected credit loss
+23. Financial investments (continued)
+Balance as at the end of the year
+Balance as at the beginning of the year
+Total
+impaired)
+1,962
+24,077
+Total
+1,209,359
+Less: Loss allowances of debt investments
+at amortised cost
+(14,974)
+(712)
+(24,021)
+Net debt investments at amortised cost
+1,168,346
+1,250
+56
+(39,707)
+1,169,652
+2020
+-Stage 2
+(Lifetime
+-Stage 3
+-Stage 1
+ECL-not
+(326)
+(11,832)
+Less: Loss allowances of debt investments
+at amortised cost
+Total
+1,060,387
+14,590
+971
+1,183,320
+1,044,826
+impaired)
+impaired)
+ECL)
+credit-
+(12-month
+(Lifetime
+Debt investments at amortised cost
+(13,960)
+Debt investments at amortised cost
+impaired)
+130,471
+148,978
+130,471
+148,978
+1,209,359
+1,060,387
+(39,707)
+(26,118)
+(14,974)
+(11,832)
+(712)
+(326)
+(24,021)
+(13,960)
+1,169,652
+1,034,269
+China Merchants Bank
+ECL)
+ECL-credit-
+credit-
+(12-month
+-Stage 3
+(Lifetime
+ECL-not
+impaired)
+-Stage 1
+2021
+(ii) Analysed by stage of ECL:
+(b) Debt investments at amortised cost (continued)
+23. Financial investments (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+-Stage 2
+(Lifetime
+(26,118)
+Net debt investments at amortised cost
+1,032,994
+Recovery of debt previously written off
+419
+419
+Exchange difference
+(9)
+(12)
+(21)
+Balance as at the end of the year
+14,974
+712
+24,021
+39,707
+227
+228
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+impaired)
+ECL)
+(Lifetime
+ECL-credit-
+-Stage 3
+credit-
+(12-month
+(10)
+ECL-not
+(Lifetime
+-Stage 2
+2020
+(iii)
+(b) Debt investments at amortised cost (continued)
+Movements of allowances for expected credit loss (continued)
+23. Financial investments (continued)
+-Stage 1
+(10)
+Write-offs disposals
+13,201
+ECL)
+ECL-credit-
+credit-
+(12-month
+-Stage 3
+(Lifetime
+ECL-not
+impaired)
+-Stage 1
+2021
+Movements of allowances for expected credit loss
+(iii)
+1,034,269
+630
+645
+-Stage 2
+(Lifetime
+Principal activities
+impaired)
+Balance as at the beginning of the year
+9,664
+381
+3,156
+Charge for the year (note 14)
+Stage 3
+5
+Total
+(5)
+- Stage 1
+Transfer to:
+26,118
+13,960
+326
+11,832
+Stage 2
+32,282
+Level 3
+1,009
+(e)
+As at 31 December 2021 and 2020, the leases committed but not yet commenced were not significant.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+30. Intangible assets
+Software
+and other
+Core deposits
+Total
+(d) During the year of 2021, total cash outflow of the Group's leases amounted to RMB4,835 million (2020: RMB4,644
+million).
+Cost/appraisal value:
+Additions
+Exchange difference
+At 31 December 2021
+9,576
+1,118
+10,694
+479
+479
+(10)
+At 1 January 2021
+(35)
+Short-term lease expense and leases of low-value assets expense are disclosed in note 10. The Group entered into
+short-term leases for buildings, computer equipment, motor vehicles and other.
+13,812
+1 year to 2 years (inclusive)
+2 year to 5 years (inclusive)
+Over 5 years
+Total
+Interest expense on lease liabilities are set out in note 7.
+(c) Short-term leases and leases of low-value assets
+2021
+2020
+506
+14,242
+527
+488
+2,989
+2,805
+3,228
+3,395
+4,925
+5,182
+1,628
+1,845
+536
+(45)
+10,045
+1,083
+629
+4,763
+Software
+and other
+Core deposits
+Total
+Cost/appraisal value:
+At 1 January 2020
+Additions
+Exchange difference
+4,134
+8,161
+9,347
+1,419
+1,419
+(4)
+(68)
+(72)
+At 31 December 2020
+9,576
+1,118
+1,186
+4,066
+571
+3,495
+11,128
+Accumulated amortisation:
+At 1 January 2021
+5,442
+489
+5,931
+Charge for the year (Note 10)
+1,114
+39
+1,153
+Exchange difference
+(6)
+(16)
+(22)
+At 31 December 2021
+6,550
+512
+7,062
+Net carrying amount:
+At 31 December 2021
+At 1 January 2021
+3 months to 1 year (inclusive)
+1 month to 3 months (inclusive)
+Within 1 month (inclusive)
+Analysis of the Group's lease liabilities by remaining maturity is as follows:
+Total
+Cost:
+At 1 January 2020
+5,968
+18,602
+3
+18
+24,591
+Additions
+and other
+3,888
+2
+3,894
+Decrease
+At 31 December 2020
+(11)
+(1,368)
+(3)
+(4)
+(1,386)
+4
+vehicles
+Computer
+equipment
+Buildings
+59
+At 31 December 2021
+59
+59
+59
+Net carrying amount:
+At 31 December 2021
+4,736
+13,656
+4
+7
+18,403
+At 1 January 2021
+4,948
+14,144
+2
+10
+19,104
+Motor
+Land
+use rights
+5,957
+10,694
+21,122
+16
+At 31 December 2020
+4,948
+14,144
+2
+10
+19,104
+At 1 January 2020
+5,138
+14,847
+Net carrying amount:
+2
+20,000
+The Group mainly leases land use rights and buildings for its operations. Lease terms are negotiated on an individual
+basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the
+length of the non-cancellable period, the Group reassesses whether it is reasonably certain to exercise an extension
+option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant
+change in circumstances that is within the control of the lessee.
+237
+238
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+29. Lease contracts (continued)
+(b) Lease liabilities
+13
+7,995
+6
+2
+27,099
+Accumulated depreciation:
+At 1 January 2020
+830
+3,755
+Depreciation (Note 10)
+183
+4,228
+53
+12
+4,591
+4,416
+Decrease
+(4)
+(1,005)
+(1)
+(2)
+(1,012)
+At 31 December 2020
+1,009
+6,978
+4
+Accumulated amortisation:
+At 1 January 2020
+4,294
+2,899
+604
+287
+11,665
+2,245
+499
+9
+30
+490
+2,215
+71
+289,731 26,441 6,775
+72,015 5,521 1,684
+tax
+Other
+Total Cash Depreciation
+comprehensive comprehensive and cash
+and Income
+income
+income equivalents amortisation
+Assets Liabilities Equity Revenue Net profit
+Summarised financial information of the associate which is individually material to the Group is as follows:
+The Bank, which originally held a 10% stake in Bank of Taizhou, acquired a total of 14.8559% stake from Ping An Trust Co., Ltd. and Ping An
+Life Insurance Company of China, Ltd. at a total consideration of RMB3,121 million on 31 May 2021. Upon the completion of the transaction,
+the Bank held 24.8559% stake of Bank of Taizhou. The Bank can exercise significant influence on Bank of Taizhou and therefore this
+investment is converted from equity investments designated at FVTOCI to interests in associates.
+Note:
+Commercial Bank
+24.8559%
+24.8559%
+2021 (note)
+Bank of Taizhou Co.,
+Ltd.
+316,172
+Group's effective interest 77,536
+150
+2877
+Note:
+Group's effective interest
+36,582
+25
+36,557
+Other associates
+2020
+654
+37,893
+(65)
+(9)
+663
+Group's effective interest
+37,958
+Other associates
+2021
+income
+comprehensive
+Total
+comprehensive
+(expense)/income
+Net profit
+Other
+The period for profit or loss and other comprehensive income is from 1 June 2021 to 31 December 2021.
+Summarised financial information of the associates that are not individually material to the Group is as follows:
+RMB 1,800
+489
+Taizhou
+Bank of Taizhou Co., Ltd. (Note)
+China Merchants Bank
+748
+4,349
+| |
+748
+Group's effective interest
+4,349
+Other joint ventures
+2020
+Chapter VIII Financial Statements
+Group's effective interest
+2021
+805
+4,675
+expense
+Net profit
+comprehensive
+Other
+4,672
+805
+(3)
+Other joint ventures
+Annual Report 2021
+26. Interests in associates
+Share of net assets
+(in millions)
+Principal activity
+Percentage of
+ownership held
+by the Bank
+interest
+paid up capital
+effective
+issued and
+Group's
+Particulars of
+Place of
+incorporation
+and operation
+Economic nature
+7
+489
+1,153
+2,519
+8,875
+2020
+2021
+Details of the Group's interest in major associate are as follows:
+Share of other comprehensive income for the year
+Share of profits for the year
+Limited liability
+Charge
+7
+233
+as at
+Fair Value
+The fair value hierarchy of the investment properties of the Group are listed as follows:
+1,022
+1,180
+364
+359
+Total
+Over 5 years
+31 December
+60
+106
+71
+127
+165
+170
+296
+313
+4 year to 5 years (inclusive)
+3 year to 4 years (inclusive)
+66
+Level 1
+239
+4,575
+478
+4,772
+Charge for the year (Note 10)
+1,148
+40
+1,188
+Exchange difference
+(29)
+(29)
+At 31 December 2020
+5,442
+489
+5,931
+Net carrying amount:
+At 31 December 2020
+At 1 January 2020
+4,134
+629
+4,763
+3,867
+708
+2 year to 3 years (inclusive)
+496
+1 year to 2 years (inclusive)
+2020
+(86)
+3,558
+3,276
+2020
+2021
+Net carrying amount:
+At 31 December
+Exchange difference
+Transfers out
+(173)
+Depreciation
+Accumulated depreciation:
+At 31 December
+Exchange difference
+At 1 January
+Transfers out
+Cost:
+27. Investment properties
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+234
+At 1 January
+(55)
+(109)
+3,135
+2021
+The Group's total future minimum leases receivable under non-cancellable operating leases are as follows:
+Investment properties of the Group mainly represent the leased properties of CMB WLB and the Bank that have
+been leased out under operating leases. The fair value of the Group's investment properties is determined by the
+method of capitalisation of net rental income. There has been no change to the valuation methodology during
+the year. As at 31 December 2021, the fair value of these properties was RMB4,978 million (31 December 2020:
+RMB5,317 million).
+As at 31 December 2021, no impairment allowance was considered necessary for investment properties by the
+Group (2020: Nil).
+At 1 January
+At 31 December
+1,925
+1,623
+1,623
+1,372
+1,653
+1,763
+(74)
+(38)
+(72)
+(7)
+166
+155
+1,633
+1,653
+3,276
+Within 1 year (inclusive)
+comprehensive
+income
+At 1 January 2021
+10,616
+12,924
+7,028
+9,051
+4,465
+46,466
+Impairment loss:
+At 1 January 2021
+Charge
+12
+12,998
+20
+At 31 December 2021
+20
+236
+267
+(5)
+498
+236
+287
+(5)
+Exchange difference
+518
+At 31 December 2021
+(210)
+950
+3,822
+519
+8,702
+Reclassification and transfers
+6
+17
+(16)
+7
+(328)
+Disposals
+(661)
+(15)
+(1,290)
+(848)
+(2,828)
+Exchange difference
+(58)
+(18)
+(39)
+(14)
+Net carrying amount:
+At 31 December 2021
+15,858
+Computer
+Leasehold
+professional
+vehicles
+buildings
+in progress
+equipment
+improvements
+equipment
+Construction
+and other
+Cost:
+At 1 January 2020
+27,356
+2,964
+13,750
+8,510
+43,309
+6,351
+102,240
+Total
+Land and
+Motor
+vessels and
+3,502
+3,936
+3,897
+51,778
+1,444
+80,415
+At 1 January 2021
+16,529
+3,107
+3,660
+3,529
+41,159
+1,486
+69,470
+235
+236
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+28. Property and equipment (continued)
+Aircraft,
+2,097
+1,314
+Depreciation
+40,913
+5,317
+In estimating the fair value of the properties, the highest and best use of the properties is their current use.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+28. Property and equipment
+Land and
+Construction
+buildings
+5,317
+in progress
+Aircraft,
+vessels and
+professional
+Motor
+vehicles
+equipment
+and other
+Total
+Cost:
+At 1 January 2021
+28,279
+3,107
+Computer Leasehold
+equipment improvements
+Total
+2,390
+2,390
+2021
+Located in Mainland China
+2,775
+2,775
+Located overseas
+2,203
+2,203
+Total
+4,978
+4,978
+Fair Value
+as at
+31 December
+Level 1
+Level 2
+Level 3
+2020
+Located in Mainland China
+2,927
+2,927
+Located overseas
+15,149
+Additions
+9,661
+6,299
+(31)
+(47)
+(1,261)
+(4)
+(1,435)
+At 31 December 2021
+28,876
+3,502
+16,860
+(92)
+10,925
+5,909
+127,399
+Accumulated depreciation:
+At 1 January 2021
+11,750
+11,489
+6,132
+6,729
+4,813
+61,327
+Exchange difference
+(5,121)
+(971)
+110,619
+Additions
+539
+743
+2,420
+1,106
+17,879
+563
+23,250
+Reclassification and transfers
+169
+(348)
+20
+223
+22
+86
+Disposals
+(19)
+(698)
+(18)
+(3,415)
+48,124
+290
+1,003
+2,078
+4,862
+4,303
+4,253
+3,916
+13,357
+13,550
+43,181
+37,819
+China Merchants Bank
+Annual Report 2021
+Total
+Chapter VIII Financial Statements
+(a)
+Right-of-use assets
+Cost:
+At 1 January 2021
+Additions
+Decrease
+At 31 December 2021
+Accumulated depreciation:
+At 1 January 2021
+29. Lease contracts
+4 year to 5 years (inclusive)
+Over 5 years
+3 year to 4 years (inclusive)
+4,883
+3,069
+38,693
+1,251
+66,408
+(b)
+(c)
+As at 31 December 2021, the process of obtaining the registration license for the Group's properties with an aggregate net carrying value of
+RMB1,026 million (31 December 2020: RMB1,565 million) was still in progress. Management is of the view that the aforesaid matter would
+neither affect the rights of the Group to these assets nor have any significant impact on the business operation of the Group.
+As at 31 December 2021, the Group had no significant unused property and equipment (31 December 2020: Nil).
+As at 31 December 2021, the carrying value of mortgaged aircraft and vessels for placements from banks and other financial institutions of
+the CMBFLC's subsidiaries was RMB 15,075 million (31 December 2020: RMB 12,884 million).
+(d)
+The Group's total future minimum lease receivables under non-cancellable operating leases are as follows:
+2021
+2020
+Within 1 year (inclusive)
+1 year to 2 years (inclusive)
+2 year to 3 years (inclusive)
+7,765
+5,851
+7,148
+5,316
+5,796
+Depreciation (Note 10)
+3,587
+Decrease
+Motor
+16
+29,078
+Level 2
+6,978
+182
+4,070
+23
+6
+7,995
+7
+4
+(1)
+(1,634)
+(2)
+(1)
+(1,638)
+1,190
+9,414
+3
+9
+4,259
+23,070
+5,985
+(2,131)
+Land
+Computer
+vehicles
+use rights
+Buildings
+equipment
+and other
+Total
+5,957
+21,122
+4
+16
+27,099
+33
+4,071
+5
+1
+4,110
+(5)
+(2,123)
+(1)
+At 31 December 2021
+Impairment loss:
+2,964
+1,486
+At 31 December 2020
+28,279
+3,107
+15,149
+9,661
+48,124
+6,299
+110,619
+Accumulated depreciation:
+(3,378)
+At 1 January 2020
+10,163
+5,441
+4,523
+5,100
+35,739
+Depreciation
+1,270
+1,948
+779
+10,512
+(3)
+(3,047)
+(90)
+1,081
+10,475
+777
+15,704
+Reclassification and transfers
+841
+(860)
+25
+172
+(5)
+173
+Disposals
+(33)
+(641)
+(12)
+(2,613)
+(821)
+(4,120)
+Exchange difference
+(175)
+(63)
+3,109
+69,470
+443
+Reclassification and transfers
+At 1 January 2020
+Charge
+Exchange difference
+At 31 December 2020
+Net carrying amount:
+At 31 December 2020
+93
+153
+(10)
+236
+Impairment loss:
+93
+(10)
+236
+At 1 January 2020
+(a)
+16,529
+16,844
+3,107
+3,660
+3,529
+41,159
+153
+40,913
+4,813
+6,729
+72
+23
+(23)
+72
+Disposals
+(13)
+(609)
+(5)
+(479)
+(704)
+(1,810)
+Exchange difference
+(91)
+(36)
+(83)
+(424)
+(637)
+At 31 December 2020
+11,750
+11,489
+6,132
+7,549
+Total
+105
+5551
+The Group holds 50.00% equity interests in CIGNA & CMB Life Insurance Co., Ltd. ("CIGNA & CMB Life"), and Cigna Health and Life
+Insurance Company ("CHLIC") holds the other 50.00% equity interests. The Bank and CHLIC share the joint venture's risk, profits and losses
+based on their shareholding proportionally. The Bank's investment in CIGNA & CMB Life is accounted for as an investment in a joint venture.
+CMB WLB, one of the Group's wholly-owned subsidiaries, and China United Network Communications Limited ("CUNC"), a subsidiary of China
+Unicom Limited, jointly set up Merchants Union Consumer Finance Company Limited ("MUCFC"). CBIRC approved the operation of MUCFC on
+3 March 2015. CMB WLB and CUNC each held 50% equity interests in MUCFC and share the risks, profits and losses proportionally based on
+their shareholdings. In December 2017, the Bank and CUNC made a capital contribution of RMB600 million in MUCFC respectively. After the
+capital injection, the capital of MUCFC increased to RMB2,859 million, with the Bank's shareholding percentage becoming 15%, CMB WLB's
+shareholding percentage becoming 35%, and the Group's total shareholding percentage remained at 50%. In December 2018, the Bank made
+another capital contribution of RMB1,000 million in MUCFC, and CUNC made the same amount of capital injection. The Bank and CMB WLB
+then held 24.15% and 25.85% of equity interests in MUCFC, respectively, and the Group's total shareholding percentage remained at 50%.
+In July 2021, CMB WLB transferred all its shares of MUCFC to the Bank. After the transfer, the Bank and CUNC each held 50% of equity
+interests in MUCFC, and the Group's total shareholding percentage remained unchanged. In October 2021, MUCFC converted RMB1,331
+million of its the capital reserve and RMB4,800 million of its retained earnings into share capital, and the share capital of MUCFC increased to
+RMB10,000 million after the conversion.
+(!!)
+(i)
+Notes:
+Consumer finance
+50.00%
+50.00%
+RMB10,000
+231
+Shenzhen
+Life insurance
+business
+50.00%
+50.00%
+(in millions)
+RMB2,800
+Shenzhen
+CIGNA & CMB Life Insurance Co., Ltd. (note(i)) Limited liability
+by the Bank Principal activity
+interest
+Merchants Union Consumer Finance Company Limited liability
+Limited (note(ii))
+paid up capital
+232
+Chapter VIII Financial Statements
+108,815 97,686 11,129
+54,172 48,843 5,329
+Group's effective interest
+CIGNA & CMB Life
+2021
+tax
+equivalents amortisation
+income
+and Income
+China Merchants Bank
+Cash Depreciation
+and cash
+Assets Liabilities Equity Revenue
+Total
+Other
+CIGNA & CMB Life:
+(i)
+Summarised financial information with necessary adjustments in accordance with the Group's accounting policies of
+the joint ventures which are individually material to the Group is as follows:
+25. Interests in joint ventures (continued)
+Annual Report 2021
+Net comprehensive comprehensive
+profit
+income
+26,635 1,174
+ownership held
+issued and
+CMB Wing Lung Bank Limited ("CMB WLB") was formerly known as Wing Lung Bank Limited. On 30 September 2008, the Bank acquired
+a 53.12% equity interests in CMB WLB. CMB WLB became a wholly owned subsidiary of the Bank on 15 January 2009. CMB WLB had
+withdrawn from listing on the HKEx as of 16 January 2009.
+CMB Financial Leasing Company Limited ("CMBFLC") is a wholly-owned subsidiary of the Bank approved for setting up by the CBIRC through
+its Yin Jian Fu [2008] No. 110 and commenced its operation in April 2008. In 2014, the Bank made an additional capital contribution of
+RMB2,000 million in CMBFLC. The capital of CMBFLC increased to RMB6,000 million and the Bank's shareholding percentage remains
+unchanged. In August 2021, CMBFLC converted RMB6,000 million of its retained earnings into share capital, and the capital of CMBFLC
+increased to RMB 12,000 million. The Bank's shareholding percentage remained unchanged.
+The Board of Directors passed "The Resolution regarding the Capital Increase and Restructuring of CMBICHC" which agreed that the Bank
+made capital contribution of USD400 million (or its equivalent) to CMBICHC on 28 July 2015. The capital contribution was completed on 20
+January 2016.
+CMB International Capital Holdings Corporation Limited ("CMBICHC"), formerly known as Jiangnan Finance Company Limited and CMB
+International Capital Corporation Limited, is the Bank's wholly-owned subsidiary approved for setting up by the PBOC through its Yin Fu [1998]
+No. 405. In 2014, the Bank made an additional capital contribution of HKD750 million in CMBICHC. The capital of CMBICHC increased to
+HKD1,000 million, and the Bank's shareholding percentage remained unchanged.
+(vii)
+(vi)
+(v)
+(iv)
+In 2012, the Bank acquired 21.60% equity interests in China Merchants Fund Management Co., Ltd. ("CMFM"), its former associate, from
+ING Asset Management B.V. at a consideration of EUR63,567,567.57. Following the settlement of the above consideration in cash, the Bank's
+shareholding in CMFM increased from 33.40% to 55.00% in 2013. As a result, the Bank obtained the control over CMFM, which became
+the Bank's subsidiary on 28 November 2013. In December 2017, the Bank made an additional capital contribution of RMB605 million in
+CMFM, and other shareholders of CMFM also made capital contribution of RMB495 million proportionally. The capital of CMFM increased to
+RMB1,310 million, and the Bank's shareholding percentage remained unchanged.
+(iii)
+(i)
+Notes:
+24. Particulars of principal subsidiaries of the bank (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+230
+Summarised financial information of the joint ventures that are not individually material to the Group is as follows:
+(ii)
+effective
+CMB Wealth Management Co., Ltd. ("CMBWM") is a wholly-owned subsidiary of the Bank, approved for setting up by the CBIRC with Yinbao
+Jianfu [2019] No. 981. It was formally established on November 1 2019.
+Cigna & CMB Asset Management Company Limited ("CIGNA & CMAM") was registered and established on 18 October 2020 with the
+approval for setting up by the CBIRC with Yinbao Jianfu [2020] No. 708. CIGNA & CMAM is an indirectly controlled subsidiary of the Bank,
+with 87.3458% held by CIGNA & CMB Life Insurance Co., Ltd., a joint venture of the Bank, and 12.6542% held by CMBICHC, a subsidiary of
+the Bank.
+Percentage of
+Particulars of
+Place of
+incorporation
+and operation
+Economic nature
+Name of joint ventures
+456
+2,392
+2,877
+133
+China Merchants Europe S.A. ("CMB Europe S.A.") is a wholly-owned subsidiary of which the establishment was approved by the CBIRC with
+Yin Jianfu [2016] No. 460. It was formally established in November 2019 and obtained a commercial banking license in Luxemburg from the
+European Central Bank in May 2021.
+2020
+12,403
+Details of the Group's interests in major joint ventures are as follows:
+Share of other comprehensive income for the year
+Share of profits for the year
+Share of net assets
+25. Interests in joint ventures
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+2021
+14,779
+13,318
+Group's
+1333
+1,507
+1,507
+7,967
+7,019
+67,830
+74,849
+Group's effective interest
+477
+2,328
+42
+3,015
+3,015
+14,038 15,933
+135,660
+149,698
+MUCFC
+2021
+tax
+4,655
+income equivalents amortisation
+239
+MUCFC
+22
+565
+1,224
+832
+832
+6,408
+5,512
+48,929
+2020
+54,441
+44
+2,447
+1,663
+1,663
+12,816
+11,023
+97,858
+108,881
+Group's effective interest
+profit
+21
+Liabilities
+37,386
+Group's effective interest
+912
+1,638
+23,608
+75,196
+CIGNA & CMB Life
+2020
+32,630 4,756
+(22)
+25
+645
+698
+151
+1,290
+Equity Revenue
+1,442
+268
+76
+11,804
+65,259 9,937
+812
+Assets
+and Income
+and cash
+Net comprehensive
+Cash Depreciation
+Total
+MUCFC:
+(ii)
+1550
+28
+299
+1,268
+456
+56
+437
+2,550
+419
+219
+(4,495)
+Charge
+4,884
+1,240
+1,629
+2020
+Payment/
+Beginning
+balance
+transfers
+(1,388)
+for the year
+in the year
+balance
+(1,438)
+69
+1,449
+1,916
+22
+130
+610
+Ending
+(61)
+2021
+22
+Basic retirement insurance
+Supplementary pension
+1,088
+Unemployment insurance
+Total
+Total
+Payment/
+Beginning
+Charge
+transfers
+balance
+for the year
+in the year
+Ending
+balance
+130
+2,566
+(2,539)
+157
+1,088
+2,257
+(1,895)
+1,450
+61
+20
+at 1 January
+(43)
+in the year
+Ending
+balance
+(30)
+67
+The Group has offered 10 phases of H share appreciation rights under the Scheme, the remaining seventh to tenth
+phases have not been exercised as of 31 December 2021. The share appreciation rights of the Scheme vest after 3
+years from the grant date and are then exercisable within a period of 7 years. Each of the share appreciation right is
+linked to one H-share.
+249
+240
+China Merchants Bank
+Chapter VIII Financial Statements
+for the year
+30
+Annual Report 2021
+Impairment
+loss at
+Net value
+1 January
+As at
+1 January
+Addition
+during
+Release
+Basic retirement insurance
+Supplementary pension
+Unemployment insurance
+As at
+31. Goodwill
+67
+Payment
+Charge
+22
+699
+3,410
+(2,869)
+1,240
+In accordance with the regulations in the PRC, the Group participates in statutory pension schemes organised by
+the municipal and provincial governments for its employees (endowment insurance). During the year ended 31
+December 2021, the Group's contributions to these pension schemes are determined by local governments and vary
+at a range of 14% to 16% (2020: 12% to 16%) of the staff salaries.
+In addition to the above statutory pension schemes, the Group has established a supplementary defined contribution
+plan for its employees (annuity insurance) in accordance with relevant annuity policies for corporate entities in the
+PRC. During the year ended 31 December 2021, the Group's annual contributions to this plan are determined based
+on 0% to 8.33% of the staff salaries and bonuses (2020: 0% to 8.33%).
+For its employees outside Mainland China, the Group participates in defined contribution retirement schemes at
+funding rates determined in accordance with the local practices and regulations.
+(iii) Other long-term employee benefits
+Cash settled share-based transactions
+Cash settled share-based transactions
+2021
+Beginning
+balance
+67
+Charge
+for the year
+17
+Payment
+in the year
+Ending
+balance
+(17)
+67
+2020
+Beginning
+balance
+45
+(ii)
+530
+Chapter VIII Financial Statements
+(87)
+9
+Housing reserve
+191
+2,119
+(2,144)
+166
+Labour union and employee education expenses
+2,411
+85
+1,926
+3,032
+Total
+14,155
+53,827
+(49,917)
+18,065
+2020
+Payment/
+Salaries and bonus
+(1,305)
+11
+- Maternity insurance
+6
+Ending
+balance
+43,716
+(40,519)
+14,318
+24
+2,908
+(2,913)
+19
+408
+3,158
+(3,036)
+2021 and
+- Medical insurance
+391
+3,046
+(2,922)
+515
+- Injury insurance
+6
+27
+(27)
+Beginning
+balance
+8,451
+Charge
+for the year
+transfers
+Ending
+- Maternity insurance
+7
+79
+(75)
+11
+Housing reserve
+246
+1,921
+(1,976)
+191
+Labour union and employee education expenses
+1,986
+1,653
+(1,228)
+2,411
+Total
+10,872
+44,407
+(41,124)
+14,155
+China Merchants Bank
+Annual Report 2021
+6
+39. Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+Post-employment benefits-defined contribution plans
+(20)
+6
+in the year
+balance
+34,037
+(31,367)
+11,121
+Welfare expense
+Social insurance
+69
+4,156
+(4,201)
+24
+120
+2,640
+(2,352)
+408
+- Medical insurance
+107
+2,541
+(2,257)
+391
+- Injury insurance
+20
+2021 and
+47,928
+the year
+At 1 January 2021
+Recognised in profit or loss
+Recognised in other comprehensive Income
+Exchange difference
+At 31 December 2021
+Impairment
+allowances
+on loans and
+advances to
+customers and
+other assets at
+amortised cost
+Financial
+assets
+Movements of deferred tax
+at FVTOCI
+instruments
+at FVTPL
+welfare
+payable
+བྷི དྷཱཝཱ ཙིཏྟཱནྟི
+(1,404)
+942
+Other
+Total
+61,340
+Financial Salaries and
+(b)
+32. Deferred tax assets and deferred tax liabilities (continued)
+Annual Report 2021
+10
+2
+Financial instruments at FVTPL
+(144)
+(27)
+8
+2
+Other
+(7,755)
+(1,325)
+(6,677)
+(1,077)
+Total
+(7,904)
+(1,353)
+(6,659)
+(1,073)
+241
+242
+China Merchants Bank
+Chapter VIII Financial Statements
+1,579
+9,363
+71,820
+9,850
+customers and
+other assets at
+amortised cost
+Financial
+assets
+Financial Salaries and
+instruments
+welfare
+at FVTOCI
+at FVTPL
+payable
+Other
+Total
+59,232
+(2,244)
+(313)
+6,621
+899
+64,195
+2,160
+336
+1,899
+2,742
+28
+7,165
+Note:
+(1)
+At 31 December 2020
+Recognised in other comprehensive Income
+1,020
+(1,584)
+2,584
+(1,068) 10,802
+(2,383)
+14
+(2,369)
+1
+3
+1
+28
+33
+71,191
+(2,764)
+(4)
+11,947
+(84) 80,286
+Impairment
+allowances
+on loans and
+advances to
+At 1 January 2020
+Recognised in profit or loss
+Exchange difference
+(5)
+Financial assets at FVTOCI
+Deferred tax liabilities
+Notes:
+(i)
+(ii)
+(iii)
+On 30 September 2008, the Bank acquired a 53.12% equity interests in CMB WLB. On the acquisition date, the fair value of CMB WLB's
+identifiable net assets was RMB12,898 million, of which the Bank accounted for RMB6,851 million. A sum of RMB10,177 million, being the
+excess of acquisition cost over the fair value of the identifiable net assets, was recognised as goodwill. The details about CMB WLB are set out
+in Note 24.
+On 28 November 2013, the Bank acquired a 55.00% equity interests in CMFM. On the acquisition date, the fair value of CMFM's identifiable
+net assets was RMB752 million, of which the Bank accounted for RMB414 million. A sum of RMB355 million, being the excess of acquisition
+cost of RMB769 million over the fair value of the identifiable net assets, was recognised as goodwill. The details about CMFM are set out in
+Note 24.
+On 1 April 2015, CMBICHC acquired the 100% equity interests in Zhaoyin Internet Technology (Shenzhen) Corporation Limited ("Zhaoyin
+Internet"). On the acquisition date, the fair value of Zhaoyin Internet's identifiable net assets was RMB3 million. A sum of RMB1 million, being
+the excess of acquisition cost over the fair value of the identifiable net assets, was recognised as goodwill. Zhaoyin Internet's scope of business
+comprises development and sales of computer software and hardware; sales of communication and office automation equipment; and IT
+consulting.
+Impairment test for goodwill
+The recoverable amounts of the CGUS are determined based on value in use calculations. These calculations use
+cash flow projections based on financial forecasts approved by management covering a 5-year period. Cash flows
+beyond the 5-year period are extrapolated using a steady growth rate. The growth rate does not exceed the long-
+term average growth rate for the business in which the CGU operates.
+In assessing the impairment of goodwill, the Group assumed that the terminal growth rate is comparable to the
+forecast long-term economic growth rate issued by authoritative institutions. A pre-tax discount rates of CMB WLB
+and CMFM adopted by the Group are 7% and 10% (2020: 9% and 12%). The Group believes any reasonably
+possible change in the key assumptions on which recoverable amounts are based would not cause the carrying
+amounts of the CGUS to exceed their recoverable amounts.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+32. Deferred tax assets and deferred tax liabilities
+Deferred tax assets
+Deferred tax liabilities
+Net amount
+(a) Analysed by nature of deferred tax assets and liabilities
+The components of deferred tax assets/liabilities are as follows:
+Deferred tax assets
+Impairment allowances on loans and advances to
+9,954
+customers and other assets at amortised cost
+(579)
+10,533
+during
+the year
+31 December
+31 December
+31 December
+2021
+2021
+2021
+CMB WLB (note (i))
+10,177
+10,177
+(579)
+9,598
+CMFM (note (ii))
+355
+355
+355
+Zhaoyin Internet (note (iii))
+1
+1
+1
+Total
+10,533
+2021
+2021
+81,639
+(11,092)
+92
+(2,763)
+(6,673)
+(1,406)
+23
+6,309
+1,577
+Salaries and welfare payable
+in the year
+Other
+5,582
+11,947
+1,241
+37,592
+9,363
+8,665
+2,019
+Total
+326,870
+81,639
+291,114
+72,893
+Financial instruments at FVTPL
+2020
+Financial assets at FVTOCI
+245,221
+72,893
+(1,353)
+(1,073)
+80,286
+71,820
+2021
+2020
+Deductible/
+Deductible/
+(taxable)
+(taxable)
+temporary
+Deferred
+temporary
+Deferred
+difference
+tax
+difference
+tax
+284,360
+71,191
+61,340
+transfers
+699
+Beginning
+balance
+11,121
+Debt securities
+- Government bonds
+152,071
+108,352
+90,956
+45,684
+- Bonds issued by policy banks
+48,833
+53,445
+- Bonds issued by commercial banks and other financial institutions
+2,774
+4,872
+_
+- Other debt securities
+9,508
+4,351
+Discounted bills
+5,501
+34,529
+Total
+157,572
+142,881
+China Merchants Bank
+Annual Report 2021
+2020
+Chapter VIII Financial Statements
+2021
+157,572
+- Other financial institutions
+Total
+(b) Analysed by underlying assets
+2021
+157,572
+88
+2020
+142,881
+46
+157,660
+142,927
+2021
+2020
+155,322
+137,228
+147,410
+136,248
+7,912
+980
+2,250
+5,653
+1,854
+4,868
+396
+785
+142,881
+- Banks
+38. Deposits from customers
+50,169
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+244
+243
+In 2021, the Group disposed of repossessed assets with a total carrying value of RMB66 million (2020: RMB228 million).
+Note:
+612
+513
+(102)
+(141)
+714
+654
+14
+31
+700
+2020
+623
+2021
+Net repossessed assets
+Less: Impairment allowances
+Total
+Other repossessed assets
+Land and buildings
+34. Deposits from banks and other financial institutions
+Principal (a)
+Principal (a)
+Total
+568,557
+623,297
+143,846
+77,788
+712,403
+701,085
+2020
+2021
+723,402
+753,018
+3,638
+1,764
+719,764
+2020
+2021
+751,254
+Total
+- Other financial institutions
+- Banks
+Outside Mainland China
+- Other financial institutions
+- Banks
+In Mainland China
+(a) Analysed by nature of counterparties
+Interest payable
+(a) Repossessed assets
+Outside Mainland China
+- Banks
+114,496
+96,910
+107,214
+75,768
+7,282
+21,142
+55,761
+46,207
+55,570
+46,011
+191
+196
+170,257
+143,117
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+36. Financial liabilities at fair value through profit or loss
+2021
+Financial liabilities held for trading (a)
+17,017
+2020
+20,990
+Financial liabilities designated at fair value through profit or loss (b)
+Total
+46,744
+2020
+39,361
+2021
+400
+7,361
+507
+48,301
+6,964
+1,868
+397
+751,254
+719,764
+35. Placements from banks and other financial institutions
+Principal (a)
+Interest payable
+Total
+(a) Analysed by nature of counterparties
+In Mainland China
+- Banks
+- Other financial institutions
+Outside Mainland China
+- Banks
+-
+- Other financial institutions
+Total
+2021
+170,257
+393
+170,650
+2020
+143,117
+143,517
+- Other financial institutions
+63,761
+(a) Financial liabilities held for trading
+7,600
+13,914
+4,090
+2,480
+46,744
+39,361
+Outside Mainland China
+- Certificates of deposit issued
+- Debt securities issued
+- Other
+Total
+As at 31 December 2021 and 2020, the difference between the fair values of the Group's financial liabilities
+designated at fair value through profit or loss and the contractual payable amount at maturity is not significant. The
+amounts of changes in the fair value of these liabilities that are attributable to changes in credit risk of the Group
+are not significant during the years ended 31 December 2021 and 2020 and as at 31 December 2021 and 2020.
+245
+246
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+37. Amounts sold under repurchase agreements
+Principal (a) (b)
+Interest payable
+Total
+(a) Analysed by nature of counterparties
+In Mainland China
+605
+60,351
+377
+12,067
+Financial liabilities related to precious metal
+Short position on bonds
+Total
+2021
+2020
+16,406
+611
+20,361
+629
+17,017
+20,990
+In Mainland China
+- Precious metal contracts with other banks
+- Other
+(b)
+Financial liabilities designated at fair value through profit or loss
+2021
+2020
+34,677
+22,362
+11,596
+1,589
+23,081
+20,773
+16,999
+Charge
+for the year
+(3)
+314
+5,628,336
+2020
+2021
+6,347,078
+38,076
+Total
+- Time deposits
+- Demand deposits
+-
+Retail customers
+35,799
+- Time deposits
+Corporate customers
+(a) Analysed by nature of counterparties
+Total
+Interest payable
+504
+(52)
+(3)
+(7)
+-Demand deposits
+6,385,154
+5,664,135
+2021
+Guarantee for issuing letters of credit
+Guarantee for loans
+Guarantee for acceptance bills
+(b) The deposits taken from customers as collateral or for the purpose of
+guarantees are as follows:
+5,628,336
+6,347,078
+632,126
+730,293
+1,400,520
+1,557,861
+2,032,646
+2,288,154
+1,289,556
+1,406,107
+2,306,134
+2,652,817
+3,595,690
+4,058,924
+2020
+18
+Deposit for letters of guarantee
+(44)
+122,521
+Prepaid lease payments
+2,972
+3,913
+3,128
+5,274
+48,423
+78,719
+Continuing involvement assets
+Interest receivable
+257
+Amounts pending for settlement
+2021
+33. Other assets
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+No deferred tax liability has been recognised in respect of temporary differences associated with investments in subsidiaries because the Group
+is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not be reversed in
+the foreseeable future.
+71,820
+942
+9,363
+2020
+61,340
+Repossessed assets (a)
+513
+24,115
+27,953
+Total
+Other
+60
+65
+Post-employment benefits: defined benefit plan (Note 39(b))
+150
+135
+4,985
+4,987
+Prepayment for leasehold improvement and other miscellaneous items
+Premium receivables
+190
+186
+Receivable from reinsurers
+510
+519
+Guarantee deposits
+612
+85,459
+1,579
+Other
+2021
+Ending
+transfers
+Charge
+Beginning
+Payment/
+2020
+19,761
+(54,429)
+balance
+58,728
+67
+(17)
+1,629
+(4,495)
+4,884
+17
+67
+1,240
+18,065
+15,462
+for the year
+in the year
+balance
+Social insurance
+Welfare expense
+Salaries and bonus
+Payment/
+2021
+15,462
+67
+(30)
+(44,023)
+47,847
+11,638
+30
+67
+1,240
+(2,869)
+3,410
+14,155
+(41,124)
+44,407
+10,872
+(49,917)
+Total
+53,827
+balance
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+248
+247
+194,243
+238,930
+25,878
+39. Staff welfare scheme
+31,208
+32,412
+15,861
+21,574
+19,183
+18,878
+103,858
+134,858
+2020
+29,463
+(a) Salaries and welfare payable
+Short-term employee benefits (i)
+Post-employment benefits - defined
+in the year
+for the year
+balance
+Ending
+transfers
+Charge
+Beginning
+Payment/
+2021
+Short-term employee benefits
+(i)
+Total
+Other long-term employee benefits (iii)
+contribution plans (ii)
+Post-employment benefits - defined
+Short-term employee benefits (i)
+Total
+Other long-term employee benefits (iii)
+contribution plans (ii)
+14,155
+(1,404)
+240
+2021
+Phase VII
+2020
+1,808
+1,762
+570
+510
+457
+225
+660
+203
+607
+240
+210
+157
+Phase VIII
+233
+1,155
+330
+300
+300
+225
+(in thousands) (in thousands) (in thousands) (in thousands) (in thousands) (in thousands)
+Forfeited
+Exercised/
+Total
+Phase X
+2021
+Phase IX
+Phase VIII
+Phase VII
+75
+Notes:
+Phase IX
+(in thousands)
+135
+52
+100
+230
+180
+50
+203
+607
+240
+210
+157
+420
+450
+240
+(in thousands)
+158
+75
+1,155
+330
+300
+300
+225
+1,903
+2,131
+(in thousands)
+(in thousands)
+Exercised
+Total
+Phase X
+(in thousands)
+(in thousands)
+52
+427
+Total
+Xu Shiqing
+1,050
+2,869
+5,065
+In 2021, senior management had exercised 0.42 million shares of appreciation rights (2020: 1.27 million) and the weighted average exercise price was
+HKD17.23 (2020: HKD14.90).
+Post-employment benefits - defined benefit plan
+The Group's subsidiary CMB WLB operates a defined benefit plan (the "plan") for the staff, which includes a
+defined benefit scheme and a defined benefit pension scheme. Contributions to the plan are determined based on
+periodic valuations by qualified actuaries on the assets and liabilities of the plan. The plan provides benefits based
+on members' final salary. The costs are solely funded by CMB WLB.
+The latest actuarial valuation of the plan as at 31 December 2021 was performed by Towers Watson Hong Kong
+Limited, a professional actuarial firm in accordance with IAS 19 Employee Benefits. The present values of the defined
+benefit obligation and current service cost of the plan are calculated based on the projected unit credit method. At
+the valuation date, the plan had a funding level of 123% (2020: 118%).
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+39. Staff welfare scheme (continued)
+(b)
+Post-employment benefits - defined benefit plan (continued)
+The amounts recognised in the consolidated statement of financial position as at 31 December 2021 and 2020 are
+analysed as follows:
+803
+Fair value of the plan assets
+Net asset recognised in the consolidated statement of financial position
+2021
+349
+(284)
+65
+2020
+401
+(341)
+60
+A portion of the above asset is expected to be recovered after more than one year. However, it is not practicable
+to segregate this amount from the amounts receivable in the next twelve months, as future contributions will
+also relate to future services rendered and future changes in actuarial assumptions and market conditions. No
+contribution to the plan is expected to be paid in 2022.
+There was no plan amendment, curtailment or settlement impact for the years ended 31 December 2021 and 2020.
+The amounts recognised in the consolidated statement of profit or loss are as follows:
+Current service cost
+Net interest income
+Net expense for the year included in retirement benefit costs
+Present value of the funded defined benefit obligation
+Xiong Liangjun
+741
+4.50
+Liu Jianjun
+Wang Liang
+Tian Huiyu
+Tang Zhihong
+Li Hao
+Total
+Xiong Liangjun
+Liu Jianjun
+Wang Liang
+Tian Huiyu
+(b)
+Other long-term employee benefits (continued)
+The number of share appreciation rights granted:
+(4)
+(iii)
+(a) Salaries and welfare payable (continued)
+39. Staff welfare scheme (continued)
+275
+Annual Report 2021
+China Merchants Bank
+252
+251
+Share appreciation rights were granted under service conditions. The conditions have not been taken into account in
+the grant date fair value measurement of the services received. There were no market conditions associated with the
+share appreciation rights granted.
+The expected volatility is based on the historical volatility (calculated based on the weighted average remaining
+life of the share appreciation rights) and adjusted for any expected changes to future volatility based on publicly
+available information. Expected dividend yield is based on historical dividend yields. Changes in the subjective input
+assumptions could materially affect the fair value estimate.
+1.43%
+1.43%
+3.51%
+3.51%
+3.51%
+1.43%
+3.51%
+1.43%
+Risk-free interest rate
+6.58
+5.58
+Chapter VIII Financial Statements
+870
+259
+(10)
+4.00
+RMB500
+499
+499
+Fixed rate bond
+36 months
+27 May 2019 3.68
+RMB3,000
+13 Mar 2019
+2,996
+2,999
+Fixed rate bond (iii)
+60 months
+3 Jul 2019
+3.00
+USD900
+5,843
+10
+3
+(148)
+60 months
+1,500
+RMB4,000
+3,999
+1
+(4,000)
+Fixed rate bond
+36 months
+16 Jul 2018
+4.50
+Fixed rate bond
+RMB4,000
+2
+(4,000)
+Fixed rate bond
+36 months
+13 Mar 2019 3.50
+RMB1,500
+1,498
+2
+3,998
+5,705
+Fixed rate bond (iv)
+120 months
+120 months
+14 Jul 2020
+4.25
+RMB2,000
+1,992
+1
+1,993
+Fixed rate bond (vi)
+Fixed rate bond
+60 months
+USD800
+5,204
+6
+(132)
+5,078
+Fixed rate bond (vii)
+120 months
+12 Aug 2020 2.75
+12 Aug 2020 1.88
+(261)
+261
+USD40
+3 Jul 2019
+3.63
+USD100
+648
+1
+(16)
+633
+Fixed rate bond
+36 months
+17 Jul 2019
+3.60
+RMB3,000
+2,995
+3
+2,998
+Fixed rate bond (v)
+12 months
+17 Apr 2020
+1.73
+9 May 2018 4.80
+USD400
+36 months
+(4,000)
+1 Sep 2021
+0.55
+USD300
+1,912
+7
+1,912
+Total
+101,256
+60 months
+43,819
+(468)
+(30,000)
+114,623
+Notes:
+(i)
+(ii)
+(iii)
+(iv)
+16
+(v)
+1,912
+1,912
+RMB10,000
+9,999
+9,998
+Fixed rate bond
+Fixed rate bond
+Medium term note (iv)
+Medium term note (v)
+36 months
+3 Jun 2021 3.18
+RMB20,000
+19,997
+2
+19,995
+24 Aug 2021 2.90
+RMB10,000
+9,999
+9,998
+24 months
+1 Sep 2021
+1.25
+USD300
+36 months
+Financial bonds issued by the Bank that were held by CMB WLB amounted to EUR 37 million as of 31 December 2021, equivalent to RMB263
+million (31 December 2020: EUR 37 million, equivalent to RMB293 million).
+Financial bonds issued by the Bank that were held by CMB WLB amounted to USD30 million as of 31 December 2021, equivalent to RMB191
+million (31 December 2020: USD30 million, equivalent to RMB196 million).
+Financial bonds issued by the Bank that were held by CMB WLB amounted to USD30 million as of 31 December 2021, equivalent to RMB191
+million (31 December 2020: USD30 million, equivalent to RMB196 million).
+Exchange
+difference during the year Ending balance
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+Fixed rate bond
+60 months
+29 Nov 2016
+3.25
+USD900
+5,873
+Repayment
+6
+(5,814)
+Fixed rate bond (i)
+36 months
+14 Mar 2018
+5.24
+RMB4,000
+3,999
+1
+(65)
+premium
+amortisation
+Issue
+Beginning
+balance during the year
+Financial bonds issued by the Bank that were held by CMB WLB amounted to USD45 million as of 31 December 2021, equivalent to RMB287
+million (31 December 2020: nil).
+Financial bonds issued by the Bank that were held by CMB WLB amounted to USD33 million as of 31 December 2021, equivalent to RMB210
+million (31 December 2020: nil).
+257
+258
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Debt type
+Term to
+maturity
+Date of
+issuance
+Annual
+interest rate
+Nominal
+value
+(%)
+43. Debt securities issued (continued)
+(b)
+Long-term debt securities issued (continued)
+As at the end of the reporting period, debt securities issued by CMBFLC were as follows:
+Discount or
+Fixed rate bond (ii)
+11 Mar 2021 3.40
+2,588
+(65)
+(vii)
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to nil as of 31 December 2021 (31 December 2020: RMB260
+million).
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to nil as of 31 December 2021 (31 December 2020: RMB140
+million).
+Fixed rate bonds issued by CMB International Leasing Management Limited ("CMBILM"), a wholly-owned subsidiary of CMBFLC that were
+held by the Bank amounted to USD152 million as of 31 December 2021, equivalent to RMB967 million (31 December 2020: USD98 million,
+equivalent to RMB639 million). Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to USD30 million as of 31
+December 2021, equivalent to RMB191 million (31 December 2020: USD30 million, equivalent to RMB196 million).
+Fixed rate bonds issued by CMBILM that were held by the Bank amounted to USD43 million as of 31 December 2021, equivalent to RMB273
+million (31 December 2020: USD43 million, equivalent to RMB282 million).
+Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to nil as of 31 December 2021 (31 December 2020: USD40 million,
+equivalent to RMB261 million).
+Fixed rate bonds issued by CMBILM that were held by the Bank amounted to USD21 million as of 31 December 2021, equivalent to RMB132
+million (31 December 2020: nil). Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to USD32 million as of 31
+December 2021, equivalent to RMB204 million (31 December 2020: USD32 million, equivalent to RMB209 million).
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to USD5 million as of 31 December 2021, equivalent to RMB32
+million (31 December 2020: nil).
+(vi)
+China Merchants Bank
+Annual Report 2021
+43. Debt securities issued (continued)
+(b)
+Long-term debt securities issued (continued)
+Notes: (continued)
+(viii)
+(ix)
+(x)
+Chapter VIII Financial Statements
+(xi)
+(v)
+(iii)
+USD60
+382
+382
+22 Dec 2021
+0.50
+EUR30
+216
+216
+(iv)
+Total
+18,800
+44
+(721)
+(18,204)
+46,432
+Notes:
+(i)
+(ii)
+46,513
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to RMB500 million as of 31 December 2021(31 December 2020:
+RMB500 million).
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to RMB800 million as of 31 December 2021(31 December 2020:
+nil).
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to USD24 million as of 31 December 2021, equivalent to RMB155
+million (31 December 2020: nil).
+Nominal Beginning
+Issue
+value balance during the year
+(in million) (RMB in million) (RMB in million)
+USD 300
+1,962
+USD 600
+premium
+amortisation
+Exchange Repayment
+difference during the year Ending balance
+(RMB in million) (RMB in million) (RMB in million) (RMB in million)
+(25)
+(1,937)
+Total
+1.38
+1,962
+(6)
+(52)
+3,816
+(77)
+(1,937)
+3,816
+(i)
+Fixed rate bonds issued by CMBICHC that were held by CMB WLB amounted to USD11 million as of 31 December 2021, equivalent to RMB68
+million (31 December 2020: nil).
+3,874
+3,874
+36 months 2 June 2021
+Fixed rate bond (i)
+3.72
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to USD53 million as of 31 December 2021, equivalent to RMB335
+million (31 December 2020: nil).
+(xii)
+Fixed rate bonds issued by CMBFLC that were held by the Bank amounted to RMB70 million (31 December 2020: nil).
+(xiii)
+(xiv)
+(xv)
+Fixed rate bonds issued by CMBILM that were held by the Bank amounted to USD30 million as of 31 December 2021, equivalent to RMB191
+million (31 December 2020: nil). Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to USD8 million as of 31
+December 2021, equivalent to RMB51 million (31 December 2020: nil).
+Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to EUR 10 million as of 31 December 2021, equivalent to RMB72
+million (31 December 2020: nil).
+Fixed rate bonds issued by CMBILM that were held by CMB WLB amounted to USD60 million as of 31 December 2021, equivalent to RMB382
+million (31 December 2020: nil).
+As at the end of the reporting period, long-term debt securities issued by CMBICHC were as follows:
+Discount or
+Debt type
+Term to
+maturity
+Date of
+issuance
+Annual
+interest rate
+(%)
+Fixed rate bond
+36 months 9 Jul 2018
+3M Libor+0.55
+3
+13 Dec 2021
+Fixed rate bond (xv)
+Fixed rate bond
+3,992
+Fixed rate bond (x)
+60 months
+4 Feb 2021
+2.00
+USD400
+2,584
+4
+4,000
+2,539
+120 months
+5 Feb 2021
+2.88
+USD400
+2,588
+5
+2,520
+Fixed rate bond
+Fixed rate bond (xi)
+18 months
+RMB4,000
+28 Jan 2021
+2,526
+Fixed rate bond (viii)
+36 months
+17 Nov 2020
+3.85
+RMB4,000
+3,989
+4
+3.60
+3,993
+12 months
+29 Dec 2020
+1.50
+USD20
+131
+(129)
+Fixed rate bond (ix)
+36 months
+Fixed rate bond
+19 Mar 2021
+1.16
+USD50
+(73)
+3,805
+Fixed rate bond
+60 months
+16 Sep 2021
+1.75
+USD300
+1,938
+3,876
+(46)
+Fixed rate bond (xiv)
+36 months
+16 Sep 2021
+0.50
+EUR100
+760
+(39)
+721
+1,893
+USD600
+1.25
+16 Sep 2021
+326
+318
+Fixed rate bond (xii)
+36 months
+24 Mar 2021
+3.58
+RMB2,000
+2,000
+1,996
+Fixed rate bond
+60 months
+24 Mar 2021
+2.00
+USD20
+130
+1
+126
+Fixed rate bond (xiii)
+36 months
+12 months
+24 months
+36 months
+Fixed rate bond
+9,998
+16,539
+13,907
+4,399
+3,347
+1,553
+1,394
+22,491
+18,648
+2020
+China Merchants Bank
+Annual Report 2021
+41. Contract liabilities
+2021
+2020
+Credit card points
+6,065
+5,309
+Other deferred fee and commission income
+1,471
+Chapter VIII Financial Statements
+1,520
+2021
+Other
+- Defined benefit pension scheme
+Long-term average rate of salary increase for the plan
+Pension increase rate for the defined benefit pension plan
+2021
+2020
+%
+%
+1.4
+Total
+0.4
+0.1
+5.0
+5.0
+3.50
+In 2021 and 2020, there were no significant change in the amount of retirement benefit plan liabilities due to
+changes in the above-mentioned actuarial assumptions.
+40. Tax payable
+Corporate income tax
+Value added tax
+0.4
+Total
+7,536
+6,829
+impaired)
+impaired)
+Expected credit loss on provisions
+8,210
+3,724
+856
+Total
+12,790
+2020
+ECL)
+-Stage 2
+-Stage 3
+ECL-not
+(Lifetime
+Expected credit loss on provisions
+-Stage 1
+(12-month ECL)
+5,560
+credit-
+ECL-credit-
+impaired)
+(Lifetime
+ECL-credit-
+credit-
+(12-month
+42. Provisions
+2021
+2020
+Expected credit loss on provisions
+Other
+12,790
+7,236
+1,870
+993
+Total
+14,660
+8,229
+The expected credit loss for loan commitments and financial guarantee contracts by stages are as follows:
+2021
+-Stage 2
+(Lifetime
+-Stage 1
+ECL-not
+-Stage 3
+(Lifetime
+- Defined benefit scheme
+impaired)
+Discount rate
+As at 31 December 2021, deposit with the Bank included in the amount of the plan assets was RMB53 million (2020:
+RMB65 million).
+(22)
+5
+Actuarial gains or losses due to demographic assumption changes
+Exchange difference
+10
+(8)
+(22)
+Actual obligation at 31 December
+284
+Actuarial gains or losses due to financial assumption changes
+341
+2021
+2020
+Fair value of the plan assets at 1 January
+401
+385
+Interest income
+1
+6
+The movements in the fair value of the plan assets during the year are as follows:
+Expected return on plan assets
+2
+Actuarial gains or losses due to liability experience
+2020
+(12)
+(12)
+The actual gain on the plan assets for the year ended 31 December 2021 was RMB2 million (2020: RMB64 million).
+The movements in the defined benefit obligation during the year are as follows:
+2021
+2020
+Present value of obligation at 1 January
+341
+(6)
+363
+Interest cost
+Actual benefits paid
+10
+12
+1
+6
+(42)
+(25)
+Current service cost
+1
+58
+Actual benefits paid
+Amount
+%
+202
+57.9
+259
+64.5
+71
+20.3
+%
+64
+76
+21.8
+78
+19.5
+349
+100.0
+401
+100.0
+16.0
+Amount
+2020
+2021
+Exchange difference
+Fair value of the plan assets at 31 December
+(42)
+(25)
+(12)
+(23)
+349
+401
+253
+254
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+39. Staff welfare scheme (continued)
+(b)
+Post-employment benefits - defined benefit plan (continued)
+The major categories of the plan assets are as follows:
+Equities
+Bonds
+Cash
+Total
+The principal actuarial assumptions adopted in the valuation are as follows:
+Total
+1,073
+603
+Medium term note (i)
+36 months
+19 Jun 2019
+0.25
+EUR300
+2,411
+Medium term note
+36 months
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+(30,000)
+19 Jun 2019
+USD600
+3,920
+17
+2
+(249)
+(97)
+2,164
+3,823
+3M Libor+0.74
+Fixed rate bond
+29,983
+3.95
+43. Debt securities issued (continued)
+(b) Long-term debt securities issued
+As at the end of reporting period, debt securities issued by the Bank were as follows:
+Debt type
+Term to
+maturity
+Date of Annual
+issuance
+interest rate
+Nominal
+value
+RMB30,000
+Discount or
+Issue
+premium
+amortisation
+Exchange Repayment
+difference during the year Ending balance
+(%)
+Fixed rate bond
+36 months
+17 Aug 2018
+Beginning
+balance during the year
+36 months
+5 Jul 2019
+3.45
+1.10
+USD400
+2,610
+(62)
+2,546
+Medium term note (ii)
+36 months
+25 Sep 2020
+25 Sep 2020
+0.95
+1,955
+1,908
+Fixed rate bond
+36 months
+6 Nov 2020
+3.48
+RMB10,000
+9,998
+USD300
+36 months
+Medium term note (ii)
+382
+RMB30,000
+29,991
+Fixed rate bond
+36 months
+24 Sep 2019
+3.33
+RMB20,000
+19,996
+1
+' '
+29,990
+19,997
+Medium term note
+33 months
+27 Sep 2019
+3M Libor+0.74
+USD60
+392
+(10)
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+2,546
+(67)
+Interest payable
+Total
+2,104
+446,645
+1,985
+346,141
+Subordinated notes issued
+As at the end of the reporting period, subordinated notes issued by the Bank were as follows:
+Discount or
+Date of
+18,479
+Annual
+Term to maturity issuance
+interest rate
+(%)
+Nominal
+value
+(in million)
+Fixed rate bond 180 months
+28 Dec 2012
+5.20
+RMB11,700
+Debt type
+10,715
+Certificates of deposit issued
+146,559
+144,816
+7,236
+255
+256
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+43. Debt securities issued
+(a)
+Notes
+2021
+2020
+Subordinated notes issued
+34,236
+34,302
+Long-term debt securities issued
+(b)
+159,306
+Negotiable interbank certificates of deposit
+240,284
+Beginning
+balance during the year
+(RMB in million) (RMB in million)
+11,694
+(10)
+Issue
+amortisation
+Repayment
+difference during the year Ending balance
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+Debt type
+Term to
+maturity
+Date of
+issuance
+Annual interest rate
+(%)
+Nominal
+value
+Exchange
+Fixed to floating 120 months
+rate bond
+USD400
+Total
+*
+T represents the 5 years US Treasury rate.
+2,613
+(67)
+2,546
+2,613
+22 Nov 2017 3.75 (for the first 5 years);
+T*+1.75% (from 6th year
+onwards, if the notes are
+not called by the Bank)
+premium
+amortisation
+Beginning
+balance
+Discount or
+Repayment
+during the year
+Ending balance
+(RMB in million)
+(RMB in million)
+(RMB in million)
+2
+11,696
+Fixed rate bond 120 months
+15 Nov 2018
+4.65
+RMB20,000
+19,995
+(1)
+19,994
+Total
+31,689
+1
+31,690
+As at the end of the reporting period, subordinated note issued by CMB WLB was as follows:
+premium
+Share appreciation rights remaining life (year)
+Expected dividends yield
+Share price (in HKD)
+36.10%
+exercise price
+(HKD)
+rights
+(in million)
+exercise price
+rights
+(HKD)
+(in million)
+Outstanding as at the beginning of the year
+18.34
+2.87
+18.57
+4.14
+Exercised during the year
+17.23
+(0.42)
+14.90
+(1.27)
+The share appreciation rights outstanding at 31 December 2021 had a weighted average exercise price of HKD16.21
+(2020: HKD18.34) and a weighted average remaining contractual life of 4.36 years (2020: 5.55 years).
+1.34
+16.05
+1.35
+14.92
+Exercisable at the end of the year
+Number
+of share
+appreciation
+2.87
+1.76
+16.21
+Outstanding at the end of the year
+(0.69)
+19.11
+Forfeited during the year
+18.34
+Pursuant to the requirements set out in the Scheme, if there are any dividends distributed, capital reserve converted
+into shares, share split or dilution, adjustments to the exercise price will be applied.
+average
+Number
+of share
+appreciation
+36.10%
+250
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+39. Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+(iii) Other long-term employee benefits (continued)
+(1)
+All share appreciation rights shall be settled in cash. The terms and conditions of the scheme are listed below:
+Number of
+unexercised share
+appreciation rights
+at the end of 2021
+(in millions)
+Contract period of
+share appreciation
+Exercise conditions
+rights
+Share appreciation rights granted on 7 Jul 2014 (Phase VII)
+Share appreciation rights granted on 22 Jul 2015 (Phase VIII)
+Share appreciation rights granted on 24 Aug 2016 (Phase IX)
+Share appreciation rights granted on 25 Aug 2017 (Phase X)
+0.225
+3 years after the grant date
+Weighted
+average
+2020
+2021
+(2)
+10 years
+3 years after the grant date
+Weighted
+0.570
+3 years after the grant date
+0.510
+10 years
+3 years after the grant date
+0.458
+10 years
+10 years
+China Merchants Bank
+Annual Report 2021
+The number and weighted average exercise prices of share appreciation rights are as follows:
+39. Staff welfare scheme (continued)
+37.41%
+2.50
+3.36%
+3.50
+3.36%
+3.36%
+1.43%
+1.43%
+1.43%
+1.43%
+2020
+Phase VII
+Phase VIII
+Phase IX
+Phase X
+Fair value at measurement date (in RMB Yuan)
+29.03
+22.91
+36.10%
+Chapter VIII Financial Statements
+36.10%
+Expected volatility
+25.20
+14.66
+7.44
+16.09
+Exercise price (in HKD)
+48.50
+48.50
+48.50
+48.50
+17.05
+8.94
+3.36%
+22.81
+37.41%
+Phase VII
+Risk-free interest rate
+Share appreciation rights remaining life (year)
+Expected dividends yield
+Expected volatility
+Share price (in HKD)
+Fair value at measurement date (in RMB Yuan)
+40.54
+The fair value of services received in return for share appreciation rights granted are measured by reference to the
+fair value of share appreciation rights granted. The estimate of the fair value of the share appreciation rights granted
+is measured based on the Black-Scholes model. The contractual life of the rights are used as an input to the model.
+(3)
+Other long-term employee benefits (continued)
+(iii)
+5.58
+(a)
+Salaries and welfare payable (continued)
+Fair value of share appreciation rights and assumptions
+61.75
+Exercise price (in HKD)
+61.75
+37.41%
+37.41%
+Phase VIII
+Till
+23.70
+25.98
+Phase X
+4.58
+Phase IX
+33.40
+2021
+14.59
+61.75
+33.66
+61.75
+13.16
+2021
+50. Surplus reserve
+At 31 December
+Provided for the year
+2020
+At 1 January
+Statutory surplus reserve is calculated according to the requirements of the Accounting Standards for Business
+Enterprises and other relevant regulations issued by the Ministry of Finance ("MOF") and is provided at 10% of the
+audited profit after tax of the Bank. Surplus reserve can be used to offset accumulated losses or capitalised as paid-
+up capital with the approval of shareholders.
+8,207
+263
+Chapter VIII Financial Statements
+China Merchants Bank
+264
+The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
+instruments used in cash flow hedges. Subsequent recognition of the hedged cash flow is accounted for in
+accordance with the accounting policy adopted for cash flow hedge in Note 4(5).
+15,047
+71,158
+49. Hedging reserve
+Annual Report 2021
+62,291
+98,082
+8,867
+98,082
+789
+115,288
+7,931
+17,206
+90,151
+2020
+2021
+10,979
+Ordinary share dividends in 2020, approved and declared:
+RMB1.253 per share
+52. Profit appropriations
+At 31 December
+year
+At 1 January
+Provided for the
+According to the relevant regulations of the Ministry of Finance, in addition to the impairment allowances, the
+Bank maintains a general reserve according to a certain proportion of the balance of risk assets to make up for
+unidentified potential losses. The general reserve is treated as profit distribution and is an integral part of equity.
+In principle, the balance of general reserve shall not be less than 1.5% of the ending balance of risk assets. The
+general reserve of the Group also includes the general reserve maintained by the subsidiaries of the Group according
+to the applicable laws and regulations of their industry or region. The Bank and the Group's subsidiaries have
+maintained general reserves in accordance with the regulatory requirements as of 31 December 2021 and 2020.
+51. General reserve
+71,158
+82,137
+(a) Dividends approved/declared by shareholders
+922
+3,613
+73
+Equity attributed to non-controlling interests
+Cumulative undistributed dividends
+(1,651)
+(3,613)
+1,651
+3,613
+Total comprehensive income
+Distributions in current year
+1,651
+Including: Net profit
+84,054
+127,043
+- Equity attributed to other equity instrument holders of the Bank
+639,696
+731,702
+- Equity attributed to ordinary shareholders of the Bank
+723,750
+2021
+6,936
+6,604
+- Equity attributed to non-controlling holders of ordinary shares
+3,300
+88
+3,064
+2,578
+4,281
+11,459
+Debt instruments measured at FVTOCI: investment revaluation reserve
+Fair value gain on equity instruments designated at FVTOCI
+Remeasurement of defined benefit scheme
+2020
+2021
+Share of other comprehensive income of equity-accounted investees
+Total
+2020
+67,523
+48. Investment revaluation reserve
+At 1 January and 31 December
+Capital reserve primarily represents share premium of the Bank and can be converted into share capital with the
+shareholders' approval.
+47. Capital reserve
+3,753
+3,636
+- Equity attributed to non-controlling holders of perpetual debt
+capital (Note 62)
+2,851
+2021
+67,523
+2020
+Interests in joint ventures
+Ordinary share dividends in 2019, approved and declared:
+RMB1.20 per share
+through other comprehensive income
+Equity investments designated at fair value
+449,428
+552,498
+Debt investments at fair value through other comprehensive income
+1,047,040
+1,183,662
+Debt investments at amortised cost
+46,526
+23,179
+Derivative financial assets
+451,978
+290,941
+Financial assets at fair value through profit or loss
+4,510,864
+5,023,050
+282,240
+6,392
+523,516
+6,693
+49,495
+17,701
+26,300
+26,833
+1,057
+945
+5,521
+7,630
+12,582
+Liabilities
+Total assets
+Other assets
+Deferred tax assets
+Intangible assets
+Property and equipment
+Right-of-use assets
+Interests in associates
+Investment properties
+2020
+49,495
+Investments in subsidiaries
+217,325
+188,376
+73,318
+2021 final dividends is proposed in accordance with the resolution passed at the meeting of the Board of Directors
+held on 18 March 2022 and will be submitted to the 2021 annual general meeting for approval.
+48,399
+66,570
+31,601
+38,385
+7,931
+17,206
+8,867
+10,979
+2020
+2021
+- cash dividend: RMB1.522 per shares (2020: RMB1.253 per shares)
+Total
+Dividends
+General reserve
+Statutory surplus reserve
+(b) Proposed profit appropriations
+30,264
+53. Exchange reserve
+Exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements
+of operations outside Mainland China.
+China Merchants Bank
+Chapter VIII Financial Statements
+41,632
+508,385
+7,873
+12,547
+12,794
+4,554
+543,652
+Loans and advances to customers
+Amounts held under resale agreements
+Placements with banks and other financial institutions
+31,601
+Balances with banks and other financial institutions
+Precious metals
+Cash
+2020
+2021
+Assets
+bank's equity
+54. The bank's statement of financial position and changes in the
+Annual Report 2021
+Balances with central banks
+2021
+858,745
+Domestic Perpetual Bonds (note (i))
+Domestic Perpetual Bonds (note (ii))
+Total
+(c) Relative Information Attributed to Equity Instrument Holders
+275
+4.81% RMB100/Share
+22 Dec 2017 Equity instruments
+Note (iii) None
+Conversion Con-
+conditions version
+No. Amount Due date
+(millions of shares) (RMB in million)
+6,597 Perpetual existence
+50
+USD20/Share
+4.40%
+Offshore Preference Shares in 2017 25 Oct 2017 Equity instruments
+(note (i))
+Domestic Preference Shares in
+2017 (note (ii))
+Issue price
+Dividend
+rate
+Accounting
+Issuance date classification
+Preference Shares
+(a)
+46. Other equity instruments
+Annual Report 2021
+27,468 Perpetual existence
+Chapter VIII Financial Statements
+Note (iii)
+Total
+261
+After deducting the issuance expenses from the Domestic Preference Shares and Offshore Preference Shares above, the total net funds raised amounted
+to RMB34,065 million, which has been included in additional Tier 1 capital of the Bank.
+The Offshore and Domestic Preference Shares have no maturity date. However, after the fifth anniversary of the issuance date, subject to the satisfaction
+of the redemption conditions and having obtained the prior approval of the CBIRC, the Offshore and Domestic Preference Shares may be redeemed in
+whole or in part at the discretion of the Bank, but the Bank does not have the obligation to redeem preference shares. The holders of Preference Shares
+do not have the right to demand the Bank to redeem the Preference Shares and shall not expect that Preference Shares will be redeemed.
+Dividends on the Offshore and Domestic Preference Shares shall be paid in cash. Save for such dividend at the agreed dividend rate, the holders of
+the above Preference Shares are not entitled to share the remaining profits of the Bank with the ordinary shareholders. Dividend is non-cumulative.
+The Bank has the right to cancel any dividend on Preference Shares, and such cancellation shall not be deemed as a default. After the cancellation of
+all or part of the dividend to preference shareholders, the Bank shall not make any ordinary shares distribution, until the Preference Shares dividend is
+resumed in full. As the dividends on the Offshore and Domestic Preference Shares are non-cumulative, the Bank will not distribute the dividends that
+were cancelled in prior years to Preference Shares holders.
+Upon the occurrence of the above mandatory conversion events, the Bank shall report to the CBIRC for review and determination.
+The Bank shall fulfill the relevant information disclosure requirements of the Securities Law, the CSRC and Hong Kong's relevant laws
+and regulations such as making provisional reports or announcements in accordance with relevant regulatory requirements.
+Upon the occurrence of a Tier-2 Capital Trigger Event, the Bank shall have the right to convert, without the consent of the holders
+of Preference Shares, all or part of the Preference Shares then issued and outstanding into Ordinary A Shares (Domestic Preference
+Shares) or Ordinary H Shares (Offshore Preference Shares) based on the total nominal value of the Preference Shares. A Tier-2 Capital
+Trigger Event refers the earlier of the following events: 1) CBIRC having concluded that without a conversion or write-off, the Bank
+would become non-viable, and 2) the relevant authorities having concluded that without a public sector injection of capital or
+equivalent support, the Bank would become non-viable.
+Upon the occurrence of any additional Tier-1 Capital Instrument Trigger Event, that is, the Core Tier-1 Capital Adequacy Ratio drops
+to 5.125% or below, the Bank shall have the right to convert, without the consent of the holders of Preference Shares, all or part
+of the Preference Shares then issued and outstanding into Ordinary A Shares (Domestic Preference Shares) or Ordinary H Shares
+(Offshore Preference Shares) based on the total nominal value of the Preference Shares in order to restore the Core Tier-1 Capital
+Adequacy Ratio of the Bank to above 5.125%. In the case of partial conversion, the Preference Shares shall be converted on a pro
+rata basis and on identical conditions.
+(2)
+(1)
+Both Domestic and Offshore Preference Shares have clauses that state certain events would trigger mandatory conversion, those clauses are as
+follows:
+Pursuant to the approvals by the relevant regulatory authorities in China, the Bank issued non-cumulative Domestic Preference Shares in
+the aggregate nominal value of RMB27,500 million on 22 December 2017. Each Domestic Preference Share has a nominal value of RMB100
+and 275 million Domestic Preference Shares were issued in total. The dividend rate is initially at 4.81% and subject to reset per agreement
+subsequently, but not exceeds 16.68%.
+Pursuant to the approvals by the relevant regulatory authorities in China, the Bank issued US Dollar traded and settled non-cumulative
+Offshore Preference Shares in the aggregate nominal value of USD1,000 million on 25 October 2017. Each Offshore Preference Share has a
+nominal value of USD20 and 50 million Offshore Preference Shares were issued in total. The dividend rate is initially at 4.40% and subject to
+reset per agreement subsequently, but not exceeds 16.68%.
+(iii)
+(!!)
+(i)
+34,065
+325
+None
+China Merchants Bank
+25,220
+25,220
+951
+2,021
+2,063
+3,128
+5,274
+31,200
+38,500
+22,557
+50,565
+2020
+2021
+Note:
+Total
+Collecting on behalf of customers
+Cheques and remittances returned
+Other payable
+Clearing and settlement accounts
+Salary risk allowances (note)
+Continuing involvement liability
+Insurance liabilities
+44. Other liabilities
+Chapter VIII Financial Statements
+3,610
+47
+127
+42,170
+Amount
+No. of shares
+(in million)
+Capital
+At 1 January 2021 and at 31 December 2021
+All H Shares are ordinary shares and rank pari passu with the A Shares. There is no restriction on these shares.
+Total
+- H Shares
+25,220
+262
+20,629
+4,591
+- A Shares
+Listed shares
+By type of shares:
+45. Share capital
+Salary risk allowances are specific funds withheld from the employees' annual remunerations of which the payments are delayed for the
+purpose of risk management. The allocation of the funds is based on performance assessment and risk management results, taking into
+account the short term and long term benefit. In the event of a decline in the asset quality, a sharp deterioration of risk profiles and
+profitability, the occurrence of legal case, or a significant regulatory violation identified by any regulatory authorities, the relevant employees
+will be restricted from the allocation of these allowances.
+104,455
+139,570
+41,812
+2021 and 2020
+No. of shares
+(in million)
+Equity attributed to shareholders of the Bank
+China Merchants Bank
+Annual Report 2021
+430
+49,989
+500
+42,989
+430
+42,989
+430
+49,989
+500
+49,989
+500
+(millions of units)
+(millions of units)
+(millions of units)
+million)
+No.
+million)
+42,989
+No.
+930
+Domestic Perpetual Bonds (note (i))
+Domestic Perpetual Bonds (note (ii))
+46. Other equity instruments (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+After deducting the issuance expenses, the funds raised by the bonds have been used to supplement additional Tier
+1 capital of the Bank in accordance with applicable laws and the approval of the relevant authorities.
+Upon the occurrence of a Non-Viability Trigger Event, the Bank has the right to write off in whole or in part, without
+the need for the consent of the bond holders, the principal amount of the Perpetual Bonds. A Non-Viability Trigger
+Event refers to the earlier of the following events: (i) the CBIRC having concluded that without a write-off, the Bank
+would become non-viable; (ii) the relevant authorities having concluded that without a public sector injection of
+capital or equivalent support, the Bank would become non-viable. The write-off will not be restored.
+The coupon rate will be reset on each benchmark rate reset date (i.e. the date of every five years from the issuance
+date). The adjusted coupon rate will be determined based on the benchmark interest rate at adjustment date plus
+the fixed spread as determined at the time of issuance. The Perpetual Bonds do not contain interest rate step-up
+mechanism or any other redemption incentives. The Bank has the right to cancel, in whole or in part, distributions
+on the Perpetual Bonds and any such cancellation will not constitute an event of default. The bond interests are
+non-cumulative, and any cancelled distribution is not carried to the following year. The Bank will fully consider the
+interests of bondholders when exercising this right. The Bank can use the cancelled bond interest for the current
+period at its discretion to repay other due debts. Cancellation of any distributions to the Perpetual Bonds, no matter
+in whole or in part, will not impose any other restriction on the Bank, except in relation to dividend distributions to
+ordinary shares.
+The claims in respect of the Perpetual Bonds will be subordinated to the claims of depositors, general creditors,
+and subordinated debts that rank senior to the Perpetual Bonds, and will rank in priority to all classes of shares
+held by the Bank's shareholders and rank pari passu with the claims in respect of any other additional Tier-1 capital
+instruments of the Bank that rank pari passu with the Perpetual Bonds.
+From the fifth anniversary since the issuance of the Perpetual Bonds, the Bank has the right to redeem in whole
+or in part the Perpetual Bonds on the annual interest payment date (including the interest payment date on the
+fifth year since the issuance date) subject to the approval of the CBIRC and the satisfaction of the redemption
+preconditions. If, after the issuance, the Perpetual Bonds no longer qualify as additional Tier 1 capital as a result
+of an unforeseeable change to relevant provisions of supervisory regulation, the Bank has the right to redeem the
+whole but not part of the Perpetual Bonds. The investors do not have the right to sell back the Perpetual Bonds to
+the Bank.
+With the approval of the relevant regulatory authorities in China, the Bank issued RMB43,000 million of 2021 China Merchants Bank Co., Ltd.
+Undated Additional Tier-1 Capital Bonds (the "Perpetual Bonds 2021, together with Perpetual Bonds 2020, Perpetual Bonds") in the national
+inter-bank bond market on 7 December 2021. The unit face value is RMB100. The coupon rate adjusted period is every 5 years from the
+issuance of the Perpetual Bonds 2021. In any coupon rate adjusted period, the coupon rate of the Perpetual Bonds will remain at a prescribed
+fixed rate. The Perpetual Bonds 2021 will continue to be outstanding so long as the Bank continues to operate.
+With the approval of the relevant regulatory authorities in China, the Bank issued RMB50,000 million of 2020 China Merchants Bank Co., Ltd.
+Undated Additional Tier-1 Capital Bonds (Series 1) (the "Perpetual Bonds 2020") in the national inter-bank bond market on 9 July 2020. The
+unit face value is RMB100. The coupon rate adjusted period is every 5 years from the issuance of the Perpetual Bonds 2020. In any coupon
+rate adjusted period, the coupon rate of the Perpetual Bonds will remain at a prescribed fixed rate. The Perpetual Bonds 2020 will continue to
+be outstanding so long as the Bank continues to operate.
+(ii)
+(i)
+Note:
+Total
+7 Dec 2021
+9 Jul 2020
+92,978
+million)
+No.
+Issuance date
+Equity instruments
+Equity instruments
+9 Jul 2020
+7 Dec 2021
+18,200
+(millions of units)
+conditions Conversion
+million) Due date
+No.
+Issue price
+rate
+Issuance date classification
+Conversion
+(RMB in
+Interest
+Accounting
+Amount
+(b) Perpetual Bonds
+46. Other equity instruments (continued)
+3.95%
+3.69%
+RMB100/Unit
+500
+49,989 Perpetual existence
+(RMB in
+(RMB in
+(RMB in
+Amount
+Amount
+Amount
+31 December 2021
+Increase
+Chapter VIII Financial Statements
+1 January 2021
+930 92,978
+None
+None
+42,989 Perpetual existence
+430
+RMB100/Unit
+None
+None
+The changes of Perpetual Bonds issued were as follows:
+3,228
+82,137
+79,712
+Cash and Balances with central banks
+(a) Analysis of the balances of cash and cash equivalents (including assets with
+original maturity within 3 months):
+55. Notes to consolidated cash flow statement
+228 684,457
+31,601
+(26) 71,158 94,067 293,523
+7,951
+49,989 76,681
+34,065
+25,220
+At 31 December 2020
+60
+(60)
+of equity instruments designated at
+FVTOCI
+Transfers within equity upon disposal
+(1,651)
+(1,651)
+Balance with banks and other financial institutions
+31,601
+Placements with banks and other financial institutions
+Debt securities investments
+268
+267
+552,790
+801,754
+37,033
+53,468
+282,867
+527,341
+111,706
+65,897
+83,688
+75,919
+37,496
+79,129
+2020
+2021
+Total
+Amounts held under resale agreements
+(31,601)
+(30,264)
+(30,264)
+Other comprehensive income for the year
+88,674
+88,674
+Net profit for the year
+22 106,105
+1,337
+8,867 8,247 38,368
+(725)
+49,989
+Changes in equity for the year
+206 578,352
+30,264
+(26) 62,291 85,820 255,155
+8,676
+76,681
+34,065
+25,220
+(665)
+22
+(643)
+Total comprehensive income for the year
+8,247 (8,247)
+(8,867)
+8,867
+(31,915)
+1,337
+8,247 (50,366)
+8,867
+Dividends paid for the year 2019
+Proposed dividends for the year 2020
+Dividends paid for preference shares
+China Merchants Bank
+Appropriation to general reserve
+Profit appropriations
+49,989
+49,989
+Issue of perpetual bonds
+88,031
+22
+88,674
+(665)
+Appropriation to statutory surplus reserve
+Chapter VIII Financial Statements
+Annual Report 2021
+55. Notes to consolidated cash flow statement (continued)
+Dividend declared
+8,304
+555
+7,749
+Accrued interest
+3,850
+3,850
+Additions of lease liabilities
+Non-cash changes:
+(47,083)
+(35,685)
+(7,630)
+(3,768)
+Interest/dividend paid
+(311,678)
+(4,835)
+(3,697)
+35,685
+35,685
+Discount or premium amortisation
+5,541
+2,104
+201,142
+11,092
+240,284
+At 31 December 2021
+(2,241)
+(216)
+(1,530)
+(21,363) (55,771)
+(495)
+384
+656
+(257)
+(15)
+Fair value adjustments
+4,783
+53
+(811)
+Exchange difference
+At 1 January 2020
+(226,012)
+405,131
+of deposit
+Lease
+financial
+Dividend
+Interest
+issued
+issued
+certificates
+Other
+securities
+interbank of deposit
+Debt
+Negotiable Certificates
+(c)
+The table below details changes in the Group's liabilities from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those for which cash flows were classified in the Group's
+consolidated cash flows statement as cash flows from financing activities.
+Reconciliation of liabilities arising from financing activities
+(b)
+(Note)
+(Note)
+payable
+payable
+6,860
+63,872
+14,692
+319,707
+Proceeds from the issue
+Cash changes:
+397,975
+14,242
+Repayment
+23,047
+1,985
+194,775
+19,084
+144,816
+At 1 January 2021
+Total
+liabilities
+liabilities
+26
+3,961
+reserve Total
+Preference Perpetual Capital revaluation Hedging Surplus General Retained
+shares bonds reserve
+reserve reserve reserve reserve earnings appropriation
+76,681
+76,681
+Capital reserve
+84,054
+127,043
+Other equity instruments
+25,220
+25,220
+Share capital
+Equity
+7,181,679
+7,889,446
+86,218
+119,395
+291,246
+398,672
+8,201
+Investment revaluation reserve
+14,503
+14,866
+Hedging reserve
+Total equity
+228
+144
+Exchange reserve
+31,601
+38,385
+Proposed profit appropriations
+293,523
+340,271
+Retained earnings
+94,067
+105,941
+General reserve
+71,158
+China Merchants Bank
+Annual Report 2021
+Surplus reserve
+(26)
+7,951
+13,468
+13,164
+6,829
+36,600
+36,105
+Financial liabilities at fair value through profit or loss
+59,494
+55,710
+Placements from banks and other financial institutions
+699,161
+732,631
+Deposits from banks and other financial institutions
+331,622
+159,987
+Borrowing from central banks
+7,866,136
+8,700,134
+74,233
+109,871
+71,043
+Derivative financial liabilities
+26,866
+49,624
+Amounts sold under repurchase agreements
+7,536
+17,205
+20,926
+Total liabilities
+Other liabilities
+Debt securities issued
+Provisions
+Lease liabilities
+810,688
+Contract liabilities
+12,194
+15,853
+Salaries and welfare payable
+5,443,144
+6,150,241
+Deposits from customers
+126,673
+137,857
+Tax payable
+Total equity and liabilities
+8,700,134
+684,457
+38,385
+(38,385)
+At 31 December 2021
+of equity instruments designated at
+FVTOCI
+Proposed dividends for the year 2021
+Dividends paid for preference shares
+Distribution to perpetual bonds
+Transfers within equity upon disposal
+(31,601)
+(31,601)
+Dividends paid for the year 2020
+11,874 (11,874)
+(10,979)
+10,979
+(35,214)
+6,784
+11,874 (64,851)
+10,979
+Appropriation to general reserve
+Appropriation to statutory surplus reserve
+(1,638)
+(1,638)
+(1,975)
+(1,975)
+capital
+Share
+Proposed
+Investment
+Other equity instruments
+54. The bank's statement of financial position and changes in the
+bank's equity (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+Profit appropriations
+China Merchants Bank
+38,385
+82,137 105,941 340,271
+14,866
+92,978 76,681
+34,065
+25,220
+1,805
+(1,805)
+144 810,688
+profit Exchange
+42,989
+Issue of perpetual bonds
+25,220
+At 1 January 2021
+reserve Total
+profit Exchange
+Share Preference Perpetual Capital revaluation Hedging Surplus General Retained
+shares bonds reserve
+reserve reserve reserve reserve earnings appropriation
+capital
+Proposed
+Investment
+Other equity instruments
+Details of the changes in the Bank's equity are as follows:
+54. The bank's statement of financial position and changes in the
+bank's equity (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+266
+265
+7,866,136
+34,065 49,989 76,681
+7,951
+(26) 71,158 94,067 293,523
+31,601
+(84) 118,456
+109,794
+26
+8,720
+Total comprehensive income for the year
+109,794
+(84) 8,662
+26
+8,720
+42,989
+Other comprehensive income for the year
+Net profit for the year
+(84) 126,231
+6,784
+26 10,979 11,874 46,748
+6,915
+42,989
+Changes in equity for the year
+228 684,457
+109,794
+260
+26,650
+1,985
+(3,883)
+(90)
+(2,517)
+(1,245)
+(31)
+Exchange difference
+484
+262
+179
+43
+Fair value adjustments
+(278)
+(88)
+7,042
+Discount or premium amortisation
+32,321
+32,321
+Dividend declared
+8,572
+596
+7,976
+Accrued interest
+3,911
+At 31 December 2020
+3,911
+144,816
+194,775
+26
+269
+The accounting policies of the operating segments are the same as the Group's accounting policies as stated in Note
+4. Operating segment income represents income generated from external customers, inter-segment transactions are
+offset. No customer contributed 10% or more to the Group's revenue for 2021 and 2020. Internal transactions are
+conducted at fair value.
+For the purpose of operating segment analysis, external net interest income/expense represents the net interest
+income earned or expense incurred on banking services provided to external parties. Internal net interest income/
+expense represents the assumed profit or loss by the internal funds transfer pricing mechanism which has taken into
+account the structure and market returns of the assets and liabilities portfolio. Cost allocation is based on direct
+costs attributable to each reporting segment and apportion according to the relevant factors.
+Other business includes: property leasing and businesses operated by subsidiaries other than CMB WLB, associates
+and joint ventures. None of these segments meet any of the quantitative thresholds so far for segment division.
+(3) Other Business
+The financial services provided to retail customers include: loan and deposit service, bank card service, wealth
+management services, private banking and other services.
+(2) Retail finance business
+The financial services for corporate clients, government agencies, and financial institutions include: loan and deposit
+service, settlement and cash management service, trade finance and offshore business, investment banking business,
+inter-bank business such as placement and repurchase, asset custody business, financial market business, and other
+services.
+(1) Wholesale finance business
+The Group manages its businesses by divisions, which are organised by both business lines and geography.
+The Group's principal activities are providing corporate and personal banking services, conducting treasury business,
+providing asset management and other financial services.
+56. Operating segments
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+There were no significant non-cash transactions during the years ended 31 December 2021 and 2020.
+Significant non-cash transactions
+Note: Including financial liabilities designated at fair value through profit or loss.
+397,975
+14,242
+23,047
+26
+19,084
+Additions of lease liabilities
+6,676
+(51,811)
+liabilities
+liabilities
+payable
+payable
+(Note)
+(Note)
+of deposit
+Lease
+financial
+Dividend
+Non-cash changes:
+issued
+issued
+certificates
+Other
+securities
+of deposit
+interbank
+Debt
+Certificates
+Negotiable
+495,110
+13,812
+Total
+At 1 January 2020
+Interest
+26,774
+349,284
+(32,321)
+(8,820)
+(10,670)
+Interest/dividend paid
+(493,809)
+(4,644)
+(867)
+(413,820)
+Repayment
+283,626
+14,417
+(28,992) (45,486)
+33,606
+22,592
+213,011
+Proceeds from the issue
+Cash changes:
+611,888
+14,379
+9,325
+26
+2,829
+209,271
+Note:
+14,922
+7,548,146
+8,282,668
+23,654
+14,922
+994,548
+Reportable segment liabilities
+2,075,680
+2,329,192
+4,477,918
+4,980,618
+(i)
+972,858
+Capital expenditure represents the amount incurred for acquiring long-term segment assets.
+Goodwill
+Chapter VIII Financial Statements
+Annual Report 2021
+56. Operating segments (continued)
+(b) Reconciliations of reportable segment revenue, profit or loss, assets, liabilities
+and other material items
+Operating income for reportable segments
+Total profit before income tax for reportable segments
+2021
+327,377
+148,173
+2020
+287,398
+122,440
+31 December 2021 31 December 2020
+Assets
+Total assets for reportable segments
+23,654
+Intangible assets
+China Merchants Bank
+joint ventures
+A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong
+capability to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and
+business conditions in the longer term may not necessarily reduce the ability of the borrower to fulfill its contractual
+cash flow obligations.
+2020
+8,269,984
+9,149,124
+9,954
+3,169
+148,173
+122,440
+3,738
+18,206
+10,835
+23,762
+17,123
+Wholesale finance business
+31 December
+31 December 31 December
+Retail finance business
+Of which: Interest in associates and
+31 December 31 December
+Total
+31 December 31 December
+31 December
+2021
+Reportable segment assets
+4,954,212
+2020
+4,489,868
+2021
+2,908,405
+2020
+2,617,109
+2021
+1,286,507
+2020
+1,163,007
+2021
+9,149,124
+Other business
+8,269,984
+31 December 31 December
+2020
+2021
+3,249,998
+571
+"Bohai Rim region" refers to branches and representative offices in Beijing municipality, Tianjin municipality,
+Shandong province and Hebei province;
+"Pearl River Delta and West Coast region" refers to branches in Guangdong province and Fujian province;
+"Northeast region" refers to branches in Liaoning province, Heilongjiang province and Jilin province;
+"Central region" refers to branches in Henan province, Anhui province, Hunan province, Hubei province,
+Jiangxi province, Shanxi province and Hainan province;
+"Western region" refers to branches in Sichuan province, Chongqing municipality, Guizhou province, Yunnan
+province, Shaanxi province, Gansu province, Ningxia Hui Autonomous region, Xinjiang Uyghur autonomous
+region, Guangxi Zhuang autonomous region, Inner Mongolia autonomous region, Qinghai province and Tibet
+autonomous region;
+"Overseas" refers to overseas branches in Hong Kong, New York, Singapore, Luxembourg, London, Sydney
+and representative offices in New York and Taipei; and
+"Subsidiaries" refers to subsidiaries wholly owned or controlled by the Group, including CMB WLB,
+CMBICHC, CMBFLC, CMFM, CMBWM, CMB Europe S.A. and CIGNA & CMAM, etc.
+Total assets
+Total liabilities
+Non-current assets
+Profit before tax
+Operating income
+31 December
+Geographical information
+2021
+Headquarter
+4,155,509
+3,779,914
+Yangtze River Delta region
+1,199,329
+31 December 31 December
+2020
+2021
+3,492,876
+1,045,508 1,177,342 1,026,332
+6,876
+31 December
+2020
+51,220
+40,757
+6,198
+Bohai Rim region
+725,595
+"Yangtze River Delta region" refers to branches in Shanghai municipality, Zhejiang province and Jiangsu
+province;
+To support the Bank's operations and management's assessments, the geographical segments are defined as follows:
+"Headquarter" refers to the Group headquarter and credit card centres;
+In presenting information on the basis of geographical segments, operating income is allocated based on the
+location of the branches and subsidiaries that generate the revenue. Segment assets and non-current assets are
+allocated based on the geographical location of the underlying assets.
+The Group operates principally in the PRC with branches located in major provinces, autonomous regions and
+municipalities directly under the central government in Mainland China. The Group also has branches operating
+in Hong Kong, New York, Singapore, London, Sydney and Luxembourg, subsidiaries operating in Hong Kong,
+Shenzhen, Shanghai, Beijing and Luxembourg and representative offices in Beijing, New York and Taipei.
+Deferred tax assets
+Other unallocated assets
+81,639
+7,733
+629
+72,893
+7,988
+Consolidated total assets
+9,249,021
+8,361,448
+Liabilities
+Total liabilities for reportable segments
+8,282,668
+7,548,146
+Tax payable
+9,954
+Deferred tax liabilities
+Consolidated total liabilities
+22,491
+1,353
+76,828
+8,383,340
+18,648
+1,073
+63,227
+7,631,094
+271
+272
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+56. Operating segments (continued)
+(c)
+Geographical segments
+Other unallocated liabilities
+63,834
+Operating expenses
+2,278
+65,461
+(18,571)
+(21,019)
+(50,651)
+(44,442)
+Net interest income
+88,145
+82,289 116,841 103,343
+(1,067)
+(601)
+203,919
+185,031
+Net fee and commission income
+24,807
+24,017
+60,155
+51,426
+9,485
+4,043
+94,447
+79,486
+Other net income
+20,943
+15,723
+2,018
+1,519
+6,050
+69,222
+5,639
+Internal net interest income/(expense)
+203,919
+270
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+56. Operating segments (continued)
+(a) Segment results, assets and liabilities
+Wholesale
+Retail
+finance business
+finance business
+Other business
+Total
+2021
+2020
+2021
+2020
+2021
+2020
+2021
+2020
+External net interest income
+18,923
+16,828
+135,412
+124,362
+49,584
+43,841
+185,031
+29,011
+22,881
+Operating income
+(90,683)
+Reportable segment profit before
+impairment losses
+89,534
+83,754 117,336
+100,474
+3,628
+356
+210,498
+184,584
+Expected credit losses and impairment
+losses on other assets
+(25,946)
+(28,317)
+(39,627)
+(36,640)
+(782)
+(68)
+(66,355) (65,025)
+Share of profits of associates and joint ventures
+4,030
+2,881
+4,030
+2,881
+Reportable segment profit before taxation
+63,588
+Capital expenditure (note(i))
+(103,763)
+(5,175)
+(6,540)
+(50,677)
+133,895
+122,029
+179,014
+156,288
+14,468
+9,081
+327,377
+287,398
+640,583
+- Property, equipment and investment
+properties depreciation
+(1,917)
+(1,722)
+55,437 77,709
+2,550
+3,278
+(2,860)
+(4,080)
+(3,340)
+(8,857)
+(7,715)
+-Right-of-use assets depreciation
+(1,672)
+(1,722) (2,367) (2,484)
+(220)
+(210)
+(4,259) (4,416)
+- Other
+(40,772)
+(34,831) (56,451)
+(2,653)
+711,389
+625,403
+4,319
+The redemption obligations below represent the nominal value of government bonds underwritten and sold by the
+Group, but not yet matured at the end of the reporting period:
+As an underwriting agent of PRC government bonds, the Group has the responsibility to make advances to bond
+holders if the holders decide to early redeem the bonds held. The redemption price for the bonds at any time before
+their maturity date is based on the nominal value plus any interest unpaid and accrued up to the redemption date.
+Accrued interest payables to the bond holders are calculated in accordance with relevant requirements set by the
+MOF or the PBOC. The redemption price may be different from the fair value of similar instruments traded at the
+redemption date.
+(d) Redemption obligations
+At 31 December 2021, the Bank or other group entities was a defendant in certain outstanding litigations with total
+gross claims of RMB1,678 million (2020: RMB573 million). The Group considers that no material losses would be
+incurred by the Group as a result of these outstanding litigations and therefore no provision has been made in the
+consolidated financial statements.
+(c) Outstanding litigations
+The lease commitments of the Group as a lessor are detailed in note 58 (e).
+801
+714
+Redemption obligations
+294
+507
+480
+Total
+- Authorised but not contracted for
+- Contracted for
+2020
+2021
+The authorised capital commitments of the Group were as follows:
+234
+(b)
+2021
+30,020
+The Group expects that the amount of redemption before the maturity date of these government bonds through the
+Group will not be material.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+276
+275
+12,303
+21,171
+1,884
+2020
+27,095
+7,421
+13,750
+2020
+2021
+Total
+Financial lease commitments
+Operating lease commitments
+Operating lease commitments and financial lease commitments where the Group is a lessor at the end of the
+reporting period are as follows:
+(e) Lease commitments
+10,419
+Capital commitments
+58. Contingent liabilities and commitments (continued)
+Annual Report 2021
+120,914
+45
+198
+120,671
+- with an original maturity within 1 year (inclusive)
+212,660
+45
+3,132
+- with an original maturity over 1 year
+Credit card unused commitments
+209,483
+267,176
+292
+1,671
+265,213
+Bills of acceptances
+120,992
+3
+241
+Irrevocable loan commitments
+88,812
+2,934
+91,746
+Chapter VIII Financial Statements
+China Merchants Bank
+The Group calculated the credit risk weighted amount of its contingent liabilities and commitments in accordance
+with the requirements of the Administrative Measures on Capital of Commercial Banks (Provisional) issued by the
+CBIRC. The amount within the scope approved by the CBIRC in April 2014 is calculated using the Internal Ratings-
+Based Approach, and the Weighted Approach is used to calculate those that are not eligible for the Internal Ratings-
+Based Approach.
+2020
+470,782
+2021
+593,062
+Credit risk weighted amounts of contingent liabilities and commitments
+Apart from the irrevocable loan commitments, the Group had loan commitments of RMB4,441,835 million at 31
+December 2021 (31 December 2020: RMB3,606,998 million) which are unconditionally cancellable by the Group
+or automatically cancellable due to deterioration in the creditworthiness of the borrower as stipulated in respective
+lending agreements. The Group will not assume any risks on the unused credit limits for these loan customers. As a
+result, such balances are not included in the above contingent liabilities and commitments.
+As at 31 December 2021, the Group's irrevocable letters of credit included sight letters of credit of RMB16,974
+million (31 December 2020: RMB12,965 million), usance letters of credit of RMB9,552 million (31 December 2020:
+RMB6,516 million), and other commitments of RMB137,693 million (31 December 2020: RMB101,511 million).
+Irrevocable loan commitments include credit limits granted to offshore customers by overseas branches, subsidiaries
+and onshore and offshore syndicated loans etc.
+2,049,333
+718
+12,020
+100,419
+100,419
+2,036,595
+Total
+Other
+1,134,733
+113
+6,468
+1,128,152
+59. Transactions on behalf of customers
+120,748
+(a)
+The Group's entrusted lending business refers to activities where principals such as government departments,
+business entities and individuals provide capital for loan advances through the Group to their specified targets
+on their behalf in accordance with specific terms and conditions, with the help of the Group in monitoring loan
+usage and seeking loan recovery. The entrusted lending business does not expose the Group to any credit risk. As
+instructed by these principals, the Group holds and manages underlying assets and liabilities only in the capacity of
+an agent, and charges handling fees for related services.
+(vi)
+Maximum exposure
+The Group's maximum exposure to credit risk without taking into account of any collateral held or other credit
+enhancements is the carrying amount of the relevant financial assets (including derivatives) as disclosed in the
+consolidated statement of financial position and the contract amount of the irrevocable credit commitments
+disclosed in Note 58(a). At 31 December 2021, the amount of the Group's maximum credit risk exposure was
+RMB11,235,033 million (31 December 2020: RMB10,192,927 million).
+(vii)
+Renegotiated loans and advances to customers
+The carrying amount of loans and advances that were credit impaired and the terms had been renegotiated was
+RMB16,517 million as at 31 December 2021 (31 December 2020: RMB24,878 million).
+279
+For retail and credit card business, credit risk is considered as significantly increased if any of the following
+conditions is met: the loan classification is special-mentioned; more than 30 days (inclusive) overdue; the customer
+or the debt has credit risk early warning signal; or the customer has other significant risk signals identified by the
+Group.
+The Group divides the primary business into wholesale business, retail business and credit card business. The models
+are divided based on shared risk characteristics, and the reference indicators include the loan classification, business
+type and collateral type.
+For wholesale business, credit risk is considered as significantly increased if any of the following conditions is met:
+the loan classification is special-mentioned; more than 30 days (inclusive) overdue; the internal credit risk rating of
+the customer has been downgraded to certain level; the early warning signal of the customer has reached a certain
+level; or the customer has other significant risk signals identified by the Group.
+As describe in Note 4(5), the Group recognises lifetime ECL if there are significant increases in credit risk.
+Significant increase in credit risk
+(ii)
+The Group classifies credit risk based on probability of default. The internal credit risk rating is based on the
+forecasted default risk, taking into consideration qualitative and quantitative factors. For customers of wholesale
+business, such factors include net profit growth rate, sales growth rate, industry, etc. For customers of retail
+business, such factors include maturity, ageing, collateral ratio, etc.
+(i)
+Internal credit risk rating
+Credit risk (continued)
+(a)
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the
+risk of default occurring on the financial instrument and other items at the reporting date with that at the date of
+initial recognition. In making this assessment, the Group considers an actual or expected significant deterioration
+in the financial instrument's internal credit risk rating (Note 60(a)(i)), as well as internal early warning signal, the
+result of loan classification and overdue information. The Group regularly reviews whether the evaluation criteria are
+applicable to the current situation. During the reporting period, the Group further deepened the application of the
+early warning signal and improved the ability of the model to distinguish risks.
+60. Risk management (continued)
+Groupings based on shared risk characteristics
+As the COVID-19 is still evolving, the Group's expected credit loss model as at 31 December 2021 fully reflected the
+impact of the COVID-19 on the macroeconomic environment through continuous updating of internal and external
+data, model optimisation and other measures.
+For loan commitment and financial guarantee, the date when the commitment becomes irrevocable is considered as
+the initial recognition date.
+The Group considers that a debt instrument is impaired when its loan classification is substandard, doubtful or loss
+(debt instruments with more than 90 days overdue are included in these 3 categories).
+(iii)
+Measurement of ECL
+The key inputs used for measuring ECL are:
+probability of default (PD): is an estimate of the likelihood of default over 12 months or lifetime horizon;
+loss given default (LGD): is the proportion of the loss arising on default to the exposure at default;
+exposure at default (EAD): is the risk exposure on a debt.
+These figures are generally derived from internally developed statistical models and other historical data and they are
+adjusted to reflect forward-looking information.
+China Merchants Bank
+(v)
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(a)
+Credit risk (continued)
+(iv)
+Incorporation of forward-looking information
+The Group divides financial assets into different asset groups based on their different risk characteristics. According
+to the risk characteristics of the asset group, the Group collects external data released by authoritative institutions
+and internal risk data without undue cost or effort for modelling. During the reporting period, in addition to the
+common economic indicators such as Gross Domestic Product ("GDP"), Consumer Price Index ("CPI"), Producer
+Price Index ("PPI") and Broad Money Supply ("M2"), the Group expands its macroeconomic index database by
+including various categories of indicators such as industry index, interest and exchange rate, and survey index.
+Based on statistical analysis and expert judgements, the Group sets up multiple forward-looking scenarios to predict
+macroeconomic indicators and risk parameters. The Group will firstly refer to the forecasts issued by external
+authoritative institutions as the forecasts of economic indicators under the baseline scenario. If there is no external
+forecasts, the Group will refer to the forecasts issued by the professionals of the Bank and the outputs of the
+models. For the forecasts of economic indicators under the remaining scenarios, the Group will refer to the actual
+historical data for analysis and forecast. Taking GDP (year-on-year growth rate) and CPI (month-on-month increase)
+as an example, the forecasts adopted by the Group for 2022 under the baseline scenario are 5.34% (2021: 8.84%)
+and 2.43% (2021: 2.11%) respectively.
+Combined with quantitative measurement and expert judgement, the Group sets the weighting of multiple scenarios
+based on the principle of taking the baseline scenario as the main and the other scenarios as supplement. The
+weight of the baseline scenario of the Group as at 31 December 2021 is the highest. According to the sensitivity
+test results of the Group, when the weighting of the optimistic scenario increases by 10% and the weighting of the
+baseline scenario decreases by 10%, the ECL amount at 31 December 2021 will decrease by approximately 3.4%
+compared to the current result (at 31 December 2020: will decrease by approximately 1%). When the weighting of
+the pessimistic scenario increases by 10% and the weighting of the baseline scenario decreases by 10%, the ECL
+amount at 31 December 2021 will increase by approximately 1.5% compared to the current result (at 31 December
+2020: will increase by approximately 2.5%).
+The Group periodically forecasts macroeconomic indicators, and calculates the ECL based on a weighted 12-month
+expected credit loss (stage 1) or a weighted lifetime expected credit loss (stage 2 and stage 3).
+Annual Report 2021
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+2,386,085
+2020
+2,683,636
+2021
+Funds received from customers under wealth management services
+At the end of the reporting period, funds received from customers under unconsolidated non-principal-guaranteed
+wealth management services were as follows:
+The wealth management products and funds obtained are not assets and liabilities of the Group and are not
+recognised in the consolidated statement of financial position. The funds received from customer for wealth
+management business that yet to be invested are recorded under other liabilities.
+The Group's wealth management services to customers mainly represent sales of wealth management products to
+corporate and personal banking customers by the Bank and CMBWM. The funds obtained from wealth management
+services are invested in investment products, including government bonds, policy bank bonds, short term corporate
+debt instruments and trust loans. The Group initiated the launch of wealth management products. The investment
+risk associated with these products is borne by the customers who invest in these products. The Group does not
+consolidate these wealth management products. The Group earns commission which represents the charges on
+customers in relation to the provision of custody, sales and management services.
+Note: Funds received from customers under wealth management services are the funds received from customers under unconsolidated non-principal-
+guaranteed wealth management services.
+Wealth management services
+(264,107)
+(263,589)
+264,107
+2020
+Entrusted funds
+Entrusted loans
+At the end of the reporting period, the entrusted assets and liabilities were as follows:
+Entrusted lending are not assets of the Group and are not recognised in the consolidated statement of financial
+position. Income received and receivable for providing these services are recognised in the consolidated statement of
+profit or loss as fee and commission income.
+(b)
+(c)
+Entrusted management of insurance funds
+The entrusted management of insurance funds mainly refers to the business that the Group carries out investment
+activities on funds entrusted by insurance companies according to the regulatory policies and the investment
+guidelines from insurance companies, and charges fees for providing such services.
+At the end of the reporting period, the balance of entrusted funds was as follows:
+278
+277
+Concentration of credit risk: when certain number of customers carry out the same business activities, locate in
+the same geographical region or their industries share similar economic characteristics, their ability to meet their
+obligations may be affected by the same economic factors. The level of concentration of credit risk reflects the
+sensitivity of the Group's operating result to a specific industry or geographical region. To prevent concentration of
+credit risk, the Group has formulated a limit management policy to monitor and analyse its loan portfolio.
+Analysis of loans and advances by industry and loan portfolio are presented in Note 22.
+The risks involved in contingent liabilities and commitments are essentially the same as the credit risk involved in
+loans and advances to customers. These transactions are, therefore, subject to the same credit application, post-
+lending monitoring and collateral requirements as for customers applying for loans.
+In respect of loan classification, the Group adopts a risk based loan classification methodology. Currently, the Group
+categorises its loans on a ten-grade loan classification basis in order to refine internal risk classification management
+(normal (grades 1-5), special mention (grades 1-2), substandard, doubtful and loss).
+To mitigate risks, the Group requests customers to provide collateral and guarantees when necessary. Certain
+guidelines have been set for the acceptability of specific types of collateral or risks migrating measures. Collateral
+portfolio and legal covenants are reviewed regularly to ensure that they remain sufficient for the given risks and be
+consistent with market practices.
+With respect to credit risk management of retail financial business, the Group mainly relies on the credit assessment
+of applicants as the basis for loan approval, which takes into consideration the income level, credit history, and
+repayment ability of the applicant. The Group monitors post-lending conditions by focusing on borrowers' repayment
+ability, the status of collateral and any changes to collateral value. Once a loan becomes overdue, the Group starts
+the collection process according to standard retail loans collection procedures.
+With respect to the credit risk management of corporate financial business, the Group formulates credit policy
+guidelines, enhances the standards on credit acceptance and management requirements for corporate, interbank
+and institutional clients, and implements limits in key risk areas to improve the quality of credit exposure.
+With respect to daily operations, the Risk Management Department, as directed by the Risk and Capital Management
+Committee, participates in, coordinates and monitors the work of other risk management functions, including each
+business unit and the Legal and Compliance Department. The Group manages credit risk throughout the entire
+credit process including pre-lending evaluations, credit approval and post-lending monitoring.
+The Group designs its organisation framework, credit policies and processes with an objective to identify, evaluate
+and manage its credit risk effectively. The Risk and Capital Management Committee, set up and appointed by the
+board of directors is responsible for supervising and evaluating the set-up, organisational structure, work process
+and effectiveness of various risk management functions.
+Credit risk represents the potential losses that may arise from the failure of a counterparty or a debtor to meet its
+obligation or commitment to the Group. Credit risk increases when all counterparties are concentrated in a single
+industry or a geographical region, as different counterparties in the same region or industry may be affected by the
+same economic factors, which may eventually affect their repayment abilities.
+(a) Credit risk
+60. Risk management
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+2020
+2021
+86,098
+Entrusted management of insurance funds
+Entrusted lending business
+Irrevocable letters of credit
+117,037
+262
+- Financial assets at fair value through profit or loss
+479,572
+324,446
+142,881
+157,572
+7,080
+2020
+329,611
+2021
+159,357
+7,517
+29,241
+Subtotal
+Placements from Banks and other financial institutions
+Borrowing from central banks
+The following assets have been pledged as collateral for borrowing from central banks and liabilities under
+repurchase or placement arrangements:
+57. Assets pledged as security
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+Non-current assets include interests in joint ventures, interests in associates, property and equipment, investment properties, right-of-use
+assets, intangible assets and goodwill.
+Amounts sold under repurchase agreements
+Note:
+11,291
+195,166
+Irrevocable guarantees
+The contractual amounts of commitments and contingent liabilities are set out in the following table by category.
+The amounts reflected in the table for commitments assume that amounts are fully advanced. The amounts reflected
+in the table for guarantees and letters of credit represent the maximum potential loss that would be recognised at
+the end of the reporting period if counterparties default.
+The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third
+parties. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group
+expects most acceptances to be settled simultaneously with the reimbursement from the customers.
+At any given time the Group has outstanding commitments to extend credit. These commitments take the form of
+approved loans and credit card limits.
+Credit commitments
+(a)
+58. Contingent liabilities and commitments
+The transactions under repurchase or placement agreements are conducted under terms that are usual and
+customary to standard borrowing and placing activities.
+- Debt investments at amortised cost
+Assets pledged
+340,205
+120,238
+81,357
+- Loans and advances to customers
+Total
+35,787
+34,441
+- Debt investments at fair value through other comprehensive income
+345,302
+512,618
+119,836 148,173 122,440 327,377 287,398
+137,864
+8,361,448 8,383,340 7,631,094
+3,958
+504,742
+559,499
+513,998
+567,191
+Central region
+1,617
+164,666
+4,132
+166,933
+169,282
+Northeast region
+4,432
+871,249
+979,018
+896,144
+997,986
+Pearl River Delta and West Coast region
+165,961
+Western region
+590,272
+517,523
+9,249,021
+Total
+1,053 1,575 1,650 2,632 2,830
+53,017 14,490 9,755 25,478 20,867
+61,382
+465,201
+507,091
+581,603
+633,224
+Subsidiaries
+861
+215,032
+208,569
+220,214
+210,633
+Overseas
+2021 2020 2021 2020
+42,939 19,611 145,403 124,809
+6,149 24,092 24,297 41,451 35,897
+4,525 17,971 19,829 31,286 28,261
+4,263 22,252 21,606 35,379 32,588
+1,790 2,919 1,854 6,108 5,785
+9,744 12,227 19,448 18,040
+4,150 12,191
+11,611 20,192 18,321
+3,877
+508,471
+580,623
+Of which: Financial guarantees
+Non-financing letters of guarantees
+Irrevocable letters of credit
+Bills of acceptances
+(Lifetime
+-Stage 2
+2020
+(a) Credit commitments (continued)
+58. Contingent liabilities and commitments (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+-Stage 1
+274
+2,229,694
+1,356
+128,550
+29,102
+1,555
+7,903
+4,896
+1,239,856
+273
+ECL-not
+-Stage 3
+(Lifetime
+(12-month
+109
+116,666
+Non-financing letters of guarantees
+96,316
+3
+399
+95,914
+Of which: Financial guarantees
+213,353
+265
+508
+212,580
+Irrevocable guarantees
+Total
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+122
+The Group has made deferred repayment and interest payment arrangements for some debtors affected by the
+COVID-19. However, the deferred repayment and interest payment arrangements will not directly lead to the
+conclusion that the debtors' credit risk has increased significantly. Instead, the Group will make a comprehensive
+judgement based on the risk indicators.
+120,012
+146,625
+-Stage 3
+2021
+6,337
+7,353
+impaired)
+credit-
+ECL-not
+-Stage 2
+(Lifetime
+(Lifetime
+52,198
+ECL)
+-Stage 1
+(12-month
+Total
+Other
+Credit card unused commitments
+- with an original maturity over 1 year
+- with an original maturity within 1 year (inclusive)
+Irrevocable loan commitments
+197,208
+ECL-credit-
+impaired)
+111
+345,629
+790
+5,684
+4,896
+164,219
+188
+146,277
+251
+1,016
+58,538
+204,815
+254
+Total
+1,711
+2,199,236
+115,116
+1,231,831
+126,995
+141,727
+26,611
+339,155
+162,320
+145,010
+26,613
+2021
+263,589
+280
+(Lifetime
+286,739
+Amounts held under resale agreements
+(31)
+(345)
+226,516
+1,105
+225,411
+financial institutions
+Placements with banks and other
+(277)
+(11)
+(266)
+103,448
+11
+103,437
+institutions
+Balances with banks and other financial
+525,118
+525,118
+Balances with central banks
+Total
+impaired)
+impaired)
+ECL)
+Total
+impaired)
+ECL) impaired)
+140
+ECL-credit-
+286,879
+Debt investments at FVTOCI
+etc.
+The Group adopts quantitative indicators such as exposure indicator, market value at risk indicator (VaR,
+covers interest rate, foreign exchange rate, and commodity risk factors), exchange rate scenario stress test
+loss index, exchange rate sensitivity index, and cumulative loss index in its management of foreign exchange
+risk. The management methods include delegation, setting limits, daily monitoring and continuous reporting,
+The Group has established a market risk structure and system of the trading book, which covers exchange
+rate risk, to quantify the exchange rate risk of the trading book to facilitate centralised management. The
+structure, process and method of exchange rate risk management of trading book are consistent with that of
+the interest rate risk management of trading book.
+Trading book
+(1)
+Foreign exchange risk arises from the holding of foreign currency assets, liabilities and equity items, and the foreign
+currency and foreign currency derivative positions, which expose the Group to potential losses in the event of
+unfavourable foreign exchange rate movement. The financial assets and liabilities of the Group are denominated in
+RMB, and the other currencies are mainly in USD and HKD. The Group segregates the policy setting, execution and
+supervision of foreign exchange risk management, and establishes a foreign currency risk management governance
+structure. This structure specifies the roles, responsibilities and reporting lines of the board of directors, the board of
+supervisors, senior management, designated committees and relevant departments of the Bank in the management
+of foreign exchange risk. The Group is prudent in its foreign exchange risk appetite, and would not voluntarily take
+foreign exchange risk, which suits the current development stage of the Group. The current foreign exchange risk
+management policies and procedures of the Group meet the regulatory requirements and the requirements of the
+Group.
+Foreign exchange risk
+(i)
+Market risk refers to the risk of loss due to changes in observable market factors such as interest rates, exchange
+rates, commodity prices and stock prices, resulting in changes in the fair value or future cash flows of the Group's
+financial instruments. Interest rate and foreign exchange rate are the two major market risk factors relevant to the
+Group. The Group is exposed to market risk through the financial instruments under the trading book and banking
+book. The financial instruments and positions under the trading book are held for trading purposes or for the
+purposes of hedging the risks arising from the trading book position, and these financial instruments can be traded
+without any restriction. The financial instruments under the banking book are assets and liabilities held by the Group
+for determinable return with relative stable market value or for the purposes of hedging the risks, which include
+both the Group's on-balance sheet and off-balance sheet exposure.
+Market risk
+(b)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+The balances disclosed above do not include interest receivable.
+Note:
+(4,014)
+(1,099)
+(743)
+(140)
+(376)
+ཆི། །
+(2,915)
+510,307
+282
+14
+510,011
+(603)
+credit-
+(12-month
+ECL-credit-
+(2,860)
+(1)
+(2,859)
+196,351
+106
+196,245
+financial institutions
+Placements with banks and other
+(378)
+(11)
+(367)
+80,664
+11
+80,653
+institutions
+Balances with banks and other financial
+553,655
+553,655
+Balances with central banks
+Total
+impaired)
+impaired)
+ECL)
+Total
+impaired)
+impaired)
+ECL)
+Amounts held under resale agreements
+528,424
+140
+528,564
+credit-
+(12-month
+(Lifetime
+ECL-not
+Stage 1
+(Lifetime
+ECL-not
+Stage 1
+Stage 3
+(Lifetime
+Stage 3
+Stage 2
+Stage 2
+283
+Expected credit loss
+2020
+(6,622)
+(1,047)
+(875)
+(4,700)
+628,355
+112
+2,236
+626,007
+Debt investments at FVTOCI
+(4,263)
+(140)
+(4,123)
+Principal
+284
+China Merchants Bank
+Chapter VIII Financial Statements
+(including derivative financial
+Financial liabilities at FVTPL
+158,184
+5,988
+17,075
+54,346
+1,238,594
+6,347,078
+9,327
+40,844
+129,300
+346,349
+Deposits from customers
+4,894
+108,820
+1,115,553
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+248,483
+85,316
+9,249,021
+61,163
+203,110
+543,717
+8,441,031
+Total
+12,862
+17,569
+liabilities)
+71,041
+18,554
+1,438
+177,600
+84,809
+11,399
+2,565
+270
+7,912
+444,541
+3,345
+924 262,084
+54,450 8,383,340
+6,713
+57,940
+3,233
+797,795
+Net position
+145,170
+381,952
+540,484
+Total
+9,317
+16,336
+235,507
+Other liabilities
+221
+50,425
+390,550
+Debt securities issued
+1,759
+2,911
+91,043
+10
+7,643,236
+ECL-credit-
+4,979
+111,972
+18,482
+57,919
+487,777
+Cash and balances with central
+banks
+Assets
+HKD
+Main original currency
+USD
+Total
+Other
+Equivalent in RMB
+HKD
+USD
+RMB
+2021
+Assets and liabilities by original currency are shown as follows:
+The Group continues to strengthen banking book exchange rate risk monitoring and authorisation
+management of limits to ensure that risks are controlled within a reasonable range.
+The Group has adopted foreign exchange exposure analysis, scenario simulation analysis and stress testing
+for the measurement and analysis of foreign exchange risk. The Group regularly measures and analyses the
+foreign exchange risk exposure fluctuations, monitors and reports foreign exchange risk on a monthly basis
+under the limit control framework, and adjusts the foreign exchange exposures based on the trend of foreign
+exchange rate movements to mitigate the foreign exchange risk on its banking book.
+The banking book foreign exchange risk of the Group arises from the mismatch of the non-RMB financial
+assets and liabilities. The Group stringently monitors its foreign exchange risk exposures to control it within
+an acceptable range.
+The Group's foreign exchange risk under the banking book is centrally managed by the Head Office. The
+Asset and Liability Management Department, as the treasurer of the Bank is in charge of the banking book
+foreign exchange risk management. The Internal Audit Department is responsible for auditing this. The
+treasurer is responsible for managing the foreign exchange risk under the banking book with a prudent
+approach and compliance with the regulatory requirements, and through approaches such as transaction
+limits and adjustment of plans.
+Banking book
+(3)
+(2)
+Foreign exchange risk (continued)
+(i)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Annual Report 2021
+2,787
+566,965
+9,089
+22,611
+254,488
+Other assets
+24,893
+17,095
+2,176,515
+10,081
+20,348
+108,939
+2,037,147
+derivative financial assets)
+Financial investments (including
+173,238
+24,478
+10,513
+5,325,511
+141,605
+156,000
+4,992,946
+Loans and advances to customers
+14,879
+17,085
+798,078
+8,356
+12,162
+108,887
+668,673
+financial institutions
+Amounts due from banks and other
+34,960
+865,681
+credit-
+ECL-credit-
+- Stage 3
+(555)
+69,966
+(69,411)
+- Stage 2
+(143)
+(20,293)
+20,436
+- Stage 1
+Transfer to
+Total
+4,647,140
+463,017
+(1,093)
+(4,154)
+468,264
+Net changes for the year
+53,615
+76,286
+4,517,239
+Balance as at the beginning of the year
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+(12-month
+(Lifetime
+ECL-not
+(23,692)
+-Stage 1
+(10,451)
+Write-offs
+ECL)
+ECL-credit-
+credit-
+(12-month
+(Lifetime
+ECL-not
+-Stage 1
+-Stage 3
+(Lifetime
+-Stage 2
+2020
+Movements of loans and advances and debt investments measured at amortised cost (continued)
+Loans and advances measured at amortised cost: (continued)
+(x)
+Credit risk (continued)
+(a)
+Risk management (continued)
+60.
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+5,075,052
+50,862
+111,354
+4,912,836
+Balance as at the end of the year
+(35,105)
+(35,105)
+34,143
+-Stage 3
+(Lifetime
+-Stage 2
+(228)
+710
+340
+2020
+2021
+Total
+Subtotal
+Impairment allowances
+Unrated
+Lower than A-
+A+ to A-
+AA+ to AA-
+AAA
+Neither overdue nor impaired
+Subtotal
+Impairment allowances
+Impaired gross amount of debt investments
+At the end of the reporting period, the analysis of the credit quality of debt investments by designated external
+credit assessment institution, Standard & Poor's, is as follows:
+(ix)
+Credit quality of debt investments
+(viii)
+Credit risk (continued)
+(a)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+(428)
+112
+282
+1,345,363
+2021
+Loans and advances measured at amortised cost:
+Movements of loans and advances and debt investments measured at amortised cost
+(x)
+7,358
+4,124
+2020
+2021
+Estimate of the fair value of collateral and other credit enhancements
+held against Loans and advances to customers
+An estimate of the fair value of collateral and other credit enhancements held against financial assets that are
+overdue but not impaired is as follows:
+Collateral
+Note 2: The impairment allowances above is for debt investments at amortised cost only.
+Note 1: Bonds issued by the governments and policy banks held by the Group amounted to RMB1,596,105 million as at 31 December 2021 (31
+December 2020: RMB1,290,843 million).
+impaired)
+1,592,001
+1,591,719
+1,872,732
+(7,047)
+(10,935)
+50,525
+57,994
+83,314
+28,415
+398,206
+422,427
+242,828
+29,468
+823,893
+1,872,844
+impaired)
+Total
+Balance as at the beginning of the year
+- Stage 3
+420
+(420)
+- Stage 2
+- Stage 1
+Transfer to
+921,467
+140,742
+10,869
+(29)
+129,902
+Net changes for the year
+4,681
+580
+916,206
+Balance as at the beginning of the year
+Total
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+(12-month
+(Lifetime
+ECL-not
+-Stage 1
+-Stage 3
+-Stage 2
+(Lifetime
+(862)
+Write-offs
+Balance as at the end of the year
+1,044,826
+credit-
+(12-month
+(Lifetime
+ECL-not
+Stage 1
+(Lifetime
+ECL-not
+Stage 1
+Stage 3
+(Lifetime
+Stage 3
+Stage 2
+Expected credit loss
+2020
+Principal
+Stage 2
+(Lifetime
+The staging analysis for loans and advances to customers and debt investments at amortised cost are disclosed in
+note 22, note 23(b) and 60(a)(x) respectively. The staging analysis for credit commitments and the expected credit
+loss allowances of financial guarantees and loan commitments are disclosed in note 58(a) and 42 respectively. The
+staging analysis for other financial instruments is as follows:
+Credit quality of financial instruments
+(xi)
+(a) Credit risk (continued)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+282
+281
+(1,822)
+1,060,387
+862
+(1,822)
+14,590
+971
+2021
+(12-month
+1,209,359
+1,962
+76,286
+4,517,239
+Balance as at the end of the year
+(43,734)
+38,733
+(16,879)
+(21,854)
+(1,027)
+32,735
+(31,708)
+Write-offs
+- Stage 3
+- Stage 2
+(100)
+(10,782)
+10,882
+- Stage 1
+Transfer to
+470,103
+7,178
+(8,929)
+471,854
+Net changes for the year
+4,220,771
+52,565
+80,141
+4,088,065
+53,615
+(43,734)
+4,647,140
+Debt investments at amortised cost:
+2021
+1,183,320
+Balance as at the end of the year
+Write-offs
+- Stage 3
+1,647
+(1,647)
+- Stage 2
+- Stage 1
+Transfer to
+1,060,387
+148,972
+14,590
+9,487
+971
+(656)
+140,141
+24,077
+Net changes for the year
+Balance as at the beginning of the year
+Total
+impaired)
+impaired)
+ECL)
+ECL-credit-
+credit-
+(12-month
+-Stage 3
+(Lifetime
+ECL-not
+-Stage 1
+(Lifetime
+-Stage 2
+1,044,826
+507
+5,830,585
+Net off-balance sheet position:
+351,961
+14,152
+3,619
+13,329
+599,077
+638,419
+292
+3,332
+Financial liabilities at FVTPL
+(including derivative financial
+liabilities)
+110,412
+460
+6,336
+8,367
+130
+95,119
+Lease liabilities
+14,242
+1,015
+Debt securities issued
+344,156
+110,389
+2,805
+105,553
+8,577
+1,845
+120,655
+7,559
+952,312
+4,387,216
+Other liabilities (note (ii))
+5,628,336
+3 months
+64,238
+376,357
+2,750,245
+2,134,671
+5,325,511
+(note (i))
+Loans and advances to customers
+49
+10,507
+63,581
+723,941
+798,078
+financial institutions
+Amounts due from banks and other
+13,310
+553,655
+566,965
+Cash and balances with central
+banks
+bearing
+interest
+Over
+5 years
+Over 1 year
+to 5 years
+3 months
+to 1 year
+Non-
+Over
+or less
+(include
+overdue)
+Total
+Deposits from customers
+198,575
+763
+15
+(5,373)
+3,266
+5,444
+The above-mentioned interest rate sensitivity analysis shows the changes in net interest income and equity
+in the next 12 months under the assumption of changes in interest rates in the above table. As the actual
+situation and assumptions may be different, the actual changes in the Group's net interest income and
+equity caused by the increase or decrease in interest rates may be different from the results of this sensitivity
+analysis.
+289
+2021
+Assets
+(3) The following tables indicate the expected next repricing dates (or maturity dates whichever are
+earlier) for assets and liabilities at the end of the reporting period.
+Interest rate risk (continued)
+(ii)
+(b) Market risk (continued)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+288
+287
+The Group measures and monitors interest rate risk of banking book through the asset and liability
+management system. Major models and parameter assumptions used in the measurement are verified
+independently by the Risk Management Department before official use and reviewed and verified regularly
+after official use.
+The preference of the Group in respect of the interest rate risk in the banking book is neutrally prudent.
+Based on the risk measurement and monitoring results, the Group will propose the corresponding risk
+management policy at the regular meetings and through the reporting mechanism of the Assets and
+Liabilities Management Committee. Assets and Liabilities Management Department is responsible for its
+implementation. The key measures for risk management include the adjustment in business volume, duration
+structure and interest rate structure of on-balance sheet asset and liability business and the utilisation of off-
+balance sheet derivative to offset risk exposure.
+The Group has established the governance and management framework according to the interest rate risk
+management policy for the banking book, which specifies the roles, responsibilities and reporting lines of
+the board of directors, senior management, designated committees and relevant departments to ensure the
+effectiveness of interest rate risk management. Interest rate risk of the banking book is centrally managed by
+the Asset and Liability Management Department. Internal Audit Department is responsible for auditing this.
+The Group has mainly adopted scenario simulation analysis, re-pricing exposure analysis, duration analysis
+and stress testing for the measurement and analysis of interest rate risk under the banking book. Stress test
+is a form of scenario simulation used to assess the changes in net interest income at risk and economic value
+of equity indicators when there is an extreme fluctuation in interest rates. The Group conducts stress test on
+interest rate risk of banking book on a monthly basis. The results of stress test throughout the year of 2021
+showed that the interest rate risk of banking book of the Bank was generally stable with various indicators
+staying within the set limits.
+Banking book
+(2)
+The Group uses valuation, sensitivity analysis, value-at-risk analysis, pressure test and other measurement
+methods to identify and quantify risk factors in the interest rate market. The Group applies the market
+risk measurement model in its daily risk management and takes market risk measurement as the basis for
+business planning, resource allocation, financial market business operation and risk management.
+The trading book market risk management adopts the scale index, stop loss index, sensitivity index, value at
+risk index, stress test index and other risk measurement indices as the limits index, and sets the limit value
+by comprehensively considering the risk appetite, risk tolerance, business operation strategy, risk return,
+management conditions and other factors.
+According to the business practices and market risk governance organisation structure, the Group establishes
+the trading book market risk limits management system. A top level limit is set based on the risk appetite
+determined by the board of directors, and is transmitted from top to bottom level by level. Within the
+scope of their authorisation, management departments at all levels allocate and set limits according to risk
+characteristics, product types and trading strategies, etc. The business departments carry out the business
+according to the authorisation and limits requirements, and the supervisory and administrative departments
+at all levels continuously monitor and report according to the limits management regulations.
+Trading book (continued)
+financial institutions
+6,927
+(6,830)
+(3,266)
+3,605
+4
+197,793
+Total liabilities
+7,631,094
+5,452,155
+Asset-liability gap
+730,354
+(2,190,805)
+1,065,747
+1,887,319
+790,170
+13,449
+309,573
+360,692
+Financial investments (including
+583,625
+Notes: (i)
+For loans and advances to customers, the "3 months or less" category includes overdue amounts as at 31 December 2021
+and 31 December 2020, net of allowances for impairment losses. Overdue amounts represent loans of which the whole or
+part of the principals or interests were overdue.
+(ii)
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities"
+respectively.
+The Group uses sensitivity analysis to measure the potential effect of changes in interest rates on the
+Group's net interest income and equity. The following table sets forth the results of the Group's interest rate
+sensitivity analysis on the assets and liabilities as at 31 December 2021 and 31 December 2020.
+2021
+2020
+Change in interest rates (in basis points)
+(Decrease)/increase in net interest income
+(Decrease)/increase in equity
+Up by 25
+(3,605)
+70,883
+Down by 25
+Up by 25
+Down by 25
+89,523
+derivative financial assets)
+2,176,515
+159,659
+13,088
+525,118
+538,206
+Cash and balances with central
+banks
+Assets
+interest
+bearing
+Over
+5 years
+Over 1 year
+to 5 years
+3 months
+to 1 year
+Non-
+Over
+3 months
+or less
+(include
+overdue)
+Total
+2020
+(3) The following tables indicate the expected next repricing dates (or maturity dates whichever are
+earlier) for assets and liabilities at the end of the reporting period. (continued)
+Interest rate risk (continued)
+(ii)
+(b) Market risk (continued)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+113,491
+818,322
+354,573
+2,008,094
+865,681 (2,428,799)
+Amounts due from banks and other
+financial institutions
+615,447
+524,010
+amounts due to banks and other
+8,361,448 3,261,350 2,953,066 1,150,862
+Borrowing from central banks and
+Liabilities
+Total assets
+399,096
+597,074
+318,383
+318,383
+Other assets (note (ii))
+67,625
+524,737
+781,707
+Asset-liability gap
+369,495
+2,094,710
+derivative financial assets)
+Financial investments (including
+71,953
+365,315
+2,496,358
+1,861,076
+4,794,702
+(note (i))
+Loans and advances to customers
+384
+3,840
+87,213
+351,146
+Interest rate risk (continued)
+330,588
+916,370
+718,509
+4,820,271
+6,347,078
+Deposits from customers
+722
+6,311
+149,900
+1,081,661
+1,238,594
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+444,079
+859,898
+1,270,943
+3,102,175
+3,571,926
+9,249,021
+Total assets
+381,952
+381,952
+Other assets (note (ii))
+48,817
+795,611
+884,079
+288,349
+804,755
+348
+3,195
+Financial liabilities at FVTPL
+1,094,081
+6,000,725
+8,383,340
+Total liabilities
+248,188
+84
+248,272
+Other liabilities (note (ii))
+38,720
+88,974
+220,608
+96,239
+444,541
+41,576
+Debt securities issued
+8,153
+2,989
+1,042
+13,812
+Lease liabilities
+79,205
+158
+8,177
+2,075
+1,428
+91,043
+liabilities)
+(including derivative financial
+1,628
+(ii)
+(1)
+(b)
+3,895
+13,099
+89,613
+211,776
+Other assets
+32,132
+15,045
+2,094,710
+14,111
+27,110
+98,394
+1,955,095
+derivative financial assets)
+318,383
+Financial investments (including
+29,606
+4,794,702
+42,814
+134,443
+193,624
+4,423,821
+Loans and advances to customers
+31,507
+21,769
+615,447
+15,737
+26,582
+142,362
+159,350
+430,766
+13,701
+Total
+(including derivative financial
+Financial liabilities at FVTPL
+187,541
+54,132
+5,628,336
+36,157
+158,228
+354,012
+5,079,939
+Deposits from customers
+15,553
+13,798
+1,335,373
+15,525
+10,011
+90,234
+1,222,006
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+263,933
+84,907
+8,361,448
+79,130
+222,680
+555,295
+7,504,343
+13,122
+liabilities)
+financial institutions
+25,419
+94,441
+(23,101)
+Total
+10
+5,990
+(52,280)
+3,059
+38,175
+(13,030)
+(62,004)
+(804,338)
+10,465
+70,833
+(2,089)
+935,324
+451,419
+8,554
+(395,153) (10,651)
+459,207
+(388,786)
+(93,522)
+- net currency option position
+- forward sold
+-forward purchased
+Derivatives:
+29,909
+11,169
+16,345 2,229,694
+24,448
+71,179
+2,117,722
+Credit commitments (note (i))
+16,144
+(9,748)
+Amounts due from banks and other
+9,455
+14,819
+4,786
+538,206
+2,573
+21,446
+31,302
+482,885
+banks
+Cash and balances with central
+Assets
+HKD
+USD
+Total
+Other
+78,706
+Main original currency
+USD
+RMB
+2020
+(3) Assets and liabilities by original currency are shown as follows: (continued)
+Foreign exchange risk (continued)
+(i)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+(2,555)
+Equivalent in RMB
+HKD
+Market risk (continued)
+80,802
+2,432
+(b) Market risk (continued)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+286
+285
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+(ii)
+Credit commitments generally expire before they are drawn down, therefore the above net position does not represent the future
+cash outflows.
+(i)
+Notes:
+(i)
+7,470
+162,715
+21
+3,145
+19,733
+45,821
+32,693
+6,303
+94,526
+29,193
+Total
+26,958
+20,570
+(46,676)
+14,453
+(ii)
+Foreign exchange risk (continued)
+(3) Assets and liabilities by original currency are shown as follows: (continued)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+The trading book market risk governance organisation structure defines the responsibilities, division of labour
+and reporting lines of the board of directors, Risk and Capital Management Committee under the board of
+directors, senior management and relevant departments of the Bank, and safeguards the achievement of
+management objectives. The Market Risk Management Department is responsible for the Group's trading
+book market risk, and undertakes the task of risk policy formulation and management.
+According to the basic principles of risk management, the Group has built and continuously improved the
+market risk management system, and established the management process of market risk identification,
+measurement, monitoring, control and reporting, covering interest rate risk, exchange rate risk, commodity
+and other risks involved in the trading book business. Under the market risk preference formulated by the
+board of directors, the Group manages the trading book by clearly identifying, accurately measuring and
+effectively managing the trading book market risk, to ensure that the trading book risk exposure is within an
+acceptable range and achieves a reasonable balance of risk and return. The Group constantly improves the
+risk-adjusted return level to maximise the shareholders' value.
+Trading book
+(1)
+Interest rate risk arises from unfavourable changes in interest rates and maturity profiles which may result in loss to
+the income and decline in market value of financial instruments and positions held by the Group.
+Interest rate risk
+Actual changes in the Group's net profit and equity resulting from increases or decreases in foreign exchange
+rates may be different from the results of this sensitivity analysis.
+402
+(402)
+262
+(262)
+(Decrease)/increase in equity
+Up by 1%
+232
+(232)
+79
+(79)
+Down by 1%
+Up by 1%
+Down by 1%
+Change in foreign currency exchange rate
+(Decrease)/increase in net profit
+2020
+2021
+Under the existing managed floating exchange rate regime, the Group uses sensitivity analysis to measure
+the potential effect of changes in foreign currency exchange rates on the Group's net profit and equity. The
+following table sets forth the results of the Group's foreign exchange risk sensitivity analysis on the assets
+and liabilities of all foreign currencies involved at 31 December 2021 and 31 December 2020.
+- net currency option position
+(15,481)
+18
+(26,723) (914,615)
+(65,102)
+7,631,094
+52,993
+183,207
+535,089
+6,859,805
+Total
+10,102
+2,384
+212,817
+3,180
+8,523
+15,592
+185,522
+Other liabilities
+1,069
+7,384
+344,156
+3,425
+902
+48,293
+291,536
+Debt securities issued
+2,883
+4,122
+110,412
+220
+217,148
+Net position
+81,820
+20,206
+13,699
+25,958
+Derivatives:
+- forward purchased
+524,948
+499,708
+2,049,333
+19,346
+76,410
+22,930
+- forward sold
+(449,079)
+(425,752)
+(13,061)
+13,595 1,057,597
+644,538
+17,832
+89,591
+39,473
+26,137
+730,354
+3,087
+21,901
+1,335,373
+46,785
+Net off-balance sheet position:
+Credit commitments (note (i))
+1,920,009
+5,433
+4,253
+Commissions from custody businesses
+Others
+10,588
+6,191
+2.10
+27.75
+2020
+13.08
+2021
+3.2.8 Expected credit losses
+Total operating expenses
+Taxes and surcharges
+Other general and administrative expenses
+Allowances for insurance claims
+Depreciation, amortisation and rental expenses
+Staff costs
+66,028
+(in millions of RMB)
+3.2.7 Operating expenses
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+28
+27
+Since the Annual Report 2021, the Group has adjusted the breakdown of fee and commission income. Among which, fees and commissions
+from wealth management include income from agency distribution of funds, income from agency distribution of insurance policies, income
+from agency distribution of trust schemes, income from agency sales of wealth management services, income from securities brokerage and
+income from agency distribution of precious metals. Fees and commissions from asset management mainly include the income from the
+issuance and management of various asset management products such as funds, wealth management and asset management plans of our
+subsidiaries, China Merchants Fund, CMB International Capital, CMB Wealth Management and CIGNA & CMAM. Commissions from custody
+businesses include income from basic asset custody services and value-added services. Others mainly include income from underwriting of debt
+and equity, income from service fees from securitisation of credit assets, income from consultancy and advisory services and income from other
+intermediate businesses.
+21.13
+During the reporting period, the Group's operating expenses amounted to RMB116.879 billion, representing a year-
+on-year increase of 13.68%, among which staff costs amounted to RMB66.028 billion, representing a year-on-year
+increase of 15.76%. Other operating expenses³ amounted to RMB50.851 billion, represent a year-on-year increase
+of 11.09%. The Group adhered to technology-enabled strategy, continuously increased its investments in Fintech,
+constantly reinforced its basic infrastructures, and dramatically forged ahead with the development of its digital
+operation model and capabilities. At the same time, the Group focused on refined cost management. On one hand,
+the Group continued to promote technology innovation to save traditional costs while strengthening the monitoring
+for input and output to continuously improve its resources efficiency; on the other hand, the Group took the
+initiatives to optimise costs and expenses to reduce traditional fixed expenses including office leasing and operating
+expenses, which refined the allocation of expenses and resources. During the reporting period, the Group's cost-to-
+income ratio was 33.11%, representing a decrease of 0.22 percentage point as compared with the previous year.
+The following table sets forth, for the periods indicated, the principal components of the operating expenses of the
+Group.
+105,248
+57,040
+13,611
+6,321
+loan commitments
+Amounts due from banks and other financial institutions
+Expected credit losses relating to financial guarantees and
+Financial investments
+Loans and advances to customers
+(in millions of RMB)
+The following table sets forth, for the periods indicated, the principal components of expected credit losses of the
+Group.
+14,519
+During the reporting period, the expected credit losses of the Group were RMB65.962 billion, representing a year-
+on-year increase of 1.68%.
+116,879
+2,478
+2,772
+296
+311
+29,389
+33,249
+102,814
+9,363
+127,488
+2,881
+28.25
+25,762
+33,041
+18.82
+79,486
+94,447
+Net exchange gain
+29,011
+Net profit/(loss)from fair value change
+Other net income
+Other net non-interest income
+Net fee and commission income
+9.35
+(7,198)
+(7,871)
+Fee and commission expense
+Net investment income
+39.88
+22,881
+17,822
+4,030
+27.86
+6,058
+7,746
+Note:
+Total net non-interest income
+Share of profits of joint ventures and associates
+26.79
+Other income
+2,202
+3,351
+N/A
+(1,660)
+92
+9.47
+16,281
+52.18
+Commissions from credit commitment and loan business
+12,532
+12,651
+2.49
+Net interest margin
+During the reporting period, the average yield of our interest-earning assets of the Group was 3.98%, representing
+a year-on-year decrease of 15 basis points; the average cost ratio of our interest-bearing liabilities was 1.59%,
+representing a year-on-year decrease of 14 basis points; the net interest spread and the net interest margin were
+2.39% and 2.48%, respectively, both representing a year-on-year decrease of 1 basis point.
+The following table sets forth the breakdown of changes in interest income and interest expenses due to changes
+in volumes and interest rates of the Group for the periods indicated. Changes in volume were measured by changes
+in average balances, while changes in interest rates were measured by changes in the average interest rates; the
+changes in interest income and interest expenses due to changes in both volumes and interest rates have been
+included in the amount of changes in interest income and interest expenses due to changes in volume.
+(in millions of RMB)
+Interest-earning assets
+Volume
+2021 compared to 2020
+Increase (decrease) due to
+Interest rate
+Net increase
+(decrease)
+Loans and advances to customers
+25,169
+(10,611)
+14,558
+Investments
+/
+2.40
+2.39
+2.48
+Net interest spread
+7,751,552
+123,137
+2.76
+3.97
+1.59 7,069,207
+282,976
+8,413
+2.97
+14,582
+5,276
+596
+122,394
+1.73
+Net interest income
+203,919
+/
+185,031
+/
+4.09
+(1,060)
+4,216
+Balances with the central bank
+376
+2,602
+Debt securities issued
+(1,303)
+(817)
+(2,120)
+Borrowings from the central bank
+2,226
+(184)
+(778)
+Lease liabilities
+(24)
+(17)
+(41)
+Changes in interest expense
+9,322
+(594)
+Total
+other financial institutions
+1,080
+660
+(343)
+317
+Balances and placements with banks and
+other financial institutions
+663
+(123)
+Deposits and placements from banks and
+540
+31,768
+(12,137)
+19,631
+Interest-bearing liabilities
+Deposits from customers
+8,607
+(7,527)
+Changes in interest income
+(8,579)
+555
+Lease liabilities
+Investments
+1,672,594
+250,662
+56,059
+Balances with the central bank
+533,863
+7,792
+4.67 4,823,379
+3.35 1,513,824
+1.46 490,092
+236,104
+4.89
+51,843
+3.42
+7,475
+1.53
+Balances and placements with banks
+and other financial institutions
+5,364,195
+Loans and advances to customers
+Average
+yield (%)
+income
+Other
+1.41
+5,376,582
+83,252
+1.55
+Interest expense on deposits and placements from banks and other financial institutions
+During the reporting period, the interest expense on deposits and placements from banks and other financial
+institutions of the Group amounted to RMB18.083 billion, representing a year-on-year increase of 16.81%, which
+was primarily due to the increase in the deposits and placements from banks and other financial institutions.
+Interest expense on debt securities issued
+During the reporting period, the interest expense on debt securities issued of the Group amounted to RMB12.532
+billion, representing a year-on-year decrease of 14.47%, which was mainly due to the decrease in both daily average
+scale and cost ratio of interbank certificates of deposits issued.
+649,046
+3.2.5 Net interest income
+The following table sets out the average balances, interest income/interest expense and average yield/cost ratio of
+assets and liabilities of the Group for the periods indicated.
+(in millions of RMB, except for percentages)
+Interest-earning assets
+2021
+Average Interest
+balance income
+2020
+Average
+yield (%)
+Average
+balance
+Interest
+During the reporting period, the Group's net interest income amounted to RMB203.919 billion, representing a year-
+on-year increase of 10.21%.
+Total
+8,219,698
+12,543
+327,056
+1.55
+Deposits and placements from banks
+and other financial institutions
+Debt securities issued
+1,076,618
+18,083
+1.68 941,182
+15,481
+83,252
+1.64
+Total
+3.05 453,885
+14,652
+3.23
+Borrowings from the central bank
+276,773
+7,635
+410,711
+13,977
+5,376,582
+84,332
+1.93 615,316
+3.98 7,442,611
+12,003
+1.95
+307,425
+4.13
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+1.41
+(in millions of RMB, except for percentages)
+Average
+cost ratio Average Interest
+(%) balance expense
+Average
+cost ratio
+(%)
+Interest-bearing liabilities
+Deposits from customers
+5,973,473
+Average Interest
+balance
+expense
+743
+Changes in net interest income
+22,446
+Lease liabilities
+13,932
+137
+3.90
+13,249
+127
+3.80
+Total
+7,922,823
+31,869
+1.60
+7,768,171
+31,366
+1.60
+Net interest income
+2.78
+1,974
+282,004
+2.68
+1,044,468
+4,396
+1.67
+1,101,292
+4,693
+1.69
+Debt securities issued
+53,281
+437,500
+2.99
+426,539
+3,183
+2.96
+Borrowings from the central bank
+217,919
+1,474
+3,302
+51,297
+1
+Net interest spread
+102,318
+86,684
+18.04
+35,841
+27,783
+29.00
+Fees and commissions from asset management
++/-%
+10,856
+57.52
+Bank card fees
+19,377
+19,551
+-0.89
+Settlement and clearing fees
+13,902
+6,892
+and other financial institutions
+2020
+Fees and commissions from wealth management
+2.37
+2.37
+Net interest margin
+2.48
+2.47
+In the fourth quarter of 2021, the net interest margin of the Group was 2.48%, up by 1 basis point; and its net
+interest spread was 2.37%, substantially the same, as compared to the previous quarter.
+China Merchants Bank
+Annual Report 2021
+2021
+Chapter III Management Discussion and Analysis
+During the reporting period, the Group recorded a net non-interest income of RMB127.488 billion, representing a
+year-on-year increase of 21.13%. The components are as follows:
+Net fee and commission income amounted to RMB94.447 billion, representing a year-on-year increase of 18.82%.
+Among the fee and commission income, fee and commission income from wealth management amounted to
+RMB35.841 billion, representing a year-on-year increase of 29.00%; fee and commission income from asset
+management amounted to RMB10.856 billion, representing a year-on-year increase of 57.52%; income from bank
+card fees amounted to RMB19.377 billion, representing a year-on-year decrease of 0.89%; income from settlement
+and clearing fees amounted to RMB13.902 billion, representing a year-on-year increase of 9.89%; the commissions
+from credit commitment and loan business amounted to RMB6.321 billion, representing a year-on-year increase of
+2.10%; commission income from custody businesses amounted to RMB5.433 billion, representing a year-on-year
+increase of 27.75%; and income from others amounted to RMB10.588 billion, representing a year-on-year increase
+of 13.08%. For analysis of the reasons for changes in fee and commission income, please refer to "Net non-interest
+income" in 3.9 under this chapter.
+Other net non-interest income amounted to RMB33.041 billion, representing a year-on-year increase of 28.25%,
+of which, net investment income amounted to RMB17.822 billion, representing a year-on-year increase of 9.47%,
+mainly due to the increase in dividend of investments in non-monetary funds; net profit from fair value change
+amounted to RMB92 million, representing a year-on-year increase of RMB1.752 billion, mainly due to the increase
+in profit of fair value change of investments in non-monetary funds; the net exchange gain amounted to RMB3.351
+billion, representing a year-on-year increase of 52.18%, mainly due to the increase in exchange gains arising from
+the foreign currency-denominated monetary items; and other income amounted to RMB7.746 billion, representing a
+year-on-year increase of 27.86%, mainly due to the increase in income generated from operating leasing business of
+CMB Financial Leasing.
+In terms of business segments, the net non-interest income from retail finance amounted to RMB62.173 billion,
+representing a year-on-year increase of 17.43% and accounting for 48.77% of the Group's net non-interest income;
+the net non-interest income from wholesale finance amounted to RMB45.750 billion, representing a year-on-
+year increase of 15.12% and accounting for 35.89% of the Group's net non-interest income; the net non-interest
+income from other businesses amounted to RMB19.565 billion, representing a year-on-year increase of 55.74% and
+accounting for 15.34% of the Group's net non-interest income.
+Changes
+(in millions of RMB)
+Fee and commission income (note)
+3.2.6 Net non-interest income
+Deposits and placements from banks
+1.43
+21,389
+average
+balance
+income yield (%)
+Interest-earning assets
+Loans and advances to customers
+5,549,219
+64,921
+Interest
+4.64
+63,204
+4.64
+Investments
+1,777,841
+14,902
+3.33
+1,702,824
+5,400,330
+14,357
+Average
+income
+(3,558)
+18,888
+25
+26
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+average
+yield (%)
+The following table sets out the average balances, interest income/interest expenses and annualised average yields/
+cost ratios of assets and liabilities of the Group for the periods indicated.
+Annualised
+October to December 2021
+Annualised
+Average
+Interest
+(in millions of RMB, except for percentages)
+balance
+July to September 2021
+9.89
+3.35
+545,610
+Annualised
+Annualised
+(in millions of RMB, except for percentages)
+Average Interest
+balance expense
+average
+cost ratio
+average
+Average
+(%) balance
+3.97
+Interest
+expense
+(%)
+Interest-bearing liabilities
+Deposits from customers
+6,209,004
+22,560
+1.44 5,945,087
+cost ratio
+Balances with the central bank
+82,663
+3.97
+1,979
+1.44
+518,982
+1,919
+1.47
+Balances and placements with banks
+and other financial institutions
+8,253,247
+639,506
+2.08
+631,111
+3,183
+2.00
+Total
+8,512,176
+85,150
+3,348
+Total expected credit losses
+1.76
+2020
+1.29
+1.58
+84,332
+Core Tier 1 capital adequacy ratio under
+the Advanced Measurement Approach
+12.66
+12.29
+11.95
+11.78
+12.06
+Tier 1 capital adequacy ratio under
+the Advanced Measurement Approach
+14.94
+13.98
+12.69
+12.62
+13.02
+Capital adequacy ratio under the Advanced
+Measurement Approach
+17.48
+16.54
+0.98
+15.54
+0.70
+1.61
+1.31
+1.24
+1.15
+Return on average equity attributable to
+ordinary shareholders of the Bank
+16.96
+15.73
+16.84
+16.57
+16.54
+Cost-to-income ratio
+33.11
+33.33
+32.08
+31.04
+30.21
+Non-performing loan ratio
+0.91
+1.07
+1.16
+1.36
+Credit cost ratio
+15.68
+15.48
+Consolidating corporate finance
+Assisting the development of
+14,961
+Other net income
+29,011
+22,881
+6,130
+Operating expenses
+(116,879)
+(102,814)
+(14,065)
+Expected credit losses
+(65,962)
+(64,871)
+(1,091)
+Impairment losses on other assets
+(393)
+(154)
+(239)
+Share of profits of joint ventures and associates
+Profit before tax
+4,030
+2,881
+1,149
+79,486
+94,447
+Net fee and commission income
+18,888
+real economy
+Enhancing the integrated services of ICPT to satisfy the
+diversified needs of enterprises
+22
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+Management Discussion and Analysis
+3.1 Analysis of Overall Operation
+In 2021, the Group adhered to the concept of dynamic and balanced development of "Quality, Efficiency and
+Scale", and continued to implement its strategic direction of "Light-model Bank" and the strategic positioning of
+"One Body with Two Wings" by carrying out various businesses in a sound manner. Both the net operating income
+and profit grew relatively rapidly, structure of assets and liabilities continued to be optimised, and asset quality was
+further improved.
+During the reporting period, the Group realised the net operating income of RMB331.407 billion, representing a
+year-on-year increase of 14.17%; realised a net profit attributable to shareholders of the Bank of RMB119.922
+billion, representing a year-on-year increase of 23.20%; realised the net interest income of RMB203.919 billion,
+representing a year-on-year increase of 10.21%; and realised the net non-interest income of RMB127.488 billion,
+representing a year-on-year increase of 21.13%. The return on average asset (ROAA) attributable to shareholders of
+the Bank and return on average equity (ROAE) attributable to ordinary shareholders of the Bank were 1.36% and
+16.96%, up by 0.13 percentage point and 1.23 percentage points year-on-year, respectively.
+1.23
+As at the end of the reporting period, the Group's total assets amounted to RMB9,249.021 billion, representing
+an increase of 10.62% as compared with the end of the previous year. The total loans and advances to customers
+amounted to RMB5,570.034 billion, representing an increase of 10.76% as compared with the end of the previous
+year. Total liabilities amounted to RMB8,383.340 billion, representing an increase of 9.86% as compared with
+the end of the previous year. Total deposits from customers amounted to RMB6,347.078 billion, representing an
+increase of 12.77% as compared with the end of the previous year.
+3.2 Analysis of Income Statement
+3.2.1 Financial highlights
+During the reporting period, the Group realised a profit before tax of RMB148.173 billion, representing a year-on
+year increase of 21.02%. The effective income tax rate was 18.45%, representing a year-on-year decrease of 1.54
+percentage points. The following table sets out the changes in major income/loss items of the Group during the
+reporting period.
+(in millions of RMB)
+Net interest income
+2021
+2020
+Changes
+203,919
+185,031
+As at the end of the reporting period, the Group had a total of non-performing loans of RMB50.862 billion,
+representing an decrease of RMB2.753 billion as compared with the end of the previous year. The non-performing
+loan ratio was 0.91%, down by 0.16 percentage point as compared with the end of the previous year. The
+allowance coverage ratio was 483.87%, representing an increase of 46.19 percentage points as compared with the
+end of the previous year; the allowance-to-loan ratio was 4.42%, representing a decrease of 0.25 percentage point
+as compared with the end of the previous year.
+1.36
+shareholders of the Bank
+Return on average assets attributable to
+60,837
+59,926
+Profit before tax
+148,173
+122,440
+117,132
+106,497
+90,680
+Net profit attributable to shareholders
+of the Bank
+119,922
+97,342
+92,867
+80,560
+70,150
+(RMB)
+Per Share
+Dividend (tax inclusive)
+1.522
+1.253
+1.20
+61,159
+65,025
+66,355
+Impairment losses
+20
+China Merchants Bank
+Annual Report 2021
+Chapter II Summary of Accounting Data and Financial Indicators
+2.3 Five-year Financial Summary
+2021
+2020
+2019
+2018
+2017
+(in millions of RMB)
+0.94
+Results for the year
+Net operating income
+331,407
+290,279
+269,788
+248,444
+221,037
+116,879
+102,814
+91,497
+81,110
+70,431
+Operating expenses
+148,173
+0.84
+shareholders of the Bank
+8,383,340
+25,220
+730,354
+7,631,094
+Deposits from customers
+6,347,078
+5,628,336
+25,220
+617,707
+6,799,533
+4,844,422
+25,220
+543,605
+6,202,124
+25,220
+483,392
+5,814,246
+4,400,674 4,064,345
+Total assets
+9,249,021
+8,361,448
+7,417,240
+Total loans and advances to customers
+5,570,034
+5,029,128
+4,490,650
+6,745,729 6,297,638
+3,933,034
+3,565,044
+(%)
+Key Financial Ratios
+Total liabilities
+865,681
+Total shareholders' equity
+25,220
+4.61
+3.79
+3.62
+3.13
+2.78
+Diluted earnings attributable to ordinary
+shareholders of the Bank
+4.61
+3.79
+3.62
+Basic earnings attributable to ordinary
+3.13
+Year-end net assets attributable to ordinary
+shareholders of the Bank
+29.01
+25.36
+22.89
+20.07
+17.69
+(in millions of RMB)
+Year end
+Share capital
+2.78
+2021
+122,440
+Income tax
+Including deposits and placements with banks and other financial institutions and amounts purchased under resale agreements.
+The "allowances for impairment losses on loans" as at the end of the reporting period include the allowances for impairment losses of
+the principal and interest of the loans and advances to customers measured at amortised cost. The allowances for impairment losses of
+RMB1.581 billion were not deducted from the carrying values of the loans and advances to customers measured at fair value through other
+comprehensive income. For details, please refer to Note 22(a) to the financial statements.
+100.00
+8,361,448
+100.00
+9,249,021
+3.04
+253,312
+3.33
+308,416
+0.12
+9,954
+0.11
+9,954
+7.37
+616,516
+8.64
+799,372
+6.53
+546,416
+6.18
+(2)
+571,847
+(3)
+3.3.1.1 Loans and advances to customers
+Deposits from retail customers
+Demand
+1,453,378
+5,110
+0.35 1,261,244
+4,377
+0.35
+Time
+637,653
+17,495
+2.74 654,057
+19,077
+2.92
+Subtotal
+2,091,031
+22,605
+1.08 1,915,301
+23,454
+1.22
+29
+As at the end of the reporting period, total loans and advances to customers of the Group amounted to
+RMB5,570.034 billion, representing an increase of 10.76% as compared with the end of the previous year; total
+loans and advances to customers accounted for 60.22% of the total assets, representing an increase of 0.07
+percentage point as compared with the end of the previous year. For details of the loans and advances to customers
+of the Group, please refer to 3.4 "Analysis of Loan Quality" in this chapter.
+Including fixed assets, right-of-use assets, intangible assets, investment properties, deferred tax assets and other assets.
+25.48
+2,130,889
+24.05
+The following table sets forth, as at the dates indicated, the components of the total assets of the Group. To
+maintain the figures comparable, the financial instruments in section "3.3.1 Assets" were still analysed on the
+statistical calibre excluding interest receivable, except for the following table, in which interest receivable calculated
+using the effective interest method was included.
+As at the end of the reporting period, the total assets of the Group amounted to RMB9,249.021 billion, up by
+10.62% from the end of the previous year, which was mainly attributable to the increase in loans and advances to
+customers and bond investments of the Group.
+3.3.1 Assets
+3.3 Analysis of Balance Sheet
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Other operating expenses include depreciation, amortisation, leases, taxes and surcharges, allowances for insurance claims and various other
+administrative expenses.
+The Group adopted the Financial Instruments Standards to make adequate allowances for credit risk losses by using
+the expected credit loss model and the risk quantification parameters such as the probability of customer defaults
+and the loss given defaults, after taking into consideration the adjustments in macro perceptiveness. During the
+reporting period, expected credit losses of loans and advances to customers of the Group were RMB37.020 billion.
+The expected credit losses of other assets other than loans and advances to customers amounted to RMB28.942
+billion. The expected credit losses of certain assets increased year-on-year, which was mainly because the Group,
+based on its judgments over the overall risk situation after taking into consideration the global pandemic and the
+uncertain and unstable economic situation at home and abroad, had made forward-looking and prudent provisions
+for the expected credit losses on businesses including inter-bank asset transactions and off-balance sheet contingent
+business to corporate customers to enhance its ability to withstand risks. In addition, during the reporting period,
+the Group had made allowances for credit losses of the back-to-balance sheet wealth management assets based on
+their risk profiles. For details of the back-to-balance sheet arrangement of wealth management assets, please refer
+to "The formation and disposal of non-performing assets" in 3.9 under this chapter.
+64,871
+65,962
+168
+1,345
+2,147
+5,639
+307
+6,110
+15,367
+15,848
+46,882
+37,020
+31 December 2021
+(in millions of RMB, except for percentages)
+Total loans and advances to customers
+Allowances for impairment losses on loans (1)
+Net loans and advances to customers
+Investment securities and other financial assets
+Cash, precious metals and balances with
+the central bank
+Inter-bank transactions(2)
+2,224,041
+57.46
+4,804,361
+57.69
+5,335,391
+(2.80)
+(234,522)
+(2.65)
+(245,494)
+60.26
+1.73
+Percentage of
+the total (%)
+60.34
+5,580,885
+Percentage of
+the total (%)
+Amount
+31 December 2020
+(1)
+Notes:
+Total assets
+Other assets(3)
+Goodwill
+Amount
+5,038,883
+59,798
+1.59 3,461,281
+61,727
+Average
+Interest
+Average
+(in millions of RMB, except for percentages)
+balance
+income
+yield (%)
+balance
+income
+yield (%)
+Corporate loans
+2,095,664
+80,575
+3.84
+2,024,891
+80,575
+3.98
+Retail loans
+2,869,358
+159,124
+5.55
+Average
+Interest
+Average
+2020
+(27,339)
+(24,481)
+(2,858)
+Net profit
+120,834
+97,959
+22,875
+Net profit attributable to shareholders of the Bank
+119,922
+97,342
+2,506,828
+22,580
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+3.2.2 Net operating income
+During the reporting period, the Group realised the net operating income of RMB331.407 billion, representing a
+year-on-year increase of 14.17 %. The net interest income accounted for 61.53% of the net operating income,
+and the net non-interest income accounted for 38.47% of the net operating income, representing a year-on-year
+increase of 2.21 percentage points.
+3.2.3 Interest income
+During the reporting period, the Group recorded an interest income of RMB327.056 billion, representing a year-
+on-year increase of 6.39%, mainly due to the increase in interest-earning assets. Interest income from loans and
+advances to customers continued to be the biggest component of the interest income of the Group.
+Interest income from loans and advances to customers
+In 2021, the interest income from loans and advances to customers of the Group was RMB250.662 billion,
+representing a year-on-year increase of 6.17%.
+The following table sets forth the average balance (daily average balance, same as below), interest income and
+average yield of each component of loans and advances to customers of the Group for the periods indicated.
+2021
+China Merchants Bank
+25,733
+147,704
+Discounted bills
+(in millions of RMB, except for percentages)
+Average
+balance
+Average
+Interest cost ratio Average
+expense
+(%) balance
+Interest
+expense
+Average
+cost ratio
+(%)
+Deposits from corporate customers
+Demand
+2,396,802
+21,873
+0.91 1,964,687
+17,052
+0.87
+Time
+1,485,640
+39,854
+2.68 1,496,594
+42,746
+2.86
+Subtotal
+3,882,442
+2020
+2021
+The following table sets forth the average balances, interest expenses and average cost ratios of the deposits from
+corporate and retail customers of the Group for the periods indicated.
+During the reporting period, the Group's interest expense on deposits from customers was RMB84.332 billion,
+representing a year-on-year increase of 1.30%. Under the circumstance where the deposits from customers grew
+rapidly, the Group continued to optimise its structure of deposits and imposed effective control on pricing, which
+contributed to a substantial decrease in the cost ratio of deposit.
+399,173
+10,963
+2.75
+291,660
+7,825
+2.68
+Loans and advances to customers
+5,364,195
+250,662
+4.67 4,823,379
+5.89
+236,104
+During the reporting period, from the perspective of the maturity structure of loans and advances to customers
+of the Company, the average balance of short-term loans was RMB1,940.917 billion with the interest income
+amounting to RMB100.850 billion, and the average yield reached 5.20%; the average balance of medium-to-long
+term loans was RMB3,423.278 billion with the interest income amounting to RMB149.812 billion, and the average
+yield reached 4.38%. The average yield of short-term loans was higher than that of medium-to-long term loans,
+which was mainly attributable to the higher yield of credit card loans and micro-finance loans in short-term loans
+and the higher proportion of these loans.
+Interest income from investments
+During the reporting period, the interest income from investments of the Group was RMB56.059 billion,
+representing a year-on-year increase of 8.13%. The average yield of investments was 3.35%, representing a year-
+on-year decrease of 7 basis points, which was mainly attributable to the impact of the falling market interest rates.
+Interest income from balances and placements with banks and other financial institutions
+During the reporting period, the interest income of the Group from balances and placements with banks and
+other financial institutions was RMB12.543 billion, representing a year-on-year increase of 4.50%, and the average
+yield of balances and placements with banks and other financial institutions was 1.93%, representing a year-on-
+year decrease of 2 basis points, which was primarily attributable to the year-on-year falling yield of balances and
+placements with banks and other financial institutions denominated in foreign currencies.
+23
+24
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.2.4 Interest expense
+During the reporting period, the interest expense of the Group was RMB123.137 billion, representing a year-on-year
+increase of 0.61%.
+Interest expense on deposits from customers
+4.89
+5,973,473
+299
+290
+Operational risk arises from the loss due to deficiency in internal procedures, staffing or IT structure, as well as
+external events which have effect on operation, including legal risk but not strategy risk and reputation risk.
+During the reporting period, through stepping up the identification, evaluation and monitoring of operational risk in
+key areas, and by focusing on process, policy, employee system, and existing problems of critical control segments,
+the Group further improves the risk management framework and method, appraisal and assessment mechanism,
+and strengthens economic capital allocation mechanism with the goal of enhancing the ability and effectiveness
+of operational risk's management of the Group. All major indexes meet the requirements of the Group's risk
+preference.
+In view of the challenges from internal and external operations and management, the Group will, based on its risk
+appetite, continue to upgrade its risk management capabilities and strengthen operational risk monitoring and
+controls, in order to prevent and reduce operational risk losses.
+(e) Capital management
+The objectives of the Group's capital management are to:
+Keep capital adequacy ratios at reasonable levels, satisfy capital-specific regulatory provisions and policy
+requirements on an ongoing basis, and maintain a solid capital base in support of its business expansion,
+social responsibility and strategic planning implementation to achieve a comprehensive, coordinated and
+sustainable growth;
+Comply with capital regulatory requirements, perform procedures to assess internal capital adequacy, openly
+disclose information related to capital management, fully cover all risks and ensure safe operation of the
+entire group;
+Put in place an economic capital-centred banking value management system by fully applying various risk-
+specific quantitative deliverables, enhance decision-making processes and management application regimes,
+strengthen capital restraint and capital incentive mechanisms, reinforce capabilities to facilitate customer
+pricing and decision-making, and increase capital deployment efficiency;
+Reasonably use all kinds of capital instruments, continue to upgrade capital strengths, improve capital
+structures, raise capital quality, lower capital costs, and create the best returns for shareholders.
+The Group manages its capital structure and adjusts it based on the economic condition and the risk characteristics
+of its operations. To maintain or adjust its capital structure, the Group may modify its profit distribution policy,
+issue or repurchase shares, additional tier-1 capital instruments, eligible tier-2 capital instruments, and convertible
+debentures. The Group's management regularly monitors capital adequacy ratio under an approach stipulated by the
+CBIRC. The Group and the Bank submit required information to the CBIRC every quarter.
+295
+296
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+(d) Operational risk
+60. Risk management (continued)
+Capital management (continued)
+The Group's capital adequacy ratio calculation covers the Bank and its subsidiaries. The Bank's capital adequacy ratio
+calculation covers all branches of the Bank. As at 31 December 2021, the Group's subsidiaries that were within the
+scope in respect of capital adequacy ratio calculation included: CMB WLB, CMBICHC, CMBFLC, CMFM, CMBWM,
+CIGNA & CMAM and CMB Europe S.A.
+Since 1 January 2013, the Group has calculated its capital adequacy ratio in accordance with the CBIRC's
+Administrative Measures on the Capital of Commercial Banks (Provisional) and other relevant regulations. On 18
+April 2014, the CBIRC approved the Bank to adopt the Advanced Measurement Approach. Within the approved
+scope, the Bank could calculate corporation and financial institutions risk exposure using the Foundation Internal
+Ratings-Based Approach, retail risk exposure using the Advanced Internal Ratings-Based Approach, market risk
+using the Internal Model-Based Approach, and operational risk using the Standardised Measurement Approach. At
+the same time, the CBIRC implemented a transition period for commercial banks that were approved to adopt the
+Advanced Measurement Approach. During the transition period, commercial banks should use both the Advanced
+Measurement Approach and other approaches to calculate capital adequacy ratios, and comply with the capital floor
+requirements.
+The Group's capital management focuses on the capital adequacy ratio management. The capital adequacy
+ratio reflects the Group's capability of sound operations and risk resistance. The Group's capital adequacy ratio
+management's objective is to carefully determine capital adequacy ratio, as legally required by regulators, according
+to actual risk profiles and with reference to capital adequacy ratio levels of globally leading market peers and the
+Group's operating conditions.
+The Group adopts the scenario simulation and stress testing methods to forecast, plan and manage its capital
+adequacy ratio with considerations of factors such as strategic development planning, business expansion status,
+and risk movement trends.
+(f) Use of derivatives
+Derivatives include forwards, swaps and option transactions undertaken by the Group in the foreign exchange and
+interest rate markets.
+The Group enters into interest rate, foreign currency and other financial derivative transactions for treasury business
+and its assets and liabilities management purpose. The Group's derivatives can be divided into financial instruments
+that are held for cash flow hedging purpose and that are at fair value through profit or loss.
+The Group formulates appropriate hedging strategies and uses proper tools in light of the risk profile of interest
+rates or foreign exchange rates associated with its assets and liabilities, as well as its analysis and judgement
+regarding future movements of interest rates or foreign exchange rates.
+The Group is exposed to foreign exchange risk when assets or liabilities are denominated in foreign currencies. Such
+risk can be offset through the use of foreign exchange forwards or foreign exchange options.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(f)
+(e)
+Use of derivatives (continued)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+484
+2,836
+9,586
+2,275
+Debt securities issued
+344,156
+366,059
+61,274
+45,680
+111,340
+139,139
+8,626
+Other liabilities
+125,366 125,366
+Annual Report 2021
+29,660
+15,629
+22,876
+8,619
+632
+Total
+7,507,824 7,611,753 4,291,862
+685,185 588,206 1,119,363
+887,687
+39,450
+1,344,434
+1,344,434
+Gross loan commitments
+Note: Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+China Merchants Bank
+47,950
+In cash flow hedges, the Group uses interest rate swaps as hedging instruments to hedge the interest rate risks
+arising from RMB loans and interbank assets portfolios.
+The following tables provide an analysis of the notional amounts and the corresponding fair values of derivatives
+of the Group by remaining maturities at the end of the reporting period. The notional amounts of the derivatives
+indicate the transaction volume that has not been delivered at the end of the reporting period, and do not represent
+the amounts at risk.
+Derivatives at fair value through
+647,081
+506,850
+29,615
+1,052
+1,184,598
+10,041
+(13,966)
+Forwards
+26,577
+14,373
+1,517
+1,052
+43,519
+985
+Currency derivatives
+(164)
+485,140
+357,685
+20,086
+862,911
+7,530
+(7,048)
+Futures
+587
+1,157
+1,744
+Options
+134,777
+133,635
+8,012
+Foreign exchange swaps
+1,388
+1,388
+Bond options
+2021
+Notional amounts with remaining life
+Fair value
+Within
+3 months
+Between
+3 months
+and 1 year
+Between
+1 year
+and 5 years
+Over
+5 years
+Total
+Assets
+Liabilities
+profit or loss
+Interest rate derivatives
+567,612
+823,679
+1,240,265
+4,966
+391
+391
+Bond futures
+(11,974)
+11,831
+2,634,743
+524
+4,966
+823,679
+565,833
+Interest rate swaps
+(11,974)
+11,831
+2,636,522
+1,240,265
+15,705
+14,242
+Lease liabilities
+506,096
+350,584
+1,372,740
+1,700,755
+2,109,999
+14,407
+Financial investments
+2,047,438
+2,513,915
+5,196
+266,655
+155,314 464,750
+1,031,094
+579,923
+12,178
+9,091
+- Financial investments at FVTPL
+495,723
+503,234
+5,196
+170,739
+56,381 183,702
+69,024
+17,599
+593
+- Debt investments at amortised
+cost
+1,034,269
+1,350,789
+50,876
+1,892
+6,066,759
+4,794,702
+Loans and advances to customers
+but within
+but within
+but within
+Over
+amount
+Total
+on demand
+1 month
+3 months
+1 year
+5 years
+5 years
+Indefinite
+Overdue
+Non-derivative financial assets
+Cash and Balances with central
+banks
+384
+4,017
+88,847
+55,856
+369,529
+98,748
+40,743
+617,381
+financial institutions
+Amounts due from banks and other
+477,646
+60,560
+538,206
+538,206
+615,447
+276,424
+185,488
+467,772
+19,271
+Non-derivative financial liabilities
+and lease liabilities
+Borrowing from central banks and
+amounts due to banks and other
+financial institutions
+1,335,373 1,346,594
+543,102
+252,465
+174,326
+357,759
+15,160
+3,782
+Deposits from customers
+497,497
+5,628,336
+3,704,881
+316,664
+350,989 617,139
+706,355
+958
+Financial liabilities at FVTPL
+60,351
+61,043
+14,219
+6,308
+1,098
+7,413
+8,828
+23,177
+5,696,986
+2,690,689
+2,748,567
+1,933,097
+736
+1,648
+- Debt investments at FVTOCI
+510,307
+652,753
+45,040
+58,190
+95,560 358,544
+94,552
+623
+244
+- Equity investments designated
+at FVTOCI
+7,139
+7,139
+7,139
+Other assets
+571,486
+1,167,703
+245,710
+8,122,537 9,874,020
+Total
+2,972
+603,526
+10,760
+12,701
+6,760
+9,732
+25,423
+137,759 69,028
+126,744
+383
+1,526
+(6,754)
+Other derivatives
+(464)
+Commodity trading swaps
+4,948
+3,929
+631
+9,508
+1,048
+(987)
+Cash flow hedge derivatives
+Interest rate derivatives
+32
+1,030
+2,871
+819
+67,841
+4,752
+Interest rate swaps
+32
+1,030
+2,871
+819
+4,752
+(15)
+Derivatives managed in
+conjunction with financial
+instruments designated at FVTPL
+Interest rate derivatives
+471
+909
+1,358
+(15)
+67,353
+488
+Equity options written
+Foreign exchange swaps
+440,943
+477,298
+12,789
+867
+931,897
+20,063
+(20,136)
+Futures
+17
+706
+723
+Options
+130,903
+104,921
+3,068
+238,892
+490
+67,841
+67,353
+488
+Equity options purchased
+(1,451)
+2,738
+1,538
+631
+138,635
+5,924
+Other derivatives
+(14,623)
+11,344
+145,190
+(1,461)
+(47)
+471
+Interest rate derivatives
+Currency derivatives
+Other derivatives
+Credit valuation adjustment risk weighted assets
+Total
+Note:
+Since 2019, the Group has calculated the exposure of derivatives according to the Notice of the Measures on Default Risk Weighted Assets of
+Counterparties in Respect of Derivatives and the related requirements issued by the CBIRC. These amounts have taken the effects of bilateral
+netting arrangements into account. The risk weighted amounts in respect of derivatives are calculated in accordance with the Administrative
+Measures on Capital of Commercial Banks (Provisional) issued by the CBIRC. The amounts within the scope approved by the CBIRC in April
+2014 are calculated using the Internal Ratings-Based Approach, and the Weighted Approach is adopted to calculate those that are not eligible
+for the Internal Ratings-Based approach.
+139
+266
+3,048
+5,574
+440
+3,804
+2,382
+9,644
+6,011
+15,655
+(g) Fair value information
+(i)
+Methods of determining fair value of financial instruments
+A number of the Group's accounting policies and disclosure requirements stipulate the measurement of fair values,
+for both financial and non-financial assets and liabilities.
+The Group has established a control framework to govern the measurement of fair values. This includes a valuation
+team that takes the responsibility for overseeing all significant fair value measurements including the three levels of
+fair values.
+The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party
+information, such as broker quotes or pricing services, is used to determine fair value, then the valuation team
+assesses the evidence obtained from the third parties to support the conclusion that such valuation meets the
+requirements of IFRSS, including the classification of levels in the fair value hierarchy.
+When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
+Fair values are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation
+techniques.
+The following tables present the fair value information and the fair value hierarchy, at the end of the current
+reporting period, of the Group's assets and liabilities which are measured at fair value on a recurring basis at each
+reporting date. The level in which fair value measurement is categorised is determined by the level of the fair value
+hierarchy of the lowest level of input that is significant to the entire fair value measurement. The levels are defined
+as follows:
+Level 1 inputs: unadjusted quoted prices in active markets that are observable at the measurement date for
+identical assets or liabilities;
+Level 2 inputs: other than quoted prices included in level 1 inputs that are either directly or indirectly
+observable for underlying assets or liabilities inputs;
+Level 3 inputs: inputs that are unobservable for assets or liabilities.
+The Group recognises transfers among levels of the fair value hierarchy when they occur.
+The Group's assets and liabilities measured at fair value are measured on a recurring basis. The Group does not have
+assets nor liabilities measured at fair value on a non-recurring basis.
+6,009
+2020
+2021
+3,627
+Default risk weighted assets of counterparties
+909
+1,358
+2,738
+(47)
+Currency derivatives
+1,499
+74
+1,573
+68
+Foreign exchange swaps
+1,499
+74
+1,573
+68
+(1)
+Total
+1,198,276
+The credit risk weighted amounts in respect of these derivatives are as follows:
+Use of derivatives (continued)
+(f)
+60. Risk management (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+Interest rate swaps
+China Merchants Bank
+(50,061)
+47,272
+4,715,670
+7,302
+1,521,418
+1,988,674
+There was no ineffective portion of cash flow hedges during the years ended 31 December 2021 and 2020.
+Within
+1,691
+2,703
+2,883
+702
+3,585
+46
+445
+Derivatives managed in
+conjunction with financial
+instruments designated at FVTPL
+Interest rate derivatives
+191
+967
+581
+1,739
+Interest rate swaps
+46
+191
+581
+1,739
+(17)
+(17)
+Currency derivatives
+72
+1,360
+1,432
+(88)
+Foreign exchange swaps
+72
+1,360
+1,432
+(88)
+88
+967
+3,585
+702
+2,883
+134,230
+5,424
+277
+139,931
+1,472
+(1,237)
+Equity options purchased
+62,094
+907
+344
+Equity options written
+62,094
+907
+63,001
+(265)
+Commodity trading swaps
+10,001
+Interest rate swaps
+Interest rate derivatives
+Cash flow hedge derivatives
+(221)
+393
+217
+Total
+135
+Equity swaps
+(751)
+1,128
+13,536
+60
+3,475
+41
+93,590
+1,349,114
+1,274,981
+2,913
+3,287,522
+12,559
+(12,318)
+65
+65
+6
+(3)
+Bond futures
+89
+9
+98
+Bond options
+220
+1,499,110
+8,410
+3
+(6)
+Currency derivatives
+630,018
+614,205
+17,309
+3,570
+1,265,102
+33,098
+(36,220)
+Forwards
+58,155
+31,280
+1,452
+8,630
+(12,327)
+12,568
+3,296,315
+6,720
+3,967,807
+23,390
+(27,282)
+297
+298
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(f) Use of derivatives (continued)
+2020
+Notional amounts with remaining life
+Derivatives at fair value through
+Fair value
+Between
+Within
+3 months
+2,913
+1,499,175
+561,831 1,232,396
+561,522 1,223,977
+Bond forwards
+Interest rate swaps
+Interest rate derivatives
+1,336,992
+profit or loss
+Assets
+Total
+5 years
+Over
+Between
+1 year
+and 5 years
+3 months
+and 1 year
+Liabilities
+Repayable
+63,001
+1 year
+(Short)/long position
+(4,719,911)
+545,308
+(34,030)
+581,381
+1,370,423
+2,386,452
+712,020
+24,038
+865,681
+291
+292
+China Merchants Bank
+Chapter VIII Financial Statements
+8,383,340
+Annual Report 2021
+(c)
+Liquidity risk (continued)
+2020
+After
+After
+After
+1 month
+3 months
+1 year
+Repayable
+Within
+but within
+but within
+but within
+60. Risk management (continued)
+Over
+65,985
+1,137,177
+13,740
+20,629
+18,711
+91,043
+Lease liabilities
+506
+536
+2,989
+8,153
+1,628
+13,812
+Debt securities issued
+21,181
+70,472
+954,686
+222,647
+41,267
+444,541
+Other liabilities (note (iv))
+160,991
+37,159
+15,455
+24,744
+9,404
+519
+248,272
+Total liabilities
+4,987,678
+700,969
+536,845
+88,974
+on demand
+1 month
+3 months
+535,708
+7,710
+1,892
+2,094,710
+- Financial investments at FVTPL (including
+derivative financial assets)
+5,409
+173,666
+63,803 203,872
+77,242
+18,432
+571
+542,995
+- Debt investments at amortised cost
+842,201
+2,270
+110,511
+467,217
+420,686
+1,648
+1,034,269
+- Debt investments at FVTOCI
+7,103
+39,717
+68,911
+297,742
+96,590
+244
+510,307
+- Equity investments designated at FVTOCI
+31,937
+383,294
+135,457
+183,039
+1 year
+5 years
+5 years
+Indefinite
+Overdue
+Total
+Cash and balances with central banks (note (i))
+60,560
+477,646
+538,206
+Amounts due from banks and other financial
+institutions
+91,125
+369,355
+62,201
+88,213
+4,169
+5,409
+assets (note (ii))
+Financial investments and derivative financial
+4,794,702
+13,145
+1,469,872
+11,720
+1,298,657
+311,334
+488,169
+12,178
+Loans and advances to customers
+615,447
+384
+1,201,347
+13,301
+12,942
+derivative financial liabilities)
+5 years
+Indefinite
+Overdue
+Total
+Cash and balances with central banks (note (i))
+79,129
+487,836
+566,965
+Amounts due from banks and other financial
+institutions
+59,862
+601,897
+60,072
+65,405
+5 years
+10,793
+798,078
+Loans and advances to customers
+20,719
+545,165
+368,482
+1,333,756
+1,387,033
+1,650,468
+19,888
+5,325,511
+Financial investments and derivative financial
+assets (note (ii))
+4,058
+88,783
+49
+1 year
+3 months
+1 month
+Carrying
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+60. Risk management (continued)
+(c) Liquidity risk
+Liquidity risk is the risk that the Group is not able to obtain sufficient funds at a reasonable cost and in a timely
+manner to deal with the appreciation of asset growth, to meet its maturity obligations, or to perform other payment
+obligations.
+According to the liquidity risk management policy, the Group segregates the policy setting, execution and supervision
+of liquidity risk management, and puts in place a governance framework which defines the roles, responsibilities and
+reporting lines of the board of directors, the board of supervisors, senior management, designated committees and
+relevant departments to ensure the effectiveness of the liquidity risk management. The board of directors takes the
+ultimate responsibility for liquidity risk management, ensures the Group can effectively identify, measure, monitor
+and control liquidity risk and is responsible for determining liquidity risk level which the Group can tolerate. The
+Risk and Capital Management Committee under the board of directors discharges responsibilities in liquidity risk
+management on behalf of the board of directors. The board of supervisors is responsible for the supervision and
+evaluation of the performance of the board of directors and senior management in the liquidity risk management
+and reports to the general meeting of shareholders. The senior management is responsible for the liquidity risk
+management work and develops a timely understanding of changes in liquidity risks, and reports the same to
+the board of directors. Assets and Liabilities Committee (ALCO), under the authority of the senior management,
+exercises the corresponding liquidity risk management functions. The Assets and Liabilities Management Department
+of the Head Office is a day-to-day working body of ALCO, and is responsible for various concrete management work
+including formulating policies and procedures relating to liquidity risk management and conducting qualitative and
+quantitative analysis of liquidity risk. The Internal Audit Department of the Head Office conducts comprehensive
+audit on the Group's liquidity risk management.
+The Group is prudent in managing its liquidity risk, which suits its current development stage. The Group's existing
+liquidity risk management policies and systems meet regulatory requirements and its own management needs.
+The Group's liquidity risk management is coordinated by Head Office with branches acting in concert. The Asset
+and Liability Management Department acting as the treasurer of the Group is in charge of daily liquidity risk
+management. According to a prudent basis under regulatory requirements, the treasurer is conducting centralised
+liquidity management through limits management, budget control, initiative debt management as well as internal
+fund transfer pricing.
+The Group measures, monitors and identifies liquidity risk by short-term reserves as well as medium and long-term
+structures. It monitors the limit indicators closely at fixed intervals.
+The Group regularly conducts stress testing to assess its liquidity risk resistance under extreme circumstances. Except
+for the annual stress testing required by the regulatory authorities, the Group conducts monthly stress testing on
+the liquidity risk of local and foreign currencies. The Group sets up liquidity contingency plans and conducts liquidity
+contingency drills to continuously improve its capability to handle any liquidity crisis.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+60. Risk management (continued)
+(c)
+Liquidity risk (continued)
+on demand
+Over
+but within
+but within
+1 year
+3 months
+60,315
+1 month
+but within
+Repayable
+After
+After
+After
+2021
+Analysis of the Group's assets and liabilities by contractual remaining maturity is as follows:
+Within
+7,139
+304,846
+795,813
+6,107
+214,113
+3,913
+381,952
+Total assets
+267,767
+1,246,277
+502,815
+1,718,558
+2,325,109 2,452,437
+712,020
+24,038
+9,249,021
+Borrowing from central banks and amounts
+14,891
+due to banks and other financial institutions
+313,745
+122,210
+153,551
+18,350
+2,781
+1,238,594
+Deposits from customers (note (iii))
+4,185,788
+315,077
+316,452
+719,506
+809,176
+1,079
+Financial liabilities at FVTPL (including
+627,957
+14,551
+13,946
+10,432
+10,071
+237
+2,176,515
+- Financial investments at FVTPL (including
+derivative financial assets)
+4,058
+67,589
+31,524
+95,228
+134,821
+35,217
+3,076
+371,513
+- Debt investments at amortised cost
+8,882
+11,185 133,930
+425,327
+590,091
+103,999
+Other assets (note (iv))
+6,995
+6,995
+- Equity investments designated at FVTOCI
+628,355
+912,392
+170,505
+75,688
+17,606
+12,312
+- Debt investments at FVTOCI
+1,169,652
+237
+352,244
+7,139
+6,347,078
+70,325
+13,917
+20,892
+88,874
+393,918
+207,642
+- Equity investments designated
+at FVTOCI
+Other assets
+Total
+8,997,987
+6,995
+154,308 154,308
+10,743,569
+6,995
+6,995
+102,918
+9,891
+237
+13,745
+1,848
+528
+7,670
+3,913
+266,343
+1,262,793
+541,694
+1,922,487
+2,895,108
+3,325,489
+505,577
+24,078
+Non-derivative financial liabilities
+and lease liabilities
+13,795
+237
+734,385
+529,031
+1,831,318
+2,345,796
+19,928
+Financial investments
+2,153,125
+2,540,798
+3,715
+90,330
+67,149
+339,704
+1,050,476
+979,116
+10,071
+237
+- Financial investments at FVTPL
+348,123
+355,501
+159,993
+17,405
+12,008
+1,169,652 1,453,059
+628,355 725,243
+- Debt investments at FVTOCI
+cost
+Borrowing from central banks and
+- Debt investments at amortised
+37,089
+127,527
+90,837
+28,852
+64,405
+3,715
+3,076
+1,503,759
+financial institutions
+1,245,870 628,157
+Other liabilities
+158,091 158,091
+74,533
+36,128
+15,454
+23,052
+8,406
+518
+Total
+8,265,877 8,443,408 4,931,376
+703,504
+541,744
+1,167,092 1,028,367
+71,325
+46,072
+Gross loan commitments
+293
+294
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(c)
+Liquidity risk (continued)
+2020
+After
+After
+After
+1 month
+Other assets (note (iv))
+3 months
+1,386,481 1,386,481
+94,221
+226,189
+70,839
+315,523
+123,610 156,000
+19,668
+2,912
+Deposits from customers
+6,347,078
+6,500,805 4,215,760
+318,932
+323,909
+754,023 887,030
+1,151
+Financial liabilities at FVTPL
+63,761
+64,232
+12,926
+10,408
+7,387
+22,002
+459,323
+444,541
+Debt securities issued
+1,977
+8,974
+1,238,594
+3,080
+511
+13,812 15,087
+Lease liabilities
+18,695
+10,068
+4,748
+545
+398,738
+amounts due to banks and other
+20,719
+Financial liabilities at FVTPL (including
+derivative financial liabilities)
+14,264
+8,777
+10,745
+32,994
+20,374
+23,258
+110,412
+Lease liabilities
+527
+488
+2,805
+8,577
+909
+1,845
+Debt securities issued
+61,167
+45,304
+105,552
+124,574
+7,559
+344,156
+Other liabilities (note (iv))
+99,722
+48,613
+15,632
+25,081
+8,895
+632
+14,242
+642,047
+600,093
+354,084
+6,035
+9,720
+560,371
+7,170
+26,015
+5,842
+190,006
+3,270
+318,383
+Total assets
+239,597
+1,046,598
+518,712
+1,680,024
+2,171,042
+2,011,806
+675,362
+326,452
+3,704,751
+Deposits from customers (note (iii))
+1,335,373
+3,619
+14,152
+198,575
+351,464
+251,299
+542,955
+due to banks and other financial institutions
+Borrowing from central banks and amounts
+8,361,448
+18,307
+171,884
+Total liabilities
+5,628,336
+banks
+After
+3 months
+1 year
+but within
+but within
+1 month
+3 months
+1 year
+5 years
+5 years
+Indefinite Overdue
+Non-derivative financial assets
+Cash and balances with central
+566,965
+566,965
+79,129
+487,836
+6,680,629
+5,325,511
+4,361,692
+Loans and advances to customers
+49
+11,466
+After
+65,229
+602,201
+59,862
+800,869
+798,078
+financial institutions
+Amounts due from banks and other
+62,062
+After
+1 month
+but within
+Over
+Within
+(ii)
+(i)
+Notes:
+730,354
+675,362
+562,035 1,352,423 1,973,984
+(iii)
+349,763 (79,425)
+(Short)/long position
+7,631,094
+37,822
+1,117,989 818,619
+598,137
+696,835
+(4,122,095)
+For cash and balances with central banks, the amounts with indefinite maturities represent statutory deposit reserve and fiscal deposit
+balances.
+18,307
+Carrying
+amount
+For financial investments at FVTPL included in financial investments, their maturity dates do not represent the Group's intention to hold them
+to maturity.
+2021
+The following table provides an analysis of the contractual undiscounted cash flow of the non-derivative financial
+assets, financial liabilities, lease liabilities and gross loan commitments of the Group as at the end of the reporting
+period. The Group's expected cash flows on these instruments and lease liabilities may vary significantly from this
+analysis.
+Repayable
+on demand
+Liquidity risk (continued)
+60. Risk management (continued)
+(c)
+China Merchants Bank
+Annual Report 2021
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+(iv)
+Deposits from customers that are repayable on demand include matured time deposits which are pending for customers' instructions.
+Chapter VIII Financial Statements
+Total
+approach
+Market approach
+at FVTPL
+Financial liabilities designated
+206
+Market approach
+rate
+Risk-adjusted discount
+Liquidity discount
+Liquidity discount
+Risk-adjusted discount
+rate
+14
+Liquidity discount
+Net assets
+Discounted cash flow
+17
+1,365
+- Fund investments
+Risk-adjusted discount
+at FVTPL
+rate
+Financial investments measured
+at FVTPL
+- Debt securities
+Financial investments designated
+456
+- Equity investments
+1,738
+Market approach
+- Fund investments
+502
+Net fund value approach
+Discounted cash flow
+approach
+Financial liabilities designated
+339
+Net fund value approach
+Discounted cash flow
+approach
+287
+- In profit or loss
+1,991
+Profit or loss
+58,936
+5,064
+44,289
+6,856
+2,727
+Total
+Equity
+investments
+designated
+at FVTOCI
+Loans and
+advances to
+customers
+at FVTOCI
+Loans and
+advances to
+customers
+at FVTPL
+at FVTPL
+At 1 January 2021
+Assets
+at FVTPL
+Net assets, liquidity
+discount
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(g) Fair value information (continued)
+5,443
+(ii)
+(3)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+1)
+Valuation of financial instruments with significant unobservable inputs
+The following tables show the movements from the beginning balances to the ending balances for
+Level 3 financial instruments:
+Financial
+investments
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+44,289
+- Equity investments
+rate
+Liquidity discount
+Risk-adjusted discount
+rate, cash flow
+Net assets, liquidity
+discount
+Risk-adjusted discount
+rate
+Liquidity discount
+- Other
+Market approach
+7
+Liquidity discount
+Financial liabilities designated
+664
+Market approach
+Liquidity discount
+at FVTPL
+Market approach
+Financial liabilities designated
+5
+Net assets
+209
+- In other comprehensive income
+- Equity investments
+Discounted cash flow
+approach
+15
+- Fund investments
+Net asset value approach
+373
+Discounted cash flow
+approach
+- Fund investments
+767
+Net fund value approach
+- Debt securities
+Loans and advances to customers
+at FVTOCI
+7,483
+at FVTPL
+at FVTOCI
+1,200
+Market approach
+Liquidity discount
+Equity investments designated
+3,864
+Equity investments designated
+Net asset value approach
+Net assets, liquidity
+discount
+Loans and advances to customers
+at FVTPL
+6,856
+Discounted cash flow
+Risk-adjusted discount
+approach
+at FVTOCI
+Net fund value approach
+Unobservable inputs
+2020
+Net assets, liquidity
+discount
+303
+304
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+Valuation techniques
+(g) Fair value information (continued)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(3)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+Fair value
+as at
+31 December
+(ii)
+48
+2021
+1,098
+2020
+Balance as at 1 January
+5,649
+3,105
+In profit or loss
+470
+2021
+402
+Disposals and settlement on maturity
+Exchange difference
+Balance as at 31 December
+Total unrealised gains and losses included in the
+3,105
+2,686
+Addition for the year
+(860)
+Financial liabilities at fair value through profit or loss
+1)
+in the consolidated statement of profit
+or loss for assets held at the end of the
+reporting period
+454
+296
+-- 750
+305
+306
+Valuation of financial instruments with significant unobservable inputs (continued)
+China Merchants Bank
+Annual Report 2021
+60. Risk management (continued)
+(g) Fair value information (continued)
+(ii)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(3)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+Chapter VIII Financial Statements
+Total unrealised gains and losses included
+(453)
+(91)
+(1)
+Financial Assets
+The Group's financial assets that are not measured at fair value mainly include balances with central banks,
+balances and placements with banks and other financial institutions, amounts held under resale agreements,
+loans and advances to customers at amortised cost and investments at amortised cost.
+Except for loans and advances measured at amortised cost and debt instrument investments measured at
+amortised cost, most of the financial assets mature within 1 year, and their carrying values approximate
+to their fair values. Loans and advances are stated at amortised costs less allowances for impairment loss
+(Note 22). Loans and advances at amortised cost are mostly priced at floating rates with reference to the
+PBOC benchmark interest rates or Loan Prime Rates (LPRs) and repriced at least annually, and impairment
+allowances are made to reduce the carrying amounts of impaired loans to estimated recoverable amounts.
+Accordingly, the carrying value of loans and advances is close to their fair value.
+Debt investments measured at amortised cost are carried at amortised cost less allowances for impairment
+losses. The fair value of the listed investments is disclosed in Note 23(b).
+The carrying value, fair value and fair value hierarchy of debt investments at amortised cost not measured at
+fair value are listed as below:
+Financial assets and financial liabilities that are not measured at fair value
+The Level 1 fair value measurement is based on unadjusted quoted prices in active markets using Bloomberg
+etc. For Level 2, the latest valuation results released by China Bond website are used to measure fair value of
+bonds denominated in RMB. The Level 2 category also includes foreign currency bonds without active quoted
+price, which are measured using the published comprehensive valuation by Bloomberg. The Level 3 fair value
+is measured using discounted cash flow valuation technique.
+Carrying
+amount
+Fair value
+Level 1
+Level 2
+Market approach (Price-to-
+Book Ratio)
+Debt investments at amortised cost 1,169,652 1,235,725
+2020
+(217)
+(iii)
+60. Risk management (continued)
+8,147
+5,649
+consolidated statement of profit or loss for liabilities
+held at the end of the reporting period
+2)
+419
+(g) Fair value information (continued)
+390
+During the years ended 31 December 2021 and 2020, there were no significant transfers among
+different levels for financial instruments which are measured at fair value on a recurring basis.
+3)
+Changes in valuation techniques and the reasons for the changes
+During the years ended 31 December 2021 and 2020, the Group did not change the valuation
+techniques for the financial assets and liabilities disclosed above which are measured at fair value on
+recurring basis.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+Transfers among different levels occurred during the reporting period, the reasons for theses transfers
+and the principle of determining the dates of transfers for financial instruments measured at fair value
+on recurring basis
+1,050
+58,936
+44,289
+7,281
+56,713
+4,726
+73,599
+Total unrealised gains and losses included
+in the consolidated statement of profit
+or loss for assets held at the end of the
+reporting period
+339
+4,879
+287
+Financial
+investments
+Loans and
+advances to
+customers
+Assets
+at FVTPL
+at FVTPL
+Loans and
+advances to
+customers
+at FVTOCI
+626
+Equity
+investments
+designated
+at FVTOCI
+At 31 December 2021
+49
+Addition for the year
+1,832
+143
+118,229
+721
+120,925
+93
+Disposals or settlement on maturity
+(107,218)
+(2,158)
+(109,444)
+Exchange difference
+49
+(5)
+(68)
+5,064
+Total
+2,968
+82
+87,420
+Disposals or settlement on maturity
+(1,106)
+(73,290)
+(74,396)
+86,003
+Exchange difference
+(15)
+(235)
+(378)
+At 31 December 2020
+2,727
+6,856
+(128)
+At 1 January 2020
+796
+Addition for the year
+5,779
+30,346
+3,748
+42,841
+Profit or loss
+- In profit or loss
+539
+454
+1,210
+1,960
+- In other comprehensive income
+20
+1,469
+1,489
+296
+12
+Total
+Liquidity discount
+11,596
+11,596
+- Certificates of deposit issued
+377
+377
+- Debt securities issued
+- Placement of precious metal from financial
+institutions
+- Other
+Total
+7,600
+-
+7,600
+373
+18,651
+Derivative financial liabilities
+8,147
+46,744
+19,028
+Liabilities
+Financial liabilities held for trading
+16,832
+185
+17,017
+- Financial liabilities related to precious metal
+8,147
+16,406
+- Short position on bonds
+426
+185
+611
+Financial liabilities designated at FVTPL
+19,569
+16,406
+1,509,831
+27,171
+27,282
+2,713
+464,466
+- Debt securities
+24,267
+121,780
+456
+25,283
+146,503
+96
+96
+- Equity investments
+836
+836
+1,738
+- Long position in precious metal contracts
+27,282
+Financial investments measured at FVTPL
+Total
+36,401
+46,495
+8,147
+91,043
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+Assets
+60. Risk management (continued)
+(ii)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+2020
+Level 1
+Level 2
+Level 3
+(g) Fair value information (continued)
+3,410
+73,599
+151,655
+4,879
+373
+318,245
+146,886
+- Long position in precious metal contracts
+102
+102
+127,411
+- Equity investments
+2
+- Fund investments
+133
+161,865
+3,727
+772
+4,909
+1,180
+162,770
+19,102
+20,517
+6,659 1,097,435
+300
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(g) Fair value information (continued)
+292,849
+(ii) Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis
+2021
+Level 1
+Level 2
+Level 3
+Assets
+Financial investments measured at FVTPL
+- Debt securities
+The tables below analyse financial instruments, measured at fair value at the end of the reporting period, by the
+levels in the fair value hierarchy:
+1,284,577
+- Wealth management products
+-
+7,281
+Debt investments at FVTOCI
+127,847
+508,191
+636,038
+Loans and advances to customers at FVTOCI
+7,281
+431,291
+488,004
+Equity investments designated at FVTOCI
+2,269
+4,726
+6,995
+Total
+56,713
+2,396
+Loans and advances to customers at FVTPL
+23,390
+2,396
+- Other
+1,175
+7
+1,182
+Financial investments designated at FVTPL
+23,390
+1,022
+29,878
+- Debt securities
+1,022
+28,856
+29,878
+Derivative financial assets
+28,856
+- Equity investments
+- Fund investments
+136,229
+(1)
+Basis of determining the market prices for recurring fair value measurements categorised as Level 1
+Bloomberg etc. are used for financial instruments with quoted prices in an active market.
+(2) Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurement categorised as Level 2
+Fair value of RMB denominated bonds whose value is available on China Bond website on the valuation date
+is measured using the latest available valuation results.
+Fair value of foreign currency bonds without quoted prices in an active market, is measured by using the
+comprehensive valuations issued by Bloomberg, etc.
+Fair value of foreign exchange forwards contracts in derivative financial assets is measured by discounting the
+differences between the contract prices and market future prices of the foreign exchange forwards contracts.
+The discount rates used are the applicable RMB denominated swap yield curve as at the end of the reporting
+period.
+(ii) Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+Fair value of option contracts such as foreign exchange options, commodity options and equity options is
+measured by using the Black-Scholes model, based on market data such as risk-free interest rate, underlying
+market prices and price volatility of foreign exchange, commodities, and equity contract. The above market
+data used are quoted price in an active market, provided by Bloomberg, Refinitiv, Wind and other market
+information providers.
+Observable quoted price in market is used as the basis of determining the value of investment funds.
+The fair value of loans and advances to customers at FVTOCI in Mainland China is measured based on the
+rate of rediscounted bills announced by the Shanghai Commercial Paper Exchange Corporation Ltd. The
+Group uses 10-day average discount rate as the basis for calculating the value of discounted bills. The fair
+value of loans and advances to customers at FVTOCI outside Mainland China is measured by discounted cash
+flow approach. The discount rates used are determined by factors such as credit rating of the loan customer
+provided by S&P, Moody's or Fitch, customer industry, term to maturity of the loan, loan currency and the
+issuer credit spread.
+The fair value of non-standard bills at FVTPL in Mainland China is measured based on the rate of
+rediscounted bills announced by the Shanghai Commercial Paper Exchange Corporation Ltd. The Group uses
+10-day average discount rate as the basis for calculating the value of discounted bills.
+The fair value of certificates of deposit issued is measured by using the comprehensive valuations on
+Bloomberg.
+The fair value of other financial liabilities designated at FVTPL is measured based on the net asset values of
+the funds, determined with reference to observable (quoted) prices of underlying investment portfolio and
+adjustments of related expenses.
+China Merchants Bank
+Annual Report 2021
+Fair value of interest rate swaps, foreign exchange swaps, and non-option commodity contracts in derivative
+financial assets is measured by discounting the expected receivable or payable amounts under the assumption
+that these swaps had been terminated at the end of the reporting period. The discount rates used are the
+related currency denominated swap yield curve as at the end of reporting period.
+Chapter VIII Financial Statements
+(g) Fair value information (continued)
+Chapter VIII Financial Statements
+5,649
+23,253
+Derivative financial liabilities
+50,061
+50,061
+Total
+60. Risk management (continued)
+35,994
+5,649
+110,412
+During the years ended 31 December 2021 and 2020, there were no significant transfers of financial instruments
+between Level 1 and Level 2 of the fair value hierarchy.
+301
+302
+China Merchants Bank
+Annual Report 2021
+68,769
+17,604
+60. Risk management (continued)
+(ii)
+Liquidity discount, risk-
+adjusted discount rate
+Net assets, liquidity
+discount
+Risk-adjusted discount
+approach
+rate
+Loans and advances to customers
+at FVTOCI
+56,713
+Unobservable inputs
+Discounted cash flow
+approach
+rate
+Financial investments measured
+at FVTPL
+- Equity investments
+3,491
+Market approach
+Risk-adjusted discount
+(g) Fair value information (continued)
+Discounted cash flow
+Loans and advances to customers
+at FVTPL
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(3)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3:
+Fair value
+as at
+31 December
+7,281
+Equity investments designated
+Valuation techniques
+Market approach
+at FVTOCI
+Equity investments designated
+3,853
+Net asset value approach
+at FVTOCI
+2021
+873
+84
+- Other
+13,914
+28,625
+14
+31,257
+Derivative financial assets
+47,272
+47,272
+2,618
+Loans and advances to customers at FVTPL
+6,856
+Debt investments at FVTOCI
+109,282
+407,271
+516,553
+Loans and advances to customers at FVTOCI
+6,856
+331,070
+- Debt securities
+14
+519
+136,832
+- Wealth management products
+1,259
+1,259
+- Non-standard assets - Bills
+31,257
+175,303
+- Other
+1,063
+1,063
+Financial investments designated at FVTPL
+2,618
+28,625
+175,303
+13,914
+44,289
+Equity investments designated at FVTOCI
+499
+629
+Financial liabilities designated at FVTPL
+15,503
+18,209
+5,649
+130
+39,361
+1,589
+1,589
+- Certificates of deposit issued
+605
+605
+- Debt securities issued
+- Placement of precious metal from financial
+institutions
+375,359
+- Short position on bonds
+20,361
+2,075
+5,064
+7,139
+Total
+139,258
+1,250,708
+20,361
+58,936
+Liabilities
+Financial liabilities held for trading
+20,491
+499
+20,990
+- Financial liabilities related to precious metal
+1,448,902
+Carrying
+Level 3 amount
+131,631 1,034,269
+436,470
+Level 1
+3,387
+RMB16,191 1,574,729,111
+million
+6.24%
+Transportation business,
+Shareholder
+leasing business, ship
+Limited
+liability
+Xu Lirong
+purchasing and marketing
+business, warehousing
+business, etc.
+-China Ocean Shipping Beijing
+Co., Ltd.
+-COSCO Shipping
+RMB3,191
+696,450,214
+2.76%
+Shipping business
+Shareholder
+Limited
+Shou Jian
+(Guangzhou) Co., Ltd.
+million
+liability
+Guangzhou
+etc.
+freight forwarding agent,
+technology, international
+held by the
+by the
+of the
+Company
+held by
+capital
+Company
+Company
+the Bank
+Business
+Relationship
+with the Bank
+Legal form
+China COSCO Shipping Beijing
+Corporation Limited.
+RMB11,000
+million
+2,515,193,034
+9.97%
+(note(iii))
+International shipping
+business, supporting
+Shareholder's
+parent company
+Limited
+liability
+services to international
+shipping, imports and
+Legal
+representative
+Xu Lirong
+exports of goods and
+- Guangzhou Haining
+Guangzhou
+RMB2
+103,552,616
+Leasing business, financing Shareholder
+Limited
+Wang Daxiong
+Investment Holdings
+million
+business, insurance
+liability
+Co., Ltd.
+business etc.
+- Guangzhou Tri-Dynas Guangzhou
+Oil & Shipping Co., Ltd.
+RMB299
+million
+10,121,823
+0.04%
+Ship purchasing and
+Shareholder
+Limited
+Ren Zhaoping
+marketing business,
+liability
+shipping agency, leasing
+business, shipping
+business etc.
+0.22%
+paid
+54,721,930
+Hong Kong
+0.41%
+Business services
+Shareholder
+Limited
+Huang Biao
+Maritime Technology
+Service Co., Ltd.
+million
+liability
+- COSCO Shipping
+Shanghai
+RMB1,399
+75,617,340
+0.30%
+Shipping business, leasing Shareholder
+Limited
+Zhao Bangtao
+(Shanghai) Co., Ltd.
+million
+business, ship repairing
+liability
+and building etc.
+-COSCO Shipping
+HKD500
+Registered
+location
+Company name
+Proportion Proportion
+of the
+Bank held
+Shenzhen
+Investment and
+RMB600 1,258,542,349
+million
+4.99%
+Invest and set up industries, Shareholder
+Limited
+Xu Xin
+domestic commerce,
+liability
+Development Co., Ltd.
+materials supply and
+marketing business, etc.
+-Shenzhen Chu Yuan
+Shenzhen
+RMB600
+944,013,171
+3.74%
+Invest and set up industries, Shareholder
+Limited
+Xu Xin
+Investment and
+million
+domestic commerce,
+-Shenzhen Yan Qing
+liability
+agency services, etc.
+supply chain management
+(CMG)
+RMB16,900
+million
+7,559,427,375
+29.97%
+(note (i)(viii))
+Relationship
+with the Bank
+Legal
+Legal form representative
+Limited
+Miao Jianmin
+shareholder's
+liability
+parent company
+Transportation, shipping
+agency, warehousing
+and storage, leasing,
+manufacturing building
+and facility, repair
+and contracting, sales
+operating management
+service, etc.
+Transportation, building
+and repair, procurement,
+The largest
+- China Merchants Steam Beijing
+Navigation Co., Ltd.
+RMB7,000 3,289,470,337
+million
+13.04%
+(note (ii))
+The largest
+shareholder
+Limited
+liability
+Miao Jianmin
+(CMSNCL)
+and distribution, shipping
+309
+Development Co., Ltd.
+marketing business, etc.
+USD0.06
+million
+USD10 55,196,540
+million
+477,903,500
+1.89%
+Shareholder
+Limited
+liability
+0.22%
+Invest and set up industries, Shareholder
+Limited
+Wang Xiaoding
+enterprise management
+liability
+(Shenzhen) Co., Ltd.
+consulting and investment
+consulting, etc.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+61. Material related party transactions (continued)
+(a) Material connected person information (continued)
+Issued
+and fully
+No. of
+shares of
+the Bank
+Industry Development
+materials supply and
+Shenzhen
+Islands
+-China Merchants Finance Shenzhen
+Investment Holdings
+RMB7,778 1,147,377,415
+million
+4.55%
+Invest and set up industries, Shareholder
+Limited
+Hong Xiaoyuan
+domestic commerce,
+liability
+Co., Ltd.
+materials supply and
+marketing business, etc.
+- Best Winner Investment British Virgin
+Co., Ltd.
+Islands
+USD0.05
+million
+386,924,063
+1.53%
+Shareholder
+Joint stock
+limited
+company
+-China Merchants Union British Virgin
+(BVI) Ltd.
+-China Merchants
+China Merchants Group Beijing
+Fair value
+1,049,374
+by the
+Material connected person information
+(a)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+308
+Details of the Bank's major shareholders and their parent companies are as follows:
+307
+Note:
+184,358
+184,358
+180,861
+196,066
+196,066
+The above financial liabilities do not include interest payable.
+No. of Proportion Proportion
+Issued
+shares of
+the Bank Business
+Company
+Company
+capital
+held by
+held by the
+paid
+Registered
+location
+Company name
+Company
+Bank held
+the Bank
+and fully
+of the
+of the
+193,542
+Total
+61. Material related party transactions
+149,115
+Level 2
+Level 1
+Fair value
+Carrying
+Carrying
+amount
+2020
+2021
+Financial liabilities that are not measured at fair value mainly include deposits from customers, amounts due
+to banks and other financial institutions, amounts sold under repurchase agreements, and debts securities
+issued by the Group. The carrying value of financial liabilities approximate to their fair value at the end of the
+reporting period, except for the financial liabilities set out below:
+Financial Liabilities
+(2)
+The above financial assets do not include interest receivable.
+149,115
+131,962
+914,025
+Level 2 Level 3
+Level 3
+amount
+Note:
+Level 1
+Fair value
+146,559
+160,893
+159,306
+Long-term debt securities issued
+35,243
+35,243
+160,893
+35,173
+35,173
+34,236
+Subordinated notes issued
+Level 3
+34,302
+Level 2
+285
+13,366
+2020
+2021
+Other net income
+Operating expenses
+Interest income
+Interest expense
+- Bills of acceptances
+- Irrevocable letters of credit
+Off-balance sheet:
+485
+- Irrevocable guarantees
+Net fee and commission income
+34,467
+395
+733
+11,137
+1,266
+41,235
+73
+410
+47,840
+1,711
+46
+22
+225
+56
+927
+2,428
+- Lease liabilities
+595
+- Deposits from customers
+Securitisation of credit assets
+- Deposits from banks and other financial institutions
+(984)
+Other net income/(expenses)
+3,645
+3,615
+251
+380
+188
+292
+1,738
+1,228
+(1,599)
+(1,336)
+669
+662
+(42)
+(22)
+38
+(22)
+313
+314
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+61. Material related party transactions (continued)
+(d) Companies that share common directors, supervisors or senior management
+with the Bank (other than those disclosed in Note 61(c)) and they can control
+or exercise significant influence over the companies
+On-balance sheet:
+- Amounts held under resale agreements
+- Loans and advances to customers
+- Financial investments
+- Amounts sold under repurchase agreements
+(259)
+1,090
+719
+1,695
+Operating expenses
+(6)
+(5)
+Other major shareholders holding more than 5% shares of the Bank and
+exercising significant influence over the Bank
+On-balance sheet:
+- Amounts held under resale agreements
+- Loans and advances to customers
+- Financial investments
+- Deposits from banks and other financial institutions
+Deposits from customers
+- Lease liabilities
+Off-balance sheet:
+(16)
+- Irrevocable guarantees
+- Bills of acceptances
+Interest income
+Interest expense
+Net fee and commission income
+Other net (expense)/income
+2021
+2020
+399
+17,654
+38,862
+2,512
+2,478
+7,502
+- Irrevocable letters of credit
+273
+(20)
+516
+(1,654)
+7
+(1,349)
+8
+(e) Associates and joint ventures other than those disclosed in Note 61(c)
+2021
+2020
+(f)
+On-balance sheet:
+- Placements with banks and other financial institutions
+-
+- Loans and advances to customers
+- Deposits from banks and other financial institutions
+- Deposits from customers
+594
+Off-balance sheet:
+Interest income
+Interest expense
+Net fee and commission income
+Operating expenses
+14,500
+6,044
+14,500
+4,690
+1,251
+967
+693
+387
+8,700
+8,700
+- Irrevocable guarantees
+Net fee and commission income
+2021
+4.35%
+Interest income
+RMB5,000,000,000
+HKD4,129,000,000
+RMB 12,000,000,000
+HKD1,160,950,575
+RMB1,310,000,000
+RMB5,000,000,000
+EUR50,000,000
+RMB500,000,000
+EUR50,000,000
+RMB500,000,000
+The change of proportion of the Bank held by the largest shareholder and the portion of the subsidiaries
+held by the Bank
+The Bank held by the
+largest shareholder
+CMSNCL
+CMBICHC
+HKD
+%
+CMB WLB
+The subsidiaries held by the Bank
+CMFM
+CMBWM
+RMB1,310,000,000
+RMB %
+CMB Europe S.A.
+EUR %
+CIGNA & CMAM
+RMB
+%
+note
+CMBFLC
+RMB %
+RMB %
+HKD %
+3,289,470,337 13.04 4,129,000,000 100.00 6,000,000,000 100.00 1,160,950,575 100.00 720,500,000 55.00 5,000,000,000 100.00 50,000,000 100.00 500,000,000
+6,000,000,000 100.00
+3,289,470,337 13.04 4,129,000,000 100.00 12,000,000,000 100.00 1,160,950,575 100.00 720,500,000 55.00 5,000,000,000 100.00 50,000,000 100.00 500,000,000
+At 1 January 2021
+Change
+At 31 December 2021
+The Bank held by the
+largest shareholder
+CMSNCL
+At 1 January 2020
+Change
+RMB %
+note
+HKD1,160,950,575
+HKD4,129,000,000
+RMB2,000,000
+COSCO Shipping (Shanghai) Co., Ltd.
+RMB1,398,941,000
+RMB1,398,941,000
+COSCO Shipping Investment Holdings Co., Ltd.
+Guangzhou Tri-Dynas Oil & Shipping Co., Ltd.
+HKD500,000,000
+China Communications Construction Group Limited.
+China Communications Construction Company Limited
+Shanghai Automotive Industry Corporation (Group)
+SAIC Motor Corporation Limited
+Hebei Port Group Co., Ltd.
+CMBICHC
+CMBFLC
+CMB WLB
+CMFM
+CMBWM
+RMB6,000,000,000
+CMB Europe S.A.
+HKD500,000,000
+RMB299,020,000
+RMB299,020,000
+RMB7,274,023,830
+RMB7,274,023,830
+RMB16,174,735,425
+RMB16,174,735,425
+RMB21,599,175,737
+RMB21,599,175,737
+RMB11,683,461,365
+RMB11,683,461,365
+RMB8,000,000,000
+RMB8,000,000,000
+Cigna & CMB Asset Management Company Limited
+CMBICHC
+CMBFLC
+CMB WLB
+The Bank's largest shareholder CMSNCL and its related companies held 29.97% (2020: 29.97%) of the Bank's
+shares as at 31 December 2021 (among them 13.04% of the shares were directly held by CMSNCL (2020: 13.04%)).
+The Group's transactions and balances with CMSNCL and its related companies are disclosed as follows:
+On-balance sheet:
+2021
+2020
+- Placements with banks and other financial institutions
+3,000
+- Amounts held under resale agreements
+13,967
+1,500
+- Loans and advances to customers
+42,645
+37,411
+- Financial investments
+Shareholders and their related companies
+1,147
+- Deposits from banks and other financial institutions
+29,755
+2,667
+- Deposits from customers
+45,708
+82,558
+- Lease liabilities
+186
+91
+Off-balance sheet:
+- Irrevocable guarantees
+- Irrevocable letters of credit
+- Bills of acceptances
+1,850
+(c)
+There were no loans and advances granted to related parties that were credit impaired during the year (2020:
+None).
+4.75% to 4.90%
+0.35%
+1.10% to 2.75%
+HKD %
+RMB %
+HKD %
+The subsidiaries held by the Bank
+CMFM
+RMB %
+CMBWM
+RMB %
+CMB Europe S.A.
+EUR %
+CIGNA & CMAM
+RMB
+%
+RMB %
+3,289,470,337 13.04 4,129,000,000 100.00 6,000,000,000 100.00 1,160,950,575 100.00 720,500,000 55.00 5,000,000,000 100.00 50,000,000 100.00 500,000,000 note
+At 31 December 2020
+3,289,470,337 13.04 4,129,000,000 100.00 6,000,000,000 100.00 1,160,950,575 100.00 720,500,000 55.00 5,000,000,000 100.00 50,000,000 100.00 500,000,000 note
+Note: This information is detailed in note 24.
+As of 31 December 2021, other than those disclosed above, there were 265 companies that shared common
+directors, supervisors and senior management including their close family members with the Bank and they can
+control or exercise significant influence over the companies. (31 December 2020: 337).
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+61. Material related party transactions (continued)
+(b)
+Terms and conditions for related-party transactions
+The Group enters into transactions with related parties in the ordinary course of its banking business including
+lending, investing, deposit taking, securities trading, providing agency and trust services, and off-balance sheet
+transactions. In the opinion of the directors, the Group enters into such material related-party transactions under
+normal commercial terms. Interest rates on loans and deposits are set in accordance with such benchmark rates as
+PBOC rates and LPR:
+Short-term loans
+Medium to long-term loans
+Demand deposits
+Time deposits
+5,467
+2020
+4.35%
+4.75% to 4.90%
+0.35%
+1.10% to 2.75%
+Interest expense
+19,704
+8,789
+46
+2021
+Balance
+Financial
+investments
+Debt
+investments
+at amortised
+Debt
+investments
+Maximum
+at FVTPL
+cost
+at FVTOCI
+Total
+exposure
+76,978
+Asset management schemes
+Trust beneficiary rights
+Asset-backed securities
+Fund investments
+Total
+76,978
+31,897
+31,897
+31,897
+2,537
+307
+1,205
+4,049
+4,049
+156,112
+156,112
+156,112
+158,649
+109,182
+76,978
+1,205
+The following tables set out an analysis of the balance of interests held by the Group in the structured entities
+sponsored by third parties and an analysis of the line items in the consolidated statement of financial positions as
+at 31 December 2021 and 31 December 2020 in which assets are recognised relating to the Group's interests in
+structured entities sponsored by third parties:
+Interests in the structured entities sponsored by third parties institutions
+(226)
+3,753
+(226)
+3,753
+There is no maturity for the instruments and the payments of distribution can be cancelled at the discretion of
+the issuer. Cancelled interest is non-cumulative. There is no contractual obligation to deliver cash to other parties.
+During the years ended 31 December 2021 and 2020, CMB WLB did not cancel the payment of distribution and the
+corresponding amounts were paid to the perpetual debt holders accordingly.
+63. Transfers of financial assets
+The Group enters into transactions in the normal course of business by which it transfers recognised financial
+assets to third parties or to special purpose vehicles. In some cases, such transfers may give rise to full or partial
+derecognition of the financial assets concerned, and in other cases the transfers may not qualify for derecognition as
+the Group retains substantially all the risks and rewards of these transferred assets. As a result, the Group continues
+to recognise these transferred assets.
+The Group enters into securitisation transactions in the normal course of business by which it transfers credit assets
+to special purpose trusts which in turn issue asset-backed securities to investors. The Group may acquire certain
+investments at the subordinated tranche level and accordingly, may retain parts of the risks and rewards of the
+transferred credit assets. The Group would determine whether or not to derecognise the associated credit assets by
+evaluating the extent to which it retains the risks and rewards of the assets.
+With respect to the credit assets that are securitised and qualified for derecognition, based on the criteria set out in
+Note 4(5), the Group derecognises the transferred credit assets in their entirety. During the year ended 31 December
+2021, the Group transferred loans amounting to RMB56,068 million (2020: RMB72,001 million) in securitisation
+arrangements, as well as substantially all the risks and rewards associated with the loans. The full amount of such
+securitised loans were then derecognised.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+63. Transfers of financial assets (continued)
+Securitisation of credit assets (continued)
+The Group holds interests in some structured entities sponsored by third parties through investments in the units
+issued by these structured entities. Such interests include investments in wealth management products, asset
+management schemes, trust beneficiary rights, assets backed securities and fund investments, and the Group does
+not consolidate these structured entities. The purpose of the Group holding these structured entities is to obtain
+investment income, capital appreciation or both.
+In the cases that the Group has neither transferred nor retained substantially all the risks and rewards of the
+transferred credit assets, and for which the Group retains control, the Group recognises an asset in the consolidated
+statement of financial position to the extent of the Group's continuing involvement in the transferred assets,
+the remaining portion is derecognised. The extent of the Group's continuing involvement is the extent of the
+risks and rewards exposed by the Group to the value changes of the transferred assets. For the year ended 31
+December 2021, the carrying amount of the securitised credit assets at the time of transfer under the securitisation
+arrangements in which the Group retained a continuing involvement was RMB15,942 million (2020: RMB17,491
+million). The carrying amount of the continuing involvement asset and the corresponding continuing involvement
+liability amounting to RMB5,274 million as at 31 December 2021 (2020: RMB3, 128 million) are recognised in other
+assets and other liabilities in the consolidated statement of financial position.
+During the year 2021, in addition to securitisation transactions, the Group transferred credit assets amounting to
+RMB548 million (2020: RMB924 million) to independent third parties directly during the year ended 31 December
+2021. The Group determined that these transferred assets qualified for full derecognition, based on the criteria set
+out in Note 4(5), since the Group has transferred substantially all the risks and rewards of the transferred assets to
+the counterparties.
+Repurchase transactions and securities lending transactions
+Transferred financial assets that do not qualify for derecognition mainly include debt securities, discounted bills held
+by counterparties as collateral under repurchase agreements and securities lent to counterparties under securities
+lending agreements. The counterparties are allowed to sell or repledge those securities sold under agreements to
+repurchase in the absence of default by the Group, but has an obligation to return the securities at the maturity
+of the contract. The Group determines that it retains substantially all the risks and rewards of these securities and
+therefore does not derecognise them. Instead, it recognises a financial liability for cash received as collateral.
+317
+318
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+64. Interests in unconsolidated structured entities
+The scope of the Group's consolidated financial statements is determined on a control basis. Control means that
+the investor has the power over the investee, enjoys variable returns by participating in the relevant activities of the
+investee, and has the ability to use the power to affect the amount of its return.
+The Group has the power over structured entities, and the other investors have no substantive rights. In the
+meantime, the Group is entitled to variable returns, and will consolidate entities, in which the Group has the right
+to affect the amount of its return.
+In addition to the above-mentioned structured entities that have been included in the Group's consolidated financial
+statements, the Group's equity information on structured entities which is not covered by the consolidated financial
+statements is as follows:
+(a)
+Transfers of credit assets to third parties
+(234)
+269,036
+2020
+Trust beneficiary rights
+Asset-backed securities
+Financial
+investments
+at FVTPL
+Fund investments
+Wealth management products
+Total
+The maximum exposures of investments in funds, trust beneficiary rights, asset management schemes, wealth
+management products and asset backed securities are the balance of these assets.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+64. Interests in unconsolidated structured entities (continued)
+(b)
+Asset management schemes
+Interests in the unconsolidated structured entities sponsored by the Group
+The unconsolidated structured entities sponsored by the Group include non-principal-guaranteed wealth
+management products, funds and assets management schemes. The nature and purpose of these structured entities
+are to generate fees from managing assets on behalf of investors. These structured entities are financed through the
+issuance of investment products to investors. Interest of the Group in these unconsolidated structured entities is fees
+and commission charged for the services provided.
+As at 31 December 2021, the amount of unconsolidated funds sponsored by the Group was RMB 1,085,813 million
+(31 December 2020: RMB785,489 million).
+As at 31 December 2021, the amount of unconsolidated asset management schemes sponsored by the Group was
+RMB174,555 million (31 December 2020: RMB177,750 million).
+As at 31 December 2021, amounts held under resale agreements transacted between the Group and the
+non-principal-guaranteed wealth management products sponsored by the Group were RMB30,896 million (31
+December 2020: RMB48,898 million). The above transactions were conducted in accordance with normal business
+terms and conditions.
+As at 31 December 2021, the amount of unconsolidated non-principal-guaranteed wealth management products
+held by the Group was RMB 2,396 million (31 December 2020: RMB 1,225 million).
+As at 31 December 2021, the amount of unconsolidated fund products held by the Group was RMB6,658 million (31
+December 2020: RMB2,004 million).
+During the year ended 31 December 2021, the amount of wealth management products sponsored by the Group
+transferred to investments measured at amortised cost of the Group was RMB11,004 million (2020: RMB12,629
+million).
+During the year ended 31 December 2021, the amount of fee and commission income the Group received from such
+non-principal-guaranteed wealth management products was RMB11,998 million (2020: RMB10,162 million).
+During the year ended 31 December 2021, the amount of fee and commission income the Group received from such
+unconsolidated funds was RMB4,223 million (2020: RMB2,330 million).
+During the year ended 31 December 2021, the amount of fee and commission income the Group received from such
+unconsolidated asset management schemes was RMB627 million (2020: RMB537 million).
+The total amount of non-principal-guaranteed wealth management products sponsored by the Group after 1 January
+2021 with a maturity date before 31 December 2021 was RMB1,529,874 million (2020: RMB1,924,836 million).
+65. Comparative figures
+Certain comparative figures in the footnotes have been amended to conform to changes in disclosures in current
+year.
+319
+As at 31 December 2021, the amount of unconsolidated non-principal-guaranteed wealth management products
+sponsored by the Group was RMB2,777,537 million (31 December 2020: RMB2,445,644 million).
+269,036
+343,123
+1,442
+Balance
+Debt
+investments
+at amortised
+Debt
+investments
+Maximum
+cost
+at FVTOCI
+Total
+exposure
+63,453
+99,916
+163,369
+343,123
+163,369
+37,663
+37,663
+3,096
+134,828
+34
+2,691
+1,442
+7,229
+7,229
+134,828
+134,828
+34
+34
+201,411
+140,270
+37,663
+(234)
+234
+234
+7,657
+RMB3,191,200,000
+- Placements from banks and other financial institutions
+4
+- Amounts sold under repurchase agreements
+816
+668
+3,546
+6,596
+- Deposits from customers
+Off-balance sheet
+- Irrevocable letters of credit
+- Bills of acceptances
+- Deposits from banks and other financial institutions
+Interest income
+Net fee and commission
+Operating expenses
+Other net income
+1,998
+1,048
+81
+113
+1,124
+989
+(258)
+(195)
+(1,294)
+(3,031)
+Interest expense
+(96)
+1,819
+477
+16
+7,895
+337
+5,068
+32,577
+823
+5,454
+738
+1,145
+(585)
+(529)
+1,411
+1,811
+(10)
+122
+China Merchants Bank
+3,454
+Chapter VIII Financial Statements
+61. Material related party transactions (continued)
+(g)
+Subsidiaries
+On-balance sheet
+2021
+2020
+- Balances with banks and other financial institutions
+1,950
+4,072
+- Placements with banks and other financial institutions
+37,055
+37,331
+- Loans and advances to customers
+Annual Report 2021
+(112)
+111
+174
+At 1 January 2021
+Perpetual debt capital issued
+Distributions in 2021
+Paid in 2021
+Exchange difference
+At 31 December 2021
+At 1 January 2020
+Perpetual debt capital issued
+Distributions in 2020
+Paid in 2020
+Exchange difference
+At 31 December 2020
+Principal
+3,753
+CMB WLB, the Group's subsidiary, issued perpetual debt of US$170 million on 27 April 2017 and another perpetual
+debt of US$400 million on 24 January 2019. Movements of perpetual debt capital which were issued by CMB WLB
+are as follows:
+Distributions/Paid
+3,753
+227
+227
+(227)
+(227)
+(117)
+3,636
+(117)
+3,636
+Principal
+Distributions/Paid
+Total
+3,979
+3,979
+Total
+Perpetual debt capital
+(a)
+Non-controlling interests represent the interests that the Group does not hold in the subsidiaries. In the opinion of
+the directors of the Bank, the Group does not have any subsidiary with significant non-controlling interests during
+the reporting period.
+All significant balances and transactions between the Bank and its subsidiaries have been eliminated in the
+consolidated financial statements.
+(h)
+Key management personnel
+Key management personnel are those persons having authority and responsibility for planning, directing and
+controlling the activities of the Group, directly or indirectly, including directors, supervisors and executive officers.
+Salaries and other emoluments
+Discretionary bonuses
+Share-based payment
+Contributions to defined contribution retirement schemes
+Total
+2021
+2020
+in thousands
+39,264
+in thousands
+40,839
+13,508
+17,312
+567
+57,143
+30,290
+503
+(i)
+85,140
+The above share-based payments represent the estimated fair value of the share appreciation rights granted (Note
+39(a)(iii)) to senior management under the Bank's H share Appreciation Rights Scheme. The fair value is measured
+by using the Black-Scholes model and according to the accounting policy set out in Note 4(17); and the amounts are
+charged to the consolidated statement of profit or loss and other comprehensive income. As the share options may
+expire without being exercised, the directors consider the amounts disclosed are not representative of actual cash
+flows received or to be received by senior management.
+Annuity scheme
+Apart from the obligation for defined contributions to the annuity scheme and normal banking transactions, no
+other transactions were conducted between the Group and the annuity scheme for the years ended 31 December
+2021 and 2020.
+315
+316
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+62. Non-controlling interests
+40,062
+RMB3,191,200,000
+RMB2,000,000
+- Financial investments
+COSCO Shipping (Guangzhou) Co., Ltd.
+Industry Corporation
+RMB21,599
+million
+310,125,822
+1.23%
+(note(vi))
+(Group)
+consulting service, imports
+Shanghai
+and exports, investment
+and management business
+Production and sale
+Shareholder's
+Limited
+Chen Hong
+parent company
+liability
+-SAIC Motor Corporation Shanghai
+of vehicles, asset
+Shanghai Automotive
+limited
+company
+and repair, technical
+parent company
+liability
+Limited.
+- China Communications Beijing
+RMB16,175
+301,089,738
+1.19%
+General contraction for
+Shareholder
+Joint stock
+Wang Tongzhou
+Construction Company
+million
+construction, leasing
+Limited.
+Limited
+Wang Tongzhou
+RMB11,683
+million
+1.23%
+of the
+Bank held
+of the
+Company
+Company name
+Registered
+location
+paid
+the Bank
+held by the
+held by
+Relationship
+capital
+Company
+Company
+the Bank Business
+by the
+and fully
+Proportion Proportion
+No. of
+shares of
+management business,
+domestic trade business,
+consulting service
+Production and sale of
+Shareholder
+vehicles, consulting
+Joint stock
+limited
+Chen Hong
+service, imports and
+company
+exports
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+61. Material related party transactions (continued)
+(a)
+Material connected person information (continued)
+Issued
+310,125,822
+with the Bank
+Limited
+General contraction for
+construction
+held by
+Company name
+location
+capital
+Company
+Company
+by the
+the Bank Business
+Legal form
+Legal
+representative
+China Insurance Security Beijing
+RMB100
+815,030,635
+Relationship
+with the Bank
+held by the
+paid
+Registered
+Guangzhou Haining Maritime Technology Service Co., Ltd.
+310
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+61. Material related party transactions (continued)
+(a)
+Material connected person information (continued)
+Issued
+No. of
+shares of
+Proportion Proportion
+and fully
+the Bank
+of the
+Company
+Fund Co., Ltd
+Shareholder's
+million
+Investing and establishing
+Life insurance, health
+insurance, accident
+insurance, and other
+Shareholder
+Joint stock
+limited
+He Xiaofeng
+3.23%
+company
+services, etc.
+China Communications Beijing
+Construction Group
+RMB7,274
+million
+422,770,418
+1.68%
+(note(v))
+personal insurance
+815,030,635
+RMB30,790
+million
+Beijing
+Shareholder's
+Limited
+Yu Hua
+insurance companies,
+parent company
+liability
+supervising and managing
+various domestic and
+international businesses
+of holding investment
+enterprises, and
+investment business
+permitted by national laws
+and regulations, etc.
+- Dajia Life Insurance
+Co., Ltd
+3.23%
+(note(iv))
+Legal form
+of the
+Bank held
+RMB8,000
+(vi)
+As the largest direct shareholder, CMSNCL, a subsidiary of CMG, holds 13.04% of the Bank as at 31 December 2021 (2020: 13.04%).
+China COSCO Shipping Corporation Ltd. holds 9.97% of the Bank (2020: 9.97%) through its subsidiaries.
+China Insurance Security Fund Co., Ltd ("China Insurance Security Fund") holds 3.23% of the Bank (2020: 4.11%) through its 98.23% holding
+in Dajia Insurance Group Co., Ltd.
+China Communications Construction Group Limited ("China Communications Construction Group") holds 1.68% of the Bank through its
+subsidiaries (2020:1.68%).
+Shanghai Automotive Industry Corporation (Group) ("Shanghai Automotive Industry Group") holds 1.23% of the Bank through its subsidiaries
+(SAIC Motor Corporation Limited) (2020: 1.23%).
+(vii)
+(v)
+Hebei Port Group Company Ltd. directly holds 1.17% of the Bank (2020: 1.17%).
+The sum of the direct holding percentage of CMG's shareholdings in the Bank and the sum of the above-mentioned relevant percentages may
+differ slightly due to rounding.
+311
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+61. Material related party transactions (continued)
+(viii)
+(iv)
+(iii)
+(ii)
+liability
+Cigna & CMB Asset
+Beijing
+RMB500
+Note 24 (vii) Asset management
+Subsidiary
+Limited
+Wang Xiaoqing
+Management Company
+million
+liability
+Limited
+Notes:
+(i)
+CMG holds 29.97% of the Bank (2020: 29.97%) through its subsidiaries.
+(a)
+million
+Material connected person information (continued)
+Name of related party
+USD50,000
+USD 60,000
+USD10,000,000
+RMB100,000,000
+China Merchants Industry Development (Shenzhen) Co., Ltd.
+RMB30,790,000,000
+RMB600,000,000
+RMB7,777,800,000
+RMB30,790,000,000
+RMB11,000,000,000
+RMB11,000,000,000
+China Ocean Shipping Co., Ltd.
+RMB16,191,351,300
+RMB16,191,351,300
+Hebei Port Group Co., Ltd. Qinhuangdao
+China COSCO Shipping Corporation Limited.
+RMB600,000,000
+RMB7,000,000,000
+RMB16,900,000,000
+CMG
+CMSNCL
+Shenzhen Yan Qing Investment and Development Co., Ltd.
+Shenzhen Chu Yuan Investment and Development Co., Ltd.
+China Merchants Finance Investment Holdings Co., Ltd.
+Best Winner Investment Co., Ltd.
+China Merchants Union (BVI) Ltd.
+China Insurance Security Fund Co., Ltd
+Dajia Life Insurance Co., Ltd
+2021
+RMB 16,900,000,000
+RMB7,000,000,000
+RMB 600,000,000
+RMB600,000,000
+RMB7,778,000,000
+USD50,000
+USD60,000
+USD10,000,000
+RMB100,000,000
+2020
+The registered capital of the Group's related parties as at 31 December 2021 and 2020 are as follows:
+Li Biao
+312
+Subsidiary
+Tian Huiyu
+Holdings Corporation
+million
+investment managements
+liability
+Limited (CMBICHC)
+CMB Financial Leasing
+Shanghai
+RMB12,000
+100% Finance lease
+Subsidiary
+Limited
+Shi Shunhua
+Company Limited
+million
+Limited
+liability
+Subsidiary
+HKD4,129
+296,291,627
+1.17%
+Port construction and
+Shareholder
+Limited
+Legal
+representative
+Cao Ziyu
+Limited
+(note(vii))
+investment management,
+liability
+port leasing and
+maintenance business,
+handling and warehousing
+business etc.
+CMB International Capital Hong Kong
+100% Investment bank and
+(CMBFLC)
+million
+Hong Kong
+(CMFM)
+100% Banking
+CMB Wealth Management Shenzhen
+RMB5,000
+100%
+Asset management
+Subsidiary
+Limited
+Chen Yisong
+Co., Ltd
+million
+CMB Europe S.A
+Luxembourg
+EUR50
+CMB Wing Lung Bank
+liability
+million
+liability
+Wang Xiaoqing
+HKD1,161
+Management Co., Ltd.
+Subsidiary
+Limited
+Zhu Qi
+Limited (CMB WLB)
+million
+100% Banking
+liability
+Subsidiary
+55% Fund Management
+Limited
+Shenzhen
+China Merchants Fund
+RMB1,310
+Less: Adjustments for conversion to credit equivalent amounts
+2,368,667
+2,576,292
+Off-balance sheet exposure at gross notional amount
+Less: Netted amounts of cash payables and cash receivables of gross SFT
+551,293
+Total securities financing transaction exposures
+Agent transaction exposures
+45,094
+27,776
+Counterparty credit risk exposure for SFT assets
+assets
+327,469
+Gross SFT assets (with no recognition of netting), after adjusting for sale
+accounting transactions
+523,517
+5,374
+28,998
+14,863
+Less: Adjusted effective notional deductions for written credit derivatives
+Total derivative exposures
+Less: Exempted central counterparty leg of client-cleared trade exposures
+Effective notional amount of written credit derivatives
+Less: Deductions of receivables assets for cash variation margin provided
+in derivatives transactions
+Gross-up for derivatives collateral provided where deducted from the
+balance sheet assets
+14,918
+9,489
+Add-on amounts for potential future exposure associated with all
+derivatives transactions
+14,080
+Replacement cost associated with all derivatives transactions (net of
+eligible cash variation margin)
+(1,372,111)
+282,375
+(1,288,941)
+Annual Report 2021
+1,204,181
+7,958,833
+2,379,673
+Retail and small business customers deposits, of which:
+2
+Cash outflows
+1,315,276
+Total stock of high quality liquid assets
+1
+(average value)
+(average value)
+Stock of high quality liquid assets
+Serial No.
+Weighted
+amount
+Unweighted
+amount
+Balance of adjusted off-balance sheet assets
+The Group prepared and disclosed information on liquidity coverage ratio in accordance with the "Measures for the
+Disclosure of Information on Liquidity Coverage Ratio by Commercial Banks". The basis used herein may differ from
+those adopted in Hong Kong or other countries and regions. The average of liquidity coverage ratio of the Group
+was 164.82% in the fourth quarter of 2021, an increase of 20.71 percentage points from the previous quarter,
+mainly due to the increase in high quality liquid assets. The breakdown of the Group's average value of each item of
+liquidity coverage ratio in the fourth quarter of 2021 is set out below:
+Chapter VIII Financial Statements
+China Merchants Bank
+322
+321
+7.39%
+8.00%
+Leverage ratio
+9,395,026
+10,394,899
+Balance of adjusted on-balance sheet and off-balance sheet assets
+694,184
+831,380
+Net tier-1 capital
+1,079,726
+(C) Liquidity coverage ratio
+8,624,562
+28,340
+Balance of adjusted on-balance sheet assets
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2021
+In 2021, by the method of calculating credit risk using the weighted approach, market risk using the standardised
+approach and operational risk using the basic indicator approach, the Bank's core tier-1 capital adequacy ratio
+is 10.60%, tier-1 capital adequacy ratio is 12.73%, capital adequacy ratio is 14.26%, net capital is RMB830,529
+million and total risk-weighted assets is RMB5,824,290 million.
+In 2021, by the method of calculating credit risk using the weighted approach, market risk using the standardised
+approach and operational risk using the basic indicator approach, the Group's core tier-1 capital adequacy ratio
+is 11.17%, tier-1 capital adequacy ratio is 13.19%, capital adequacy ratio is 14.71%, net capital is RMB927,277
+million and total risk-weighted assets is RMB6,303,544 million.
+In 2021, in accordance with the advanced capital management approach approved by CBIRC in April 2014, the Bank
+calculated core tier-1 capital adequacy ratio is 12.15%, tier-1 capital adequacy ratio is 14.59%, capital adequacy
+ratio is 17.23%, net capital is RMB875,859 million and total risk-weighted assets is RMB5,082,896 million.
+(ii) : The Group's additional tier-1 capital includes preference shares, perpetual bonds, etc.
+Under CBIRC's Administrative Measures on the Capital of Commercial Banks (Provisional), other includes investment revaluation reserve,
+exchange reserve, hedging reserve in the consolidated financial statements, etc.
+(i) :
+Notes:
+4,964,542
+5,563,724
+821,290
+972,606
+127,106
+(B) Leverage ratio
+141,226
+Net capital
+Net tier-2 capital
+Regulatory deductions from core tier-2 capital
+127,106
+141,226
+Total tier-2 capital
+1,647
+1,584
+Qualifying portion of non-controlling interests
+97,119
+115,472
+Surplus provision for loans impairment
+210,446
+24,170
+Total risk-weighted assets
+(excluding derivatives and SFTs)
+In accordance with the CBIRC's Administrative Measures on Leverage Ratio of Commercial Banks (Revision) issued in
+2015 and effective on 1 April 2015, the Group's leverage ratio is as follows. The basis used herein may differ from
+those adopted in Hong Kong or other countries and regions.
+Total consolidated assets as per published financial statements
+(24,569)
+(23,322)
+Less: Asset amounts deducted in determining Basel III Tier 1 capital
+7,983,402
+8,647,884
+On-balance sheet items (excluding derivatives and securities financing
+transactions (SFT))
+2020
+2021
+(24,569)
+Leverage ratio, net tier-1 capital, adjusted on-balance sheet and off-balance sheet exposures and other information:
+9,395,026
+(23,322)
+10,394,899
+Balance of adjusted on-balance sheet and off-balance sheet assets
+Other adjustments
+The difference between regulatory items and accounting items:
+1,079,726
+Adjustment for off-balance sheet items
+45,094
+27,776
+Adjustment for securities financing transactions
+(18,274)
+(8,526)
+Adjustments for derivative financial instruments
+Adjustments for fiduciary assets
+(48,399)
+(54,231)
+Adjustments for investments in banking, financial, insurance or
+commercial entities that are consolidated for accounting purposes but
+outside the scope of regulatory consolidation
+8,361,448
+2020
+2021
+9,249,021
+1,204,181
+3
+Total stock of high quality liquid assets
+550,436
+20,000
+861,035
+Capital
+1
+≥ 12 months
+6 months to
+12 months
+< 6 months
+No maturity
+Available stable funding (ASF) item
+Serial No.
+Weighted
+amount
+Unweighted amount
+31 December 2021
+The Group prepared and disclosed information on net stable funding ratio in accordance with the "Measures for
+the Disclosure of Information on Net Stable Funding Ratio by Commercial Banks". The basis used herein may differ
+from those adopted in Hong Kong or other countries and regions. The Group's net stable funding ratio at the end
+of the fourth quarter of 2021 was 123.88%, representing an increase of 5.01 percentage points as compared with
+the previous quarter, which was basically stable. The breakdown of the Group's net stable fund ratio in the last two
+quarters is set out below:
+881,035
+(D) Net stable funding ratio
+China Merchants Bank
+Annual Report 2021
+The high quality liquid assets in the above table are prepared based on the central bank reserve available under cash and pressure conditions,
+as well as the bond in line with definition of Tier 1 and Tier 2 assets set by China Banking and Insurance Regulatory Commission on the
+"Measures for the Liquidity Risk Management of Commercial Banks".
+The domestic data in the above table is a simple arithmetic average of the 92-day value for the latest quarter and the month-end average for
+the data of subsidiaries.
+164.82%
+798,003
+(ii)
+(i)
+Note:
+Liquidity coverage ratio (%)
+23
+Net cash outflows
+22
+21
+1,315,276
+Chapter VIII Financial Statements
+Adjusted value
+2
+849,335
+Qualifying portion of tier-2 capital instruments and their premium
+7
+1,848,952
+3,795
+50,151
+682,174
+1,317,849
+Less stable deposits
+6
+572,572
+1,429
+183
+1,947
+599,073
+Regulatory capital
+Stable deposits
+2,421,524
+5,224
+50,334
+684,121
+1,916,922
+customer
+Retail deposits and deposits from small business
+4
+11,700
+11,700
+Other capital instruments
+3
+869,335
+20,000
+5
+Stable deposits
+1,339,955
+Total cash inflows
+Cash outflows arising from derivative contract and other
+11
+422,626
+1,727,728
+Additional requirements, of which:
+10
+10,866
+Secured funding
+9
+18,584
+18,584
+Unsecured debt issuance
+8
+671,454
+transactions arising from related collateral requirements
+1,454,047
+7
+638,309
+2,564,926
+Operational deposits (excluding correspondent banks)
+6
+1,328,347
+4,037,557
+Unsecured wholesale funding, of which:
+5
+182,924
+1,829,237
+Less stable deposits
+4
+27,522
+Non-operational deposits (including all counterparties)
+1,732,795
+345,429
+12
+20
+348,081
+354,702
+Other cash inflows
+19
+694,648
+1,080,407
+Contractual inflows from fully performing loans
+18
+297,226
+297,686
+Secured lending (including reverse repo and securities borrowing)
+17
+Cash inflows
+345,429
+2,137,958
+16
+92,547
+6,071,119
+Other contingent funding obligations
+15
+73,126
+73,126
+Other contractual obligations to extend funds
+14
+77,197
+1,382,299
+Undrawn committed credit and liquidity facilities
+13
+Cash outflows arising from secured debt instruments funding
+Total cash outflows
+Tier-2 capital:
+Construction
+831,380
+6 7881
+66
+40
+83
+62
+47
+Micro-finance loans
+1,214
+99
+1,183
+99
+Others
+37,616
+98
+27,217
+97
+Retail loans and advances subtotal
+48,819
+98
+38,876
+97
+Gross loans and advances to customers
+220,738
+55
+260,827
+Amount
+other security
+Transportation, storage and postal services
+412,417
+127
+117
+Credit cards
+100
+5,651
+21
+9,579
+36
+Leasing and commercial services
+4,749
+46
+11,223
+Wholesale funding
+3,481
+69
+2,177
+Water, environment and public utilities management
+Others
+821
+47
+60
+5,137
+51
+12,317
+Corporate loans and advances subtotal
+171,919
+42
+218,694
+Discounted bills
+3,257
+100
+Residential mortgage
+9,872
+100
+10,349
+2,383
+381,898
+42
+Property development
+46
+Telecommunications, software and IT services
+58,267
+44
+54,491
+35
+Finance
+57,988
+28
+74,892
+43
+Mining
+28,854
+32
+52,911
+31,097
+Others
+66,364
+23
+65,330
+27
+Corporate loans and advances subtotal
+Discounted bills
+Residential mortgage
+Credit cards
+1,979,019
+40
+1,798,538
+40
+431,305
+31
+Mining
+41
+Water, environment and public utilities management
+367,642
+52
+342,667
+53
+Manufacturing
+309,635
+39
+256,173
+36
+Production and supply of electric power, heating
+power, gas and water
+187,611
+47
+161,777
+64,427
+39
+170,009
+26
+143,805
+28
+Wholesale and retail
+138,352
+36
+132,055
+38
+Construction
+117,453
+21
+101,442
+21
+Leasing and commercial services
+24
+8,636
+18
+17.48%
+13.98%
+14.94%
+12.29%
+12.66%
+2020
+2021
+Core tier-1 capital:
+Components of capital base
+Capital adequacy ratio
+Tier-1 capital adequacy ratio
+Core tier-1 capital adequacy ratio
+In accordance with the Advanced Measurement Approach approved by the CBIRC in April 2014, the Group
+calculates core tier-1 capital adequacy ratio, tier-1 capital adequacy ratio and capital adequacy ratio as follows:
+The Group's capital adequacy ratio was prepared solely in accordance with the CBIRC's Administrative Measures on
+the Capital of Commercial Banks (Provisional) issued in 2012 and effective on 1 January 2013. The bases used herein
+may differ from those adopted in Hong Kong or other countries and regions.
+16.54%
+(A) Capital adequacy ratio
+Unaudited Supplementary Financial Information
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+320
+1,364,534
+100
+1,264,466
+100
+840,254
+746,560
+Micro-finance loans
+560,657
+81
+(Expressed in millions of Renminbi unless otherwise stated)
+474,545
+Qualifying portion of share capital
+25,220
+Net tier-1 capital
+84,092
+127,043
+Additional tier-1 capital (note (ii))
+610,092
+704,337
+Net core tier-1 capital
+24,569
+23,322
+Regulatory deductions from core tier-1 capital
+634,661
+727,659
+Total core tier-1 capital
+7,361
+25,220
+12,788
+282
+Qualifying portion of non-controlling interests
+365,168
+424,768
+Retained earnings
+98,082
+115,288
+Regulatory general reserve
+71,057
+82,104
+Surplus reserves
+67,491
+67,491
+Qualifying portion of capital reserve
+Other (note (i))
+694,184
+85
+173,527
+39,402
+21
+Property development
+34,062
+51
+48,125
+59
+Transportation, storage and postal services
+33,186
+84
+30,526
+87
+Manufacturing
+23,763
+16
+28
+31
+Wholesale and retail
+8,920
+26
+17,720
+37
+Telecommunications, software and IT services
+7,727
+25
+9,644
+19
+Production and supply of electric power, heating
+power, gas and water
+7,077
+26,962
+Others
+37,345
+other security
+16
+156,713
+25
+Retail loans and advances subtotal
+2,938,972
+63
+2,642,284
+65
+Gross loans and advances to customers
+5,349,296
+57
+4,768,301
+58
+China Merchants Bank
+Annual Report 2021
+Finance
+Chapter VIII Financial Statements
+Operation outside Mainland China
+2021
+2020
+% of gross
+% of gross
+loans and
+advances
+covered by
+loans and
+advances
+covered by
+collateral or
+collateral or
+Amount other security
+Amount
+(G) Further analysis on loans and advances to customers analysed by
+industry sector (Continued)
+2,901,087
+30 September 2021
+293,020
+institutions
+entities
+Other
+Total
+71,342
+6,050
+111,106
+188,498
+65,102
+35,237
+150,158
+250,497
+37,344
+33,862
+135,236
+206,442
+7,936
+1,175
+19,162
+28,273
+35,131
+28,197
+30,223
+93,551
+179,511
+70,659
+310,649
+560,819
+327
+Public sector
+and other
+financial
+Banks
+Total
+Public sector
+entities
+4,288
+2021
+Other
+fiu
+86,411
+66,216
+9,556
+25,361
+183,280
+31,240
+28,841
+138,985
+328
+Total
+205,225
+146,732
+286,816
+241,789
+18,401
+18,010
+30,060
+97,820
+92,080
+344,561
+619,921
+2020
+2,103
+54,449
+Foreign currencies transactions in Mainland China
+Asia Pacific excluding Mainland China
+- of which attributed to Hong Kong
+Europe
+North and South America
+169,165
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+Physical traded commodities, including gold
+27
+265,779
+175,403
+31,308
+201,954
+1,124,244
+1,286,395
+29,352
+35,737
+≥ 12 months
+12 months
+< 6 months
+No maturity
+26,203
+4,098
+as HQLA, including exchange-traded equities
+Assets with matching interdependent liabilities
+Other assets
+24
+Required stable funding (RSF) item (continued)
+Performing residential mortgages, of which:
+With a risk weight of less than or equal to 35%
+under the Basel II standardized approach for
+credit risk
+23
+22
+Serial No.
+26
+25
+Weighted
+amount
+6 months to
+Unweighted amount
+30 September 2021 (continued)
+(D) Net stable funding ratio (continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+Securities that are not in default and do not qualify
+61,952
+62,020
+41,118
+(G) Further analysis on loans and advances to customers analysed by
+industry sector
+Operation in Mainland China
+2020
+2021
+% of gross
+% of gross
+loans and
+advances
+covered by
+loans and
+advances
+covered by
+collateral or
+22,705
+collateral or
+NSFR derivative liabilities before deduction of
+30
+37,304
+NSFR derivative assets
+22
+29
+138
+162
+CCPs
+contracts and contributions to default funds of
+Assets posted as initial margin for derivative
+28
+3,483
+122,428
+Amount other security
+Banks
+and other
+financial
+institutions
+Total
+North and South America
+2021
+USD
+HKD
+Other
+Total
+(in millions of RMB)
+Non-structural position
+Spot assets
+Spot liabilities
+Forward purchased
+Forward written
+495,257
+35,808
+59,918
+590,983
+(E) Currency concentrations other than RMB
+512,533
+83,915
+612,006
+491,072
+4,528
+56,172
+551,772
+492,022
+19,146
+32,156
+543,324
+Net option position
+13,086
+361
+417
+15,558
+13,864
+Annual Report 2021
+China Merchants Bank
+100
+variation margin posted
+8,795
+8,795
+31
+All other assets not included in the above categories
+22,105
+62,020
+22,705
+3,652
+110,012
+32
+Off-balance sheet items
+9,112,573
+Chapter VIII Financial Statements
+204,768
+Total RSF
+4,688,788
+34
+Net Stable Funding Ratio (%)
+118.87%
+Note:
+(i)
+(ii)
+(iii)
+The Group calculates net stable funding ratio in accordance with the "Measures for the Liquidity Risk Management of Commercial Banks" and
+relevant statistical regulations.
+Items to be reported in the "no maturity" time include, but are not limited to, items such as capital with perpetual maturity, non-maturity
+deposits, short positions, open maturity positions, non-HQLA equities and physical traded commodities.
+The item 26 "Other assets" unweighted amount in the above table does not include the item 30 "NSFR derivative liabilities before deduction
+of variation margin posted".
+325
+326
+33
+China Merchants Bank
+Net long position
+5,993
+617,160
+Net option position
+11,721
+169
+(2,754)
+9,136
+Net long position
+Net structural position
+11,495
+10,012
+1,333
+22,840
+9,537
+31,120
+89,931
+1,005
+The net option position is calculated using the delta equivalent approach required by the Hong Kong Monetary
+Authority (the "HKMA"). The net structural position of the Group includes the structural positions of the Bank's
+branches substantially involved in foreign exchange. Structural assets and liabilities include:
+Investment properties, property and equipment, net of depreciation charges;
+Capital and statutory reserves of overseas branches; and
+Investments in subsidiaries.
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+(F) International claims
+The Group is principally engaged in business operations within Mainland China, and regards all claims on third
+parties outside Mainland China and claims in foreign currencies on third parties within the Mainland China as
+international claims.
+International claims include loans and advances, balances and placements with banks and other financial institutions,
+holdings of trade bills, certificates of deposit and securities investment.
+International claims have been disclosed by different countries or geographical areas. A country or geographical
+area is reported where it constitutes 10% or more of the aggregate amount of international claims, after taking
+into account any risk transfers. Risk is transferred only when the claims are guaranteed by a party in country which
+is different from that of the counterparty or if the claims are on an overseas branch of a bank whose head office is
+located in another country.
+Foreign currencies transactions in Mainland China
+Asia Pacific excluding Mainland China
+- of which attributed to Hong Kong
+Europe
+41,662
+(5,140)
+327,479
+512,955
+436
+1,289
+Net structural position
+19,155
+33,220
+991
+53,366
+2020
+USD
+HKD
+Other
+Total
+(in millions of RMB)
+Non-structural position
+14,274
+Spot assets
+42,491
+76,940
+634,220
+Spot liabilities
+498,529
+27,393
+70,538
+596,460
+Forward purchased
+496,469
+9,019
+87,616
+593,104
+Forward written
+514,789
+1,892,144
+232,827
+107,200
+50,202
+56,013
+116,307
+25,675
+258,559
+185,806
+38,285
+162,853
+Other assets
+26
+as HQLA, including exchange-traded equities
+Assets with matching interdependent liabilities
+25
+Securities that are not in default and do not qualify
+24
+under the Basel II standardized approach for
+credit risk
+With a risk weight of less than or equal to 35%
+23
+226,210
+1,147,834
+169,404
+1,313,371
+30,283
+36,012
+Performing residential mortgages, of which:
+22
+106,521
+125,673
+With a risk weight of less than or equal to 35%
+under the Basel II standardized approach for
+credit risk
+21
+2,492,938
+1,810,662
+218,099
+323
+324
+China Merchants Bank
+All other assets not included in the above categories
+31
+8,164
+8,164
+NSFR derivative liabilities before deduction of
+variation margin posted
+30
+36,445
+NSFR derivative assets
+29
+112
+132
+contracts and contributions to default funds of
+CCPs
+3,941
+≥ 12 months
+828,084
+4,637
+28
+27
+Required stable funding (RSF) item (continued)
+12 months
+< 6 months
+No maturity
+Serial No.
+6 months to
+Weighted
+amount
+Unweighted amount
+31 December 2021 (Continued)
+(D) Net stable funding ratio (Continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+Physical traded commodities, including gold
+Assets posted as initial margin for derivative
+1,147,428
+Performing loans to non-financial corporate clients,
+loans to retail and small business customers, and
+loans to sovereigns, central banks and PSES, of
+which:
+20
+89,705
+39,745
+above categories
+All other liabilities and equity not included in the
+13
+39,874
+NSFR derivative liabilities
+12
+179,823
+195,638
+48,117
+89,705
+39,745
+Other liabilities
+48,117
+11
+10
+1,202,686
+239,208
+293,020
+1,892,144
+302,890
+Other wholesale funding
+9
+1,299,099
+2,598,197
+Operational deposits
+8
+2,501,785
+239,208
+Liabilities with matching interdependent assets
+21,038
+155,764
+Total ASF
+20
+194,190
+24,877
+177,453
+536,930
+313
+by non-Level 1 HQLA and unsecured performing
+loans to financial institutions
+Performing loans to financial institutions secured
+19
+71,157
+474,378
+Performing loans to financial institutions secured by
+Level 1 HQLA
+18
+4,164,678
+14
+3,334,716
+24,091
+8,329
+2,357,601
+313
+Performing loans and securities
+17
+39,853
+operational purposes
+Deposits held at other financial institutions for
+16
+228,498
+Total NSFR high-quality liquid assets (HQLA)
+15
+Required stable funding (RSF) item
+179,823
+5,984,167
+1,074,105
+116,307
+56,013
+32
+Required stable funding (RSF) item
+5,573,462
+Total ASF
+14
+149,773
+124,050
+51,446
+91,306
+36,390
+above categories
+All other liabilities and equity not included in the
+13
+43,515
+NSFR derivative liabilities
+15
+12
+167,565
+51,446
+91,306
+36,390
+Other liabilities
+11
+Liabilities with matching interdependent assets
+10
+1,133,293
+224,206
+306,908
+2,194,603
+67,644
+Other wholesale funding
+149,773
+9
+Total NSFR high-quality liquid assets (HQLA)
+16
+128,990
+With a risk weight of less than or equal to 35%
+under the Basel II standardized approach for
+credit risk
+21
+778,066 1,771,438 2,428,763
+1,138,620
+which:
+Performing loans to non-financial corporate clients,
+loans to retail and small business customers, and
+loans to sovereigns, central banks and PSES, of
+20
+234,833
+20,227
+209,292
+691,380
+18,243
+by non-Level 1 HQLA and unsecured performing
+loans to financial institutions
+251,477
+Performing loans to financial institutions secured
+28,576
+214,190
+Level 1 HQLA
+Performing loans to financial institutions secured by
+18
+27,920
+4,082,195
+1,048,018 3,253,463
+5,142
+2,281,881
+18,243
+Performing loans and securities
+17
+50,698
+operational purposes
+Deposits held at other financial institutions for
+19
+176,512
+1,227,046
+Operational deposits
+797,464
+20,000
+777,464
+Regulatory capital
+2
+809,164
+20,000
+789,164
+Capital
+1
+≥ 12 months
+12 months
+< 6 months
+No maturity
+3
+Available stable funding (ASF) item
+6 months to
+amount
+Weighted
+Unweighted amount
+123.88%
+Net Stable Funding Ratio (%)
+34
+4,830,593
+Total RSF
+33
+195,227
+205,882
+13,625
+4,724,177
+Off-balance sheet items
+Serial No.
+2,454,091
+Other capital instruments
+11,700
+8
+2,360,339
+224,206
+306,908
+2,194,603
+2,521,735
+Wholesale funding
+7
+1,715,761
+6,314
+37,275
+652,161
+1,209,950
+Less stable deposits
+11,700
+6
+1,304
+161
+4,658
+560,572
+Stable deposits
+5
+2,254,186
+7,618
+37,436
+656,819
+1,770,522
+customer
+Retail deposits and deposits from small business
+4
+538,425
+100
+329
+55
+(I) Renegotiated loans and advances to customers
+- between 3 and 6 months (inclusive)
+8,629
+10,445
+-
+- between 6 and 12 months (inclusive)
+over 12 months
+7,710
+9,667
+18,760
+20,872
+35,099
+40,984
+Total
+As a percentage of total gross loans and advances:
+between 3 and 6 months (inclusive)
+- between 6 and 12 months (inclusive)
+Postcode: 518040
+Fax: +86 7558319 5109
+Tel: +86 7558319 8888
+Add: China Merchants Bank Tower, No. 7088, Shennan Boulevard, Shenzhen, China
+http://www.cmbchina.com
+CHINA MERCHANTS BANK
+招商銀行股份有限公司
+We are here Just for you
+公 招商銀行
+The Bank is a commercial bank incorporated in the Mainland China with its banking business primarily conducted
+in the Mainland China. As of 31 December 2021 and 31 December 2020, most of the Bank's exposures arose
+from businesses with Mainland China non-bank institutions or individuals. Analyses of various types of exposure by
+counterparty have been disclosed in the notes to the financial report.
+Non-bank mainland china exposures
+The amount of the Group's renegotiated loans and advances to financial institutions as at 31 December 2021 was 1
+million (2020: 1 million).
+respect to either principal or interest for periods of:
+Gross loans and advances to customers which have been overdue with
+2020
+2021
+Subsidiaries
+Total
+(ii) By overdue period
+2021
+2020
+13,812
+15,328
+3,711
+4,704
+3,490
+6,370
+5,052
+5,400
+1,510
+2,357
+4,066
+2,914
+2,295
+2,875
+166
+342
+997
+694
+35,099
+40,984
+Note: Represents the restructured non-performing loans.
+0.19%
+9,709
+0.11%
+43,862
+29,922
+25,315
+20,884
+15,148
+12,953
+2020
+2021
+Value of collateral held against overdue loans and advances
+Unsecured portion of overdue loans and advances
+Secured portion of overdue loans and advances
+(iii) Collateral information
+(H) Overdue loans and advances to customers (Continued)
+Annual Report 2021
+Chapter VIII Financial Statements
+China Merchants Bank
+332
+331
+0.81%
+0.62%
+0.41%
+0.33%
+0.19%
+0.14%
+0.21%
+The amount of the Group's overdue loans and advances to financial institutions as at 31 December 2021 was RMB1
+million (2020: RMB150 million).
+Note:
+The above analysis represents loans and advances overdue for more than 90 days as required and defined by the HKMA.
+Loans and advances with a specific repayment date are classified as overdue when the principal or interest is overdue.
+6,111
+- Renegotiated loans and advances overdue less than
+90 days
+0.30%
+15,169
+0.19%
+10,406
+- Renegotiated loans and advances overdue more
+than 90 days
+Less:
+0.49%
+24,878
+advances
+Amount
+Outside Mainland China
+advances
+0.30%
+Renegotiated loans and advances to customers (Note)
+Amount
+% of total
+loans and
+% of total
+loans and
+2020
+2021
+(J)
+- over 12 months
+Where collateral values are greater than gross advances, only the amount of collateral up to the gross advance had been included in the
+"secured portion of overdue loans and advances" as set out in the above tables.
+The collateral of the Group included cash deposit, shares, land use right, property, motor vehicles and other equipment, etc. The fair value
+of collateral was estimated by management based on the latest available external valuations adjusted by taking into account the current
+realisation experience as well as market situation.
+Loans and advances repayable on demand are classified as overdue when a demand for repayment has been served on the borrower but
+repayment has not been made in accordance with the instructions. If the loans and advances repayable on demand are outside the approved
+limit that was advised to the borrower, they were also considered as overdue.
+For loans and advances repayable by regular installments, if part of the installments is overdue, the whole amount of these loans would be
+classified as overdue.
+16,517
+Western region
+Central region
+Northeast region
+2,677
+26,823
+13,846
+21,585
+8,506
+12,987
+1,525
+3,101
+11,285
+728
+3,007
+2020
+-Stage 2
+Overdue loans
+3,500
+and advances
+19,333
+3,966
+330
+China Merchants Bank
+Annual Report 2021
+Chapter VIII Financial Statements
+(G) Further analysis on loans and advances to customers analysed by
+industry sector (Continued)
+When the amount of loans and advances to customers for an industry/category accounts for 10% or above of
+the total amount of loans and advances to customers, the amount of overdue loans, impaired loans and credit
+impairment allowances in each expected credit loss stage are disclosed as follows:
+2021
+3,821
+Overdue loans
+Impaired loans
+and advances
+-Stage 1
+(12-month ECL)
+-Stage 2
+(Lifetime ECL-not
+credit-impaired)
+0.15%
+Residential mortgage
+Credit card
+Micro-business loan
+and advances
+Impaired loans
+and advances
+-Stage 3
+(Lifetime ECL-
+credit impaired)
+(Lifetime ECL-not
+20,793
+880
+2,548
+As at 31 December 2021, for corporate loans and advances measured at amortised cost, the fair value of collateral
+held against impaired loans and advances is RMB3,304 million (31 December 2020: RMB6,262 million).
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2021
+(H) Overdue loans and advances to customers
+(i)
+By geographical segments
+Headquarters
+Yangtze River Delta region
+Bohai Rim region
+Pearl River Delta and West Coast region
+-Stage 1
+(12-month ECL)
+3,026
+2,877
+Total
+11,770
+-Stage 3
+Micro-business loan
+(Lifetime ECL-
+credit-impaired)
+Residential mortgage
+4,019
+3,759
+credit impaired)
+726
+2,729
+Credit card
+20,065
+12,424
+13,630
+9,042
+7,428
+0.26
+145
+0.27
+55,294
+175
+1.17
+Mining
+1.10
+34,505
+1.92
+786
+2.28
+40,676
+0.81
+783
+65,248
+Others(2)
+71,501
+1.29
+0.62
+18
+235
+environment and
+239
+0.21
+Construction
+120,934
+2.17
+569
+103,619
+2.06
+890
+public utilities
+0.86
+software and IT service
+65,994
+1.18
+0.36
+64,135
+1.28
+824
+1.28
+Water conservancy,
+Information transmission,
+0.47
+1,289,556
+2.27
+Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(1)
+Notes:
+1.07
+53,615
+100.00
+5,029,128
+(2)
+0.91
+100.00
+5,570,034
+customers
+Total loans and advances to
+1.39
+2,548
+3.65
+50,862
+Consists primarily of other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
+(3)
+The Company will transfer discounted bills to corporate loans for accounting purposes once overdue.
+Non-
+Performing
+loan ratio
+performing
+Non-
+Percentage
+of the
+total (%)
+balance
+(in millions of RMB, except for percentages)
+advance
+Loan and
+31 December 2020
+31 December 2021
+3.4.3 Distribution of loans and non-performing loans by industry
+With regard to retail loans, the Group actively improved the quality and efficiency of financial services for small-
+and micro-sized enterprises to ensure credit support for them; strictly implemented the national and regional
+supervision policies on mortgage loan business, focused on meeting the housing mortgage needs of customers
+with rigid housing demand and upgraders; strengthened the management of consumer loans, strictly abided by the
+bottom line of loan usage, and focused on supporting the legitimate comprehensive consumption and upgrading
+consumption of individuals or families; and prudently promoted the development of the credit card business and
+highlighted value-based customer operations. As at the end of the reporting period, the proportion of retail loans
+was 53.64%, representing an increase of 0.33 percentage point as compared with the end of the previous year; the
+balance of non-performing loans amounted to RMB24.130 billion, up by RMB2.373 billion as compared with the
+end of the previous year, mainly due to the adjustment to timing of recognising the Company's credit card loans as
+overdue loans and downgrading adverse effect of the Company's retail loans with more than 60 days overdue; and
+the non-performing loan ratio was 0.81%, which was flat as compared with the end of the previous year. Among
+which, the balance of non-performing credit card loans amounted to RMB13.846 billion, up by RMB1.422 billion as
+compared with the end of the previous year; and the non-performing ratio of credit card loans was 1.65%, down by
+0.01 percentage point as compared with the end of the previous year.
+With regard to corporate loans, the Group steadily advanced the development of business such as project financing,
+supply chain financing and trade financing, maintaining the general stability of asset quality. As at the end of the
+reporting period, the percentage of corporate loans was 38.62%, representing a decrease of 1.49 percentage points
+as compared with the end of the previous year, mainly due to the decrease in the proportion of working capital
+loans. The non-performing corporate loans amounted to RMB26.732 billion, down by RMB5.126 billion as compared
+with the end of the previous year; and the non-performing ratio of corporate loans was 1.24%, down by 0.34
+percentage point as compared with the end of the previous year.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+Consists primarily of general consumer loans, commercial housing loans, automobile loans, house decoration loans, education loans and other
+personal loans secured by monetary assets.
+(4)
+183,930
+Loan and
+1.40
+3.78
+3,026
+9.46
+475,728
+0.62
+3,500
+10.09
+561,871
+0.64
+Micro-finance loans
+21,757
+53.31
+2,681,160
+0.81
+24,130
+53.64
+2,987,791
+0.81
+Residential mortgage loans
+1,374,406
+24.68
+211,143
+Others(4)
+1.66
+12,424
+14.85
+746,687
+1.65
+13,846
+15.09
+840,371
+Credit card loans
+0.29
+3,759
+25.35
+1,274,815
+0.28
+3,821
+2,963
+advance
+loan
+(%) (1)
+3.14
+174,758
+Leasing and commercial services
+0.49
+842
+3.39
+170,413
+4,054
+0.34
+3.50
+194,688
+gas and water
+electric power, heat,
+Production and supply of
+3.55
+10,057
+658
+2.32
+155,028
+3.08
+114,294
+0.09
+90
+1.71
+95,333
+Finance
+4.25
+6,361
+2.98
+149,775
+2.53
+3,726
+2.64
+147,272
+Wholesale and retail
+4.02
+6,227
+5.63
+283,135
+2.06
+6,871
+Transportation, storage and
+1.58
+31,858
+40.11
+2,017,232
+1.24
+26,732
+38.62
+2,150,938
+Corporate loans
+(%) (1)
+loan
+loan ratio
+Non-
+Performing
+Non-
+performing
+Percentage
+of the
+total (%)
+balance
+postal services
+968
+445,603
+2,945
+5.99
+333,398
+Manufacturing
+0.30
+1,190
+7.77
+390,792
+1.41
+5,655
+7.21
+401,704
+Property development
+0.85
+3,489
+8.20
+412,424
+0.66
+8.00
+1.35
+77,647
+1.54
+0.36
+1.53
+1.96
+2.04
+19,118
+19,809
+2021 Approach) (%) advances (%)
+Percentage of
+total loans and
+Measurement
+Advanced
+(under the
+Percentage
+of net capital
+31 December
+as at
+Loan balance
+Transportation, storage and postal services
+Manufacturing industry
+Production and supply of electric power,
+heating power, gas and water
+Transportation, storage and postal services
+Transportation, storage and postal services
+Transportation, storage and postal services
+Property development
+Property development
+Transportation, storage and postal services
+Finance
+111
+Total
+14,890
+12,000
+0.87
+0.16
+0.89
+0.16
+0.92
+0.19
+1.11
+0.20
+1.16
+0.22
+1.23
+0.23
+0.27
+0.34
+1.33
+126,873
+8,425
+8,635
+9,000
+10,756
+11,336
+12,904
+0.15
+ABCDEFGH
+(in millions of RMB, except for percentages)
+Top ten
+333,332
+Pledged loans
+0.71
+13,544
+38.07
+1,914,658
+0.61
+12,684
+37.26
+2,075,639
+Collateralised loans
+2.33
+16,201
+13.85
+696,634
+1.76
+13,272
+13.51
+752,744
+Guaranteed loans
+1.06
+5.98
+borrowers Industry
+5,045
+328,598
+3.4.6 Loans to the top ten single borrowers
+As at the end of the reporting period, the Group's collateralised and pledged loans increased by 7.39% as compared
+with the end of the previous year; guaranteed loans increased by 8.05% as compared with the end of the previous
+year, and the credit loans increased by 12.43% as compared with the end of the previous year. The non-performing
+ratio of loans with all types of guarantee decreased as compared with the end of the previous year.
+Note: Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+1.07
+53,615
+100.00
+5,029,128
+0.91
+50,862
+100.00
+5,570,034
+customers
+Total loans and advances to
+6.58
+330,736
+7.74
+431,305
+Discounted bills
+1.57
+5,145
+6.53
+1.51
+18,725
+13.04
+As at the end of the reporting period, the loan balance of the Group's largest single borrower amounted to
+RMB19.809 billion, representing 2.04% of the Group's net capital under the Advanced Measurement Approach.
+The loan balance of the top ten single borrowers totalled RMB126.873 billion, representing 13.04% of the Group's
+net capital under the Advanced Measurement Approach, 13.68% of the Group's net capital under the Weighted
+Approach, and 2.28% of the Group's total loan balance, respectively.
+As at the end of the reporting period, the balance of repossessed assets (other than financial instruments) of
+the Group amounted to RMB654 million. After deducting the impairment allowances of RMB141 million, the
+net carrying value amounted to RMB513 million. The balance of repossessed financial instruments amounted to
+RMB1.956 billion.
+3.4.9 Repossessed assets and impairment allowances
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+The Group imposed strict and prudent control over loan restructuring. As at the end of the reporting period,
+the percentage of the Group's restructured loans to total loans was 0.30%, down by 0.19 percentage point as
+compared with the end of the previous year.
+0.30
+15,169
+0.19
+10,406
+0.49
+Percentage
+of total
+loans (%)
+Loan balance
+24,878
+Percentage
+of total
+loans (%)
+0.30
+16,517
+Loan balance
+31 December 2020
+31 December 2021
+Note: Represents the restructured non-performing loans.
+Of which: restructured loans overdue more than
+90 days
+Restructured loans (note)
+(in millions of RMB, except for percentages)
+3.4.10 Changes in the allowances for impairment losses on loans
+3.4.8 Restructured loans
+The following table sets forth the changes in the allowances for impairment losses on loans and advances of the
+Group.
+Balance as at the end of the previous year
+39
+The Group continued to adopt a stable and prudent policy in respect of making allowances. As at the end of the
+reporting period, the balance of allowances for impairment losses on loans of the Group amounted to RMB246.104
+billion, representing an increase of RMB11.440 billion as compared with the end of the previous year. The allowance
+coverage ratio was 483.87%, representing an increase of 46.19 percentage points as compared with the end of
+the previous year; and the allowance-to-loan ratio was 4.42%, representing a decrease of 0.25 percentage point as
+compared with the end of the previous year.
+Note: Represents the amortised cost on impaired loans as a result of the increase in their present value due to the passage of time.
+234,664
+246,104
+8,781
+(43,734)
+(176)
+(121)
+(35,105)
+9,893
+(186)
+(247)
+46,882
+37,020
+2020
+223,097
+2021
+234,664
+Balance as at the end of the period
+Foreign exchange rate movements
+Write-offs/disposal for the period
+Recovery of loans and advances previously written off
+Unwinding of discount on impaired loans and advances (note)
+Charge/release for the period
+(in millions of RMB)
+2.28
+As at the end of the reporting period, overdue loans of the Group amounted to RMB57.426 billion, up by RMB858
+million from the end of the previous year and accounting for 1.02% of its total loans, representing a decrease
+of 0.10 percentage point as compared with the end of the previous year. Due to the adjustment to timing of
+recognising credit card loans as overdue loans, the balance of loans overdue within 3 months increased by
+RMB6.743 billion as compared with the end of the previous year, and its percentage of total loans increased by
+0.09 percentage point as compared with the end of the previous year. Among the overdue loans, collateralised and
+pledged loans accounted for 28.69%; guaranteed loans accounted for 15.10%; credit loans accounted for 56.21%
+(the majority of which were overdue loans of credit cards). The Group adopted prudent classification criteria for
+overdue loans, and the ratio of its non-performing loans to the loans overdue for more than 90 days was 1.45.
+5,029,128
+0.40
+22,327
+Overdue within 3 months
+loans (%)
+balance
+loans (%)
+balance
+(in millions of RMB, except for percentages)
+of total
+advance
+advance
+Percentage
+31 December 2020
+Loan and
+Loan and
+31 December 2021
+Percentage
+of total
+3.4.7 Distribution of loans by overdue term
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+38
+37
+15,584
+100.00
+0.31
+16,339
+100.00
+5,570,034
+Total loans and advances to customers
+1.12
+56,568
+1.02
+57,426
+Total overdue loans
+0.10
+5,399
+0.14
+7,911
+Overdue more than 3 years
+0.31
+15,473
+0.19
+10,849
+Overdue from 1 year up to 3 years
+0.40
+20,112
+0.29
+Overdue from 3 months up to 1 year
+Retail loans
+34.97
+1.00
+17,325
+17.06
+858,197
+1.96
+17,862
+16.35
+910,281
+Head Office(2)
+(%) (1)
+loan
+total (%)
+balance
+(%) (1)
+loan
+total (%)
+balance
+(in millions of RMB, except for percentages)
+loan ratio
+performing
+Non-
+Performing
+Non-
+2.02
+Percentage
+of the
+Yangtze River Delta
+21.55
+0.63
+6,358
+18.09
+1,007,513
+of Taiwan Strait
+Pearl River Delta and West Side
+1.10
+6,942
+12.59
+633,008
+0.62
+4,479
+12.91
+719,187
+Bohai Rim
+0.74
+7,634
+20.63
+1,037,683
+0.62
+7,436
+1,200,571
+882,726
+advance
+performing
+50,862
+100.00
+5,570,034
+customers
+Total loans and advances to
+0.81
+21,757
+53.31
+2,681,160
+0.81
+24,130
+53.64
+2,987,791
+Retail loans
+6.58
+330,736
+7.74
+431,305
+Discounted bills
+1.04
+811
+0.91
+loan ratio
+5,029,128
+53,615
+of the
+advance
+Loan and
+Non-
+Performing
+Non-
+Percentage
+Loan and
+31 December 2020
+31 December 2021
+3.4.4 Distribution of loans and non-performing loans by region
+The Group adhered to the principle of "financial institutions serving the real economy", kept abreast with the
+development trend of national economic transformation, resolutely implemented the requirements of national
+policies, and invested credit resources in new growth engines, high-quality manufacturing, regional competitive
+industries and self-controllable industries to further accelerate the restructuring of customers and assets. At the same
+time, the Group closely tracked changes in internal and external situations, and strengthened risk prevention and
+control in key areas such as property development, local government financing platforms and industries under close
+surveillance. During the reporting period, the non-performing loan ratio of industries such as mining, culture, sports
+and entertainment, and property development increased due to the risk exposures of some small- and medium-sized
+companies with poor development prospects and high-debt real estate enterprises.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+36
+35
+Consists primarily of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health and social work, etc.
+(2)
+Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(1)
+Notes:
+1.07
+100.00
+1,758,502
+17.56
+0.74
+Non
+Performing
+Non-
+Percentage
+Loan and
+31 December 2020
+31 December 2021
+3.4.5 Distribution of loans and non-performing loans by type of guarantees
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+China Merchants Bank
+During the reporting period, closely following the key directions of the State's regional planning outline, taking
+into account the actual situation and characteristics of the regions, and featuring differentiation, the Group made
+research and formulated differentiated credit policies for the Guangdong-Hong Kong-Macau Greater Bay Area and
+Yangtze River Delta to promote the high-quality asset allocation of branches in key regions and intensify support-
+oriented efforts. At the same time, on the basis of controllable risks, the branches were authorised and equipped
+with corresponding monitoring mechanisms to implement differentiated management and control and cautiously
+prevent regional systemic risks. As at the end of the reporting period, there has been an increase in the proportion
+of the balance of loans extended to Yangtze River Delta, Bohai Rim, Pearl River Delta and West Side of Taiwan
+Strait, and Western China increased. Due to the formation of non-performing loans in certain large-sized corporate
+customers, the non-performing loan ratio of Central China increased by 0.18 percentage point as compared with
+the end of the previous year, and the non-performing loan ratio of other regions decreased as compared with the
+end of the previous year.
+The Head Office includes Credit Card Center.
+(2)
+Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(1)
+Notes:
+1.07
+53,615
+100.00
+5,029,128
+0.91
+Loan and
+50,862
+Percentage
+Non-
+Performing
+19,861
+35.51
+1,977,014
+Credit loans
+(%)(note)
+loan
+total (%)
+balance
+(%)(note)
+loan
+total (%)
+balance
+(in millions of RMB, except for percentages)
+loan ratio
+performing
+of the
+advance
+loan ratio
+performing
+of the
+advance
+Non-
+6,555
+100.00
+customers
+10.45
+581,820
+Western China
+0.83
+4,247
+10.15
+510,537
+1.01
+5,766
+10.23
+569,787
+Central China
+2.26
+3,772
+3.31
+166,632
+1.39
+2,354
+3.03
+168,974
+North-eastern China
+4,275
+5,570,034
+0.73
+10.18
+Total loans and advances to
+0.72
+2,158
+5.95
+299,222
+0.67
+2,114
+5.70
+317,748
+Subsidiaries
+0.27
+342
+2.57
+129,020
+0.23
+218
+1.69
+94,153
+Overseas
+0.91
+4,640
+512,103
+22.91
+(in millions of RMB, except for percentages)
+31 December 2020
+34
+33
+As at the end of the reporting period, the Group's equity attributable to shareholders of the Bank was RMB858.745
+billion, representing an increase of 18.65% as compared with the end of the previous year, among which retained
+profits amounted to RMB428.592 billion, representing an increase of 15.75% as compared with the end of the
+previous year; investment revaluation reserve amounted to RMB15.047 billion, representing an increase of 83.34%
+as compared with the end of the previous year, mainly due to the increase in the valuation of financial assets
+measured at fair value through other comprehensive income as compared to the end of the previous year; foreign
+currency translation differences amounted to RMB-2.144 billion, representing a decrease of RMB1.451 billion as
+compared with the end of the previous year, mainly due to the fluctuations in RMB exchange rate.
+3.3.3 Shareholders' equity
+In 2021, the percentage of daily average balance of the demand deposits to that of the total deposits from
+customers of the Group was 64.45%, representing an increase of 4.45 percentage points as compared with the
+previous year. Of these, the daily average balance of corporate demand deposits accounted for 61.73% of that of
+the corporate deposits, representing an increase of 4.97 percentage points as compared with the previous year; the
+daily average balance of retail demand deposits accounted for 69.51% of that of the retail deposits, representing an
+increase of 3.66 percentage points as compared with the previous year.
+100.00
+5,628,336
+100.00
+6,347,078
+34
+36.11
+36.05
+2,288,154
+Total deposits from customers
+Subtotal
+11.23
+632,126
+11.51
+730,293
+Time
+2,032,646
+24.88
+China Merchants Bank
+Annual Report 2021
+46,609
+98.12
+4,934,797
+98.25
+5,472,563
+Amount
+Amount the total (%)
+Total loans and advances to customers
+Loss
+Chapter III Management Discussion and Analysis
+Doubtful
+Special mention
+Normal
+Percentage of
+the total (%)
+(in millions of RMB, except for percentages)
+Percentage of
+31 December 2021
+The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
+3.4.1 Distribution of loans by 5-tier loan classification
+3.4 Analysis of Loan Quality
+Substandard
+0.84
+1,400,520
+1,557,861
+15.82
+495,723
+23.50
+- Bond investments
+176,764
+8.03
+177,760
+8.43
+- Non-standardised credit asset investments
+Others(note)
+348,123
+175,303
+171,359
+7.79
+142,660
+6.76
+Debt investments at amortised cost
+1,169,652
+53.16
+49.02
+- Bond investments
+8.31
+24.54
+Financial investments at fair value through
+profit or loss
+Percentage of
+the total (%)
+Demand
+Deposits from retail customers
+63.89
+3,595,690
+63.95
+4,058,924
+30
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+2.24
+3.3.1.2 Investment securities and other financial assets
+The following table sets forth the components of investment securities and other financial assets of the Group by
+line items.
+31 December 2021
+31 December 2020
+(in millions of RMB, except for percentages)
+Derivative financial assets
+Amount
+Percentage of
+the total (%)
+23,390
+1.06
+Amount
+47,272
+The Group's investment securities and other financial assets consist of listed and unlisted financial instruments
+denominated in RMB and foreign currencies.
+40,716
+0.81
+17,490
+5,412
+13.98
+702,892
+0.88
+7,267
+14.74
+821,259
+Fixed asset loans
+3.00
+0.77
+22,333
+744,220
+2.30
+16,755
+13.11
+729,999
+Working capital loans
+1.58
+31,858
+40.11
+14.80
+2,017,232
+Trade finance
+4.63
+6.58
+330,736
+7.74
+431,305
+Discounted bills (3)
+0.87
+3,103
+7.10
+357,334
+257,428
+0.68
+6.14
+342,252
+Others(2)
+0.47
+1,010
+4.23
+212,786
+0.15
+397
+2,313
+1.24
+26,732
+38.62
+Non-performing loans
+1.07
+53,615
+0.91
+50,862
+100.00
+5,029,128
+100.00
+5,570,034
+Note: Under the 5-tier loan classification system, non-performing loans of the Group are divided into substandard loans, doubtful loans and loss
+loans.
+0.34
+0.23
+12,617
+0.44
+22,000
+0.37
+20,755
+0.29
+14,760
+0.31
+16,855
+During the reporting period, the quality of assets of the Group was generally stable. As at the end of the reporting
+period, both the balance and percentage of the Group's non-performing loans decreased from the end of the
+previous year. Of these, the balance of the non-performing loans amounted to RMB50.862 billion, representing a
+decrease of RMB2.753 billion as compared with the end of the previous year, with a non-performing loan ratio of
+0.91%, a decrease of 0.16 percentage point as compared with the end of the previous year. The balance of the
+special-mentioned loans amounted to RMB46.609 billion, representing an increase of RMB5.893 billion as compared
+with the end of the previous year; the percentage of special-mentioned loans was 0.84%, representing an increase
+of 0.03 percentage point as compared with the end of the previous year. The balance of the special-mentioned loans
+and the percentage of special-mentioned loans both increased were mainly because the timing of recognising credit
+card loans as overdue loans was set earlier by the Company from the next billing date to the repayment deadline
+for this bill, and the Company further adjusted all its loans granted to retail borrowers with overdue or other risk
+indicators inside and outside the Bank to special-mentioned loans in strict accordance with regulatory requirements.
+3.4.2 Distribution of loans and non-performing loans by product type
+31 December 2021
+2,150,938
+Corporate loans
+(%)(1)
+loan
+total (%)
+balance
+(%) (1)
+loan
+loan ratio
+Non-
+Performing
+Non-
+performing
+Percentage
+of the
+Loan and
+advance
+Non-
+Performing
+loan ratio
+Non-
+performing
+Percentage
+of the
+total (%)
+balance
+(in millions of RMB, except for percentages)
+advance
+Loan and
+31 December 2020
+1,078,888
+49.03
+1,034,269
+43.20
+3.3.2 Liabilities
+As at the end of the reporting period, the total liabilities of the Group amounted to RMB8,383.340 billion,
+representing an increase of 9.86% as compared with the end of the previous year, which was primarily attributable
+to the rapid growth in deposits from customers.
+The following table sets forth, as at the dates indicated, the components of the total liabilities of the Group. To
+maintain the figures comparable, the financial instruments in section "3.3.2 Liabilities" were still analysed on the
+statistical calibre excluding interest payable, except for the following table, in which interest payable calculated
+using the effective interest method was included.
+31 December 2021
+Percentage of
+31 December 2020
+Percentage of
+(in millions of RMB, except for percentages)
+Amount the total (%)
+Amount the total (%)
+In compliance with the International Financial Reporting Standards, at the end of the reporting period, the Group
+conducted an impairment test on the goodwill arising from the acquisition of CMB Wing Lung Bank, China
+Merchants Fund and other companies and determined that provision for impairment was not necessary for the
+reporting period. As at the end of the reporting period, the Group had a balance of allowances for impairment
+losses on goodwill of RMB579 million and the carrying value of goodwill was RMB9.954 billion.
+Deposits from customers
+76.16
+5,664,135
+74.22
+Inter-bank transactions (1)
+1,081,328
+12.90
+1,009,846
+13.23
+Borrowings from the central bank
+6,385,154
+3.3.1.3 Goodwill
+As at the end of the reporting period, the Group's investments in joint ventures and associates amounted to
+RMB23.654 billion, up by 58.52% from the end of the previous year, which was mainly attributable to the increase
+in the investment of Taizhou Bank Co., Ltd. during this period and it was converted to be accounted as investments
+in associates, and the increase in profits of MUCFC, a joint venture of the Company. As at the end of the reporting
+period, the balance of allowances for impairment losses on investments in joint ventures and associates of the Group
+was zero. For details, please refer to Notes 25 and 26 to the financial statements.
+Investments in joint ventures and associates
+(in millions of RMB)
+911,409
+The composition of the Group's total bond investments classified by the issuing entities
+31 December
+2021
+31 December
+2020
+1,205,718
+943,029
+390,387
+347,814
+168,483
+167,553
+119,419
+141,080
+1,884,007
+1,599,476
+Policy banks
+Commercial banks and other financial institutions
+Others
+Total Bond investments
+Note: "Official authorities" include the Ministry of Finance of the PRC, local governments and the Central Bank, etc.; "Others" mainly refer to
+enterprises.
+159,987
+Annual Report 2021
+1.91
+4.35
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+Deposits from customers
+As at the end of the reporting period, total deposits from customers of the Group amounted to RMB6,347.078
+billion, representing an increase of 12.77% as compared with the end of the previous year. Deposits from
+customers, accounting for 75.71% of the total liabilities of the Group, were the major funding source of the Group.
+The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
+and customer type.
+31 December 2021
+31 December 2020
+Percentage of
+Subtotal
+Corporate customer deposits
+China Merchants Bank
+Amount the total (%)
+Percentage of
+the total (%)
+Demand
+2,652,817
+41.80
+2,306,134
+40.98
+Time
+1,406,107
+22.15
+Amount
+Including salaries and welfare payable, taxes payable, contract liabilities, lease liabilities, expected liabilities, deferred income tax liabilities and
+other liabilities.
+Including deposits and placements from banks and other financial institutions and amounts sold under repurchase agreements.
+(2)
+Financial liabilities at fair value through profit
+or loss and derivative financial liabilities
+Debt securities issued
+91,043
+1.09
+110,412
+1.45
+446,645
+5.33
+346,141
+4.54
+Others(2)
+Total liabilities
+219,183
+8,383,340
+2.61
+168,938
+2.21
+100.00
+7,631,094
+100.00
+Notes:
+(1)
+331,622
+Chapter III Management Discussion and Analysis
+Official authorities
+32
+0.34
+23,654
+1.08
+14,922
+0.71
+other financial assets
+2,200,169
+100.00
+2,109,632
+7,139
+100.00
+Including equity investments, investments in funds, wealth management products, long position in precious metal contracts and others.
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+Derivative financial instruments
+As at the end of the reporting period, the major categories and amount of derivative financial instruments held by
+the Group are indicated in the following table. For details, please refer to Note 60(f) to the financial statements.
+31 December 2021
+China Merchants Bank
+Fair value
+Note:
+Fair value
+0.32
+Equity investments designated at fair value
+through other comprehensive income
+Investments in joint ventures and associates
+Total investment securities and
+- Non-standardised credit asset investments
+129,851
+5.90
+148,386
+7.03
+- Others
+620
+0.03
+592
+6,995
+0.03
+(39,707)
+(1.80)
+(26,118)
+(1.24)
+other comprehensive income
+628,355
+28.56
+510,307
+24.19
+- Less: allowances for impairment losses
+Debt investments at fair value through
+Notional
+31 December 2020
+(in millions of RMB)
+145,190
+1,538
+Notional
+Total
+3,967,807
+23,390
+(27,282)
+4,715,670
+47,272
+(1,237)
+(50,061)
+During the reporting period, RMB exchange rate experienced bilateral fluctuations with a slight appreciation against
+US Dollar. Being an inter-bank general market maker in the foreign exchange market, the Group was committed to
+improving the pricing level of foreign exchange derivative transactions, proactively providing liquidity to the market.
+At the same time, by continuously leveraging its expertise in derivative transactions in the financial market, the
+Group actively popularised and promoted the concepts and methods of neutral management of exchange rate risk
+to corporate customers with incomes and expenses denominated in foreign currencies and helped customers use
+derivative instruments to manage various market risks, as a result of which the Group achieved continuous growth
+in the number of customers served and the transaction volumes.
+Financial investments at fair value through profit or loss
+As at the end of the reporting period, the balance of the financial investments at fair value through profit or loss
+amounted to RMB348.123 billion, with bond and fund investments etc. being the major categories. The investments
+were made by the Group through an analysis of factors such as the macroeconomic, monetary and fiscal policies,
+the industrial policies and the market supply and demand, so as to obtain investment income by capturing trading
+opportunities in the market. During the reporting period, the funds remained stable and the yield of the bond
+market decreased with fluctuations. The Group proactively increased its positions in government bonds issued by the
+PRC government in early 2021 and held until the end of the year, resulting in satisfactory returns. For details, please
+refer to Note 23(a) to the financial statements.
+Debt investments at amortised cost
+As at the end of the reporting period, the balance of the Group's debt investments measured at amortised cost
+amounted to RMB1,169.652 billion. Among them, the bond investments were made mainly in the bonds issued by
+the PRC government and policy banks. This category of investments was held on a long-term basis for the strategic
+allocation of assets and liabilities of the Group, based on the requirements of interest rate risk management of bank
+accounts and liquidity management, while taking into account the benefits and risks. For details, please refer to
+Note 23(b) to the financial statements.
+Debt investments at fair value through other comprehensive income
+As at the end of the reporting period, the balance of debt investments at fair value through other comprehensive
+income amounted to RMB628.355 billion, with interest rate bonds such as government bonds and policy bank bonds
+and medium-to-high rating quality credit bonds being the major categories. This category of investments was made
+by the Group through an analysis of the bond market, so as to obtain investment income by capturing investment
+and allocation opportunities in the market. For details, please refer to Note 23(c) to the financial statements.
+Equity investments designated at fair value through other comprehensive income
+As at the end of the reporting period, the balance of equity investments designated at fair value through other
+comprehensive income of the Group amounted to RMB6.995 billion. Such investments were mainly non-trading
+equity investments held by the Group in the investees over whom the Group had no control, joint control or
+significant influence. For details, please refer to Note 23(d) to the financial statements.
+31
+The above table shows the notional value and fair value of the Group's derivatives by their remaining maturity on
+each balance sheet date. The notional value refers only to the transaction volumes that have not yet been due or
+completed on the balance sheet date, and does not represent the value at risk.
+1,472
+(1,451)
+Other derivatives
+amount
+Assets
+Liabilities
+amount
+Assets
+Liabilities
+139,931
+2,641,846
+11,877
+(11,991)
+Interest rate derivatives
+12,568
+(36,221)
+3,303,805
+1,266,675
+(14,054)
+33,166
+1,186,030
+Currency derivatives
+(12,389)
+10,041
+536,018
+The Group
+40
+40
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.5 Analysis of Capital Adequacy
+3.5.1 Capital adequacy ratio
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Group under the Advanced Measurement Approach were 12.66%, 14.94% and
+17.48% respectively, representing an increase of 0.37, 0.96 and 0.94 percentage point respectively as compared
+with the end of the previous year.
+(in millions of RMB, except for percentages)
+491,690
+the Advanced Measurement Approach (1)
+T
+Group
+1,378,969
+2,127,347
+3,789,714
+1,368,280
+1,860,320
+1,378,969
+2,127,347
+3,789,714
+1,368,280
+1,860,320
+561,114
+Legal person
+31 December 2021
+On-balance sheet
+Off-balance sheet
+Counterparty
+3,303,130
+149,821
+13,886
+Portion not covered by
+the IRB approach
+Retail
+Corporate
+Financial institution
+Type of risk exposure
+the IRB approach
+(in millions of RMB)
+Portion covered by
+Of which: Residential mortgage
+Qualified revolving retail
+Other retail
+During the reporting period, the credit risk of the Company under the Internal Ratings-based Approach (IRB
+approach) was classified into six types of risk exposures: sovereign, financial institution, corporate, retail,
+shareholding and others. As at the end of the reporting period, the balances of various risk exposures are as follows.
+561,114
+14,631
+Value at the end of the period
+Minimum value
+Average value
+Maximum value
+Items
+3
+4
+2
+3,723,921
+163,170
+1
+(in millions of RMB)
+The Group's market risk capital requirement under the Internal Model-based Approach was calculated using the
+market risk value based on 250 days of historical market data, a confidence coefficient of 99% and a holding
+period of 10 days. The following table sets forth the market risk value indicators of the Group as at the end of the
+reporting period.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+The Group uses mixed approaches to calculate its market risk capital requirement. Specifically, it uses the Internal
+Model-based Approach to calculate the general market risk capital requirement of the Company (excluding
+overseas branches), and uses the Standardised Measurement Approach to calculate the general market risk capital
+requirement of overseas branches and subsidiaries of the Company as well as the specific market risk capital
+requirement of the Company and its subsidiaries. As at the end of the reporting period, the market risk-weighted
+assets of the Group were RMB60.296 billion, and market risk capital requirement was RMB4.824 billion, of which
+the general market risk capital requirement calculated under the Internal Model-based Approach was RMB2.384
+billion, and the market risk capital requirement calculated under the Standardised Measurement Approach was
+RMB2.440 billion.
+3.5.3 Measurement of market risk capital
+No.
+31 December 2021
+Distressed
+market risk
+value during
+the reporting
+3.5.2 Balance of credit risk exposures
+Increased by 0.95
+700,171
+830,529
+Net capital
+20.90
+613,444
+741,627
+18.62
+16.01
+617,403
+year as compared
+with the end of the
+previous year (%)
+Increase/decrease at
+the end of the current
+31 December
+2020
+31 December
+2021
+Net tier-1 capital
+532,209
+percentage point
+Risk-weighted assets
+5,258,694
+13.31%
+14.26%
+Capital adequacy ratio
+percentage points
+Increased by 1.06
+11.67%
+5,824,290
+12.73%
+percentage point
+Increased by 0.48
+10.12%
+10.60%
+Core tier-1 capital adequacy ratio
+10.76
+Tier-1 capital adequacy ratio
+General
+market risk
+value during
+the reporting
+period
+period
+1.
+3.8 Implementation of Business Development Strategies
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+44
+43
+Since 2014, the Company has proposed and implemented the strategic transformation of "Light-model Bank”.
+Since 2018, the Company has entered into the second half of its transformation into "Light-model Bank" and
+started to explore the 3.0 model of the digital era. In 2021, we proposed to create a 3.0 model of "business model
+of extensive wealth management + digital operation model + organisation model of openness and integration",
+achieving a good start of the "14th Five-Year Plan".
+As at the end of the reporting period, the Group did not have any outstanding overdue debts.
+The Group's off-balance sheet items include derivative financial instruments, commitments and contingent
+liabilities. Commitments and contingent liabilities include credit commitments, operating leasing commitments,
+capital expenditure commitments, securities underwriting commitments, bonds redemption commitments,
+pending litigations and disputes and other contingent liabilities. Among which, the credit commitment is the
+primary component. As at the end of the reporting period, the balance of credit commitments of the Group was
+RMB2,229.694 billion. For details of the contingent liabilities and commitments, please refer to Note 58 to the
+financial statements.
+3.7 Other Financial Disclosures under the Regulatory Requirements
+3.7.1 Balance of off-balance sheet items that may have a material effect on the
+financial position and operating results and the related information
+For details of the Group's business and geographical segments, please refer to Note 56 to the financial statements.
+During the reporting period, the profit before tax of retail finance of the Group amounted to RMB77.709 billion, up
+by 21.74% year-on-year, accounting for 52.44% of the profit before tax of the Group, representing a year-on-year
+increase of 0.31 percentage point; the net operating income amounted to RMB179.014 billion, up by 14.54% year-
+on-year, accounting for 54.02% of the net operating income of the Group, representing a year-on-year increase
+of 0.18 percentage point. During the reporting period, the cost-to-income ratio of retail finance was 33.43%,
+representing a year-on-year decrease of 1.22 percentage points.
+290,279
+122,440
+3.7.2 Outstanding overdue debts
+331,407
+Prominent advantages of the business model of extensive wealth management
+Firstly, the Company expanded the "vast clientele". In response to the national call for common prosperity, the
+retail finance segment gave full play to its advantages of digital customer acquisition and service, and made wealth
+management accessible to ordinary people. We carried out various forms of investor education activities and created
+a series of scenario tools catering to the needs of online traffic customers. The Company lowered the threshold for
+wealth management and launched "Zhao Zhao Bao ()", a wealth management service featured for pocket
+money and can be subscribed with one cent, to meet customers' demands for daily payment and value-added
+wealth management. As of the end of the reporting period, the number of customers subscribing "Zhao Zhao
+Bao" reached 15,403,000, with a position amount of RMB135.442 billion at the end of the period. Among them,
+the percentage of customers who purchased wealth management products for the first time in two years reached
+51.70%. As at the end of the reporting period, the Company had 173 million retail customers (including debit and
+credit card customers), among which, the number of customers holding wealth products increased by 29.68% as
+compared with the end of the previous year, and the number of Sunflower-level and above customers increased by
+18.38% as compared with the end of the previous year. The aggregate number of CMB APP users was 170 million,
+and the aggregate number of CMB Life APP users was 127 million. The wholesale finance segment followed the
+transformation and upgrading of the national economy, focusing on the directions of new growth engines, green
+economy, high-quality track manufacturing industries, regional advantageous and characteristic industries, as well as
+self-controllable industries to solidly improve the quality of customer base and build ecological customer acquisition
+and operation capabilities around customers from core enterprises and their industrial chains and investment chains.
+As at the end of the reporting period, the total number of corporate customers of the Company reached 2,317,100.
+Among them, the number of corporate customers with a daily average deposit of more than RMB500,000 reached
+229,800, representing an increase of over 15%.
+4
+China Merchants Bank
+Annual Report 2021
+46
+46
+45
+events.
+In terms of risk management, the Company continued to push forward the application of Fintech in the field of "all
+risk" to support the cyclic value chain of extensive wealth management. The intelligent risk control platform named
+"Libra" enhanced transaction risk management and control capabilities. During the reporting period, the percentage
+of fraud and account takeover amounts by non-cardholders was lowered to 0.90 in ten millionths, with a compound
+drop of 62.46% in the recent three years; the corporate intelligent early-warning system had an early-warning
+accuracy rate of 75.68% for potentially risky corporate customers. The Company established an early-warning
+platform for default risk in the debenture bond, with an accuracy rate of 86% for early warning of significant credit
+Secondly, the Company built the "comprehensive platform”. The retail finance segment built an open
+product platform and an operation platform. We initiated the "Zhaoyang Plan ()", built a growth
+platform for potential fund managers, and incubated and targeted excellent fund managers. The Bank introduced
+asset management institutions to settle on the "Zhao Cai Hao ()" open platform through market-oriented
+screening, working with external partners to meet the diversified demands of customers, thereby improving their
+investment experience. As at the end of the reporting period, a total of 87 asset management institutions were
+introduced, with a total of 2,097,400 monthly active customers, providing 140 million wealth information services
+to 9,512,900 retail customers of the Company during the reporting period. We introduced the wealth management
+products of the peer banks into the retail product system. As at the end of the reporting period, a total of 8
+wealth management subsidiaries of peer banks were introduced. The wholesale finance segment established
+institutional peer circles such as brokerages, funds and PE, which played an important role in enriching the sources
+and service methods of customers and projects. The Company built the "Zhao Ying Tong ()" interbank online
+service platform. As at the end of the reporting period, the "Zhao Ying Tong" platform had connected 94 asset
+management institutions including funds, securities companies and insurance companies, and provided customers
+with 4,865 third-party asset management products. During the reporting period, the trading value of the Company's
+third-party asset management products of our financial institution clients on the "Zhao Ying Tong" platform reached
+RMB634.269 billion. In terms of risk management, we strengthened the governance of the platform ecology.
+Facing the multi-level and complexity of risks under the extensive wealth management model, we created a "six all"
+risk management system featuring "all clients, all assets, all risks, all institutions, all processes and all elements",
+strictly controlled the access of products and cooperative institutions, and implemented the whole-process
+management from access to exit. We unified the risk management framework for on-balance and off-balance sheet
+businesses and enhanced the risk exposure management for a single customer. The Company strengthened the
+division of labor and cooperation among the three lines of defense against risks and jointly fulfilled the duties of
+"customer value guardian".
+In terms of cooperate customer service, we integrated the customer demand scenarios in the whole process,
+realising that only a one-time visit to the counter for account opening is required and the regular business can be
+handled online in a one-stop manner subsequently. The active rate of basic customers increased by 5.27 percentage
+points from the beginning of the year. We actively promoted the construction of the intelligent risk control platform
+and improved the online migration rate of the whole process of corporate finance business. As at the end of the
+reporting period, the online migration rate reached 67.26%, representing an increase of 28.41 percentage points
+as compared with the end of the previous year. The number of business transactions for products such as working
+capital loans, financial guarantees, bills, domestic letter of credit completed online surpassed the traditional offline
+process.
+More improvement of digital operation model
+2.
+Thirdly, the Company built the "diverse ecology". Through business integration, we realised the "flywheel
+effect" of mutual promotion between business lines and business units to create rich ecological scenarios for
+customers. In terms of retail "One Body" flywheel, the Company thoroughly promoted the integration of debit
+card and credit card in respect of customer acquisition and operation. Among the credit card customers, those who
+also held debit cards of the Company accounted for 62.61%, representing an increase of 1.91 percentage points
+as compared with the end of the previous year. In terms of "One Body with Two Wings (-)" flywheel,
+the wholesale and retail business lines collaborated to facilitate the expansion of payroll services, with 148,100
+new payroll enterprises, representing an increase of 16.42%. The Bank explored a new model of private banking
+services integrating wholesale finance and private banking to open up the service demands of private banking
+customers and the enterprises behind them, which achieved certain results in the integrated service of "investment
+banking, commercial banking and private banking" for key customers of new growth engine enterprises. By fully
+leveraging retail advantages to expand the scale of custody business, we had 253 newly issued mutual funds under
+custody with a custody scale of RMB406.8 billion as at the end of the reporting period, ranking first in the market
+in terms of custody number and scale of newly issued mutual funds. We built a one-stop enterprise digital service
+comprehensive platform Xin Fu Tong (3.0 integrating the forces of technology, retail and wholesale to
+achieve customer acquisition and financial service transformation based on the customers' management demands.
+As at the end of the reporting period, Xin Fu Tong 3.0 had 339,000 newly registered and certified enterprises
+in the year. In terms of the Group's flywheel, during the reporting period, the Company recommended bond
+assets of RMB198.397 billion for CMB Wealth Management, while all subsidiaries in aggregate contributed AUM
+of RMB2.48 trillion and FPA of RMB780.445 billion to the Company. CMB International Capital launched 122 new
+projects linked to the Company, representing a year-on-year increase of 23%, with an account opening rate of
+100% for lead investment projects and 77% for co-investment projects. The Company and China Merchants Fund
+further strengthened the cooperation on agency distribution of funds. As at the end of the reporting period, the
+management scale of China Merchants Fund's non-monetary mutual funds leaped to the seventh in the industry
+ranking (WIND data). Among the fund companies that the Company cooperated with on agency distribution of
+funds, the scale of China Merchants Fund took up the highest percentage of existing mutual funds distributed by
+the Company.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+Refers to customers holding wealth products (including wealth management, mutual funds, private equity funds, insurance policies, precious
+metals, large-denomination certificates of deposit and other products) at the end of the reporting period.
+In terms of retail customer service, we continued to improve the "talent + digitalisation" capability, and upgraded
+the operation model from mainly focusing on account management by account manager to the dual model of
+"account management + traffic". During the reporting period, the number of monthly active users (MAU) of CMB
+APP and CMB Life APP reached 111 million, and the number of MAU in 28 scenarios exceeded ten million. We
+promoted the organic integration of monthly active users (MAU) and total assets under management (AUM) to
+enable more customers to enjoy wealth management services on the Bank's platforms, and enhanced the digital
+service capability of private banking business, which shortened the approval cycle of family trusts by 92% to as short
+as 3 working days, with 89% of orders placed online.
+148,173
+11,962
+3,169
+Wholesale finance
+Retail finance
+(in millions of RMB)
+Items
+The principal business segments of the Group include retail finance and wholesale finance. The following table
+summarises the operating results of each business segment of the Group for the periods indicated.
+3.6 Results of Operating Segments
+Other businesses
+168
+151
+370
+677
+823
+423
+547
+437
+Total
+2021
+Profit Net operating
+2020
+18,498
+6,876
+122,029
+55,437
+133,895
+63,588
+156,288
+63,834
+179,014
+77,709
+income
+before tax
+income
+before tax
+Profit Net operating
+Net core tier-1 capital
+3.
+the Weighted Approach
+The Company
+16.01
+532,209
+617,403
+Net core tier-1 capital
+the Advanced Measurement Approach
+41
+Net tier-1 capital
+11
+Increase/decrease at
+the end of the current
+31 December
+2020
+31 December
+2021
+Capital adequacy ratios under
+(in millions of RMB, except for percentages)
+The Company
+year as compared
+with the end of the
+previous year (%)
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Company under the Advanced Measurement Approach were 12.15%, 14.59% and
+17.23% respectively, representing an increase of 0.34, 0.97 and 0.94 percentage point respectively as compared
+with the end of the previous year.
+741,627
+20.90
+19.98
+3,336,234
+4,002,933
+Of which: Credit risk weighted assets
+17.72
+3,848,927
+613,444
+4,530,952
+consideration the floor requirements
+Risk-weighted assets (without taking into
+19.32
+734,022
+875,859
+Net capital
+during the parallel run period)
+Market risk weighted assets
+Chapter III Management Discussion and Analysis
+Since 2015, the leverage ratio shall be calculated based on the "Measures for Management of the Leverage Ratio of Commercial Banks
+(Revised)" promulgated by the former CBRC on 12 February 2015. The leverage ratio of the Group was 7.42%, 7.15% and 7.40% respectively
+as at the end of the third quarter of 2021, the end of the first half of 2021 and the end of the first quarter of 2021.
+percentage point
+Increased by 0.37
+percentage point
+Increased by 0.96
+13.98%
+14.94%
+Tier-1 capital adequacy ratio
+12.29%
+17.48%
+12.66%
+12.07
+4,964,542
+5,563,724
+floor requirements during the parallel run period)
+Risk-weighted assets (taking into consideration the
+9.02
+Core tier-1 capital adequacy ratio
+China Merchants Bank
+Annual Report 2021
+16.54%
+Capital adequacy ratio
+The "Advanced Measurement Approach" refers to the advanced measurement approach set out in the "Capital Rules for Commercial Banks
+(Provisional)" issued by the former CBRC on 7 June 2012 (same as below). In accordance with the requirements of the Advanced Measurement
+Approach, the scope of entities for calculating the capital adequacy ratio of the Group shall include China Merchants Bank and its subsidiaries.
+The scope of entities for calculating the capital adequacy ratio of the Company shall include all the domestic and overseas branches and
+subbranches of China Merchants Bank. As at the end of the reporting period, the Group's subsidiaries for calculating its capital adequacy
+ratio included CMB Wing Lung Bank, CMB International Capital, CMB Financial Leasing, CMB Wealth Management, China Merchants Fund,
+CIGNA & CMAM and CMB Europe S.A. During the parallel run period when the advanced capital measurement approaches were implemented,
+a commercial bank shall use the capital floor adjustment coefficients to adjust the amount of its risk-weighted assets multiplying the sum
+of its minimum capital requirement and reserve capital requirement, total amount of capital deductions and the provision for excessive loan
+loss which can be included into capital. The capital floor adjustment coefficients shall be 95%, 90% and 80% respectively in the first year,
+the second year, and the third and subsequent years during the parallel run period. 2021 is the seventh year since the implementation of the
+parallel run period.
+(2)
+(1)
+Notes:
+Increased by 0.61
+percentage point
+7.39%
+Increased by 0.94
+percentage point
+8.00%
+10.64
+9,395,026
+10,394,899
+off-balance sheet assets
+Balance of adjusted on-balance sheet and
+Information on leverage ratio (2)
+Leverage ratio
+39,049
+62,535
+-37.56
+11.17%
+Core tier-1 capital adequacy ratio
+10.38
+5,710,544
+6,303,544
+Risk-weighted assets
+10.68%
+17.76
+927,277
+Net capital
+19.76
+694,184
+831,380
+15.45
+787,438
+610,092
+Increased by 0.49
+Tier-1 capital adequacy ratio
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Company under the Weighted Approach were 10.60%, 12.73% and 14.26%
+respectively, representing an increase of 0.48, 1.06 and 0.95 percentage point respectively as compared with the
+end of the previous year.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+42
+The "Weighted Approach" refers to the Weighted Approach for credit risk, the Standardised Measurement Approach for market risk and
+the Basic Indicator Approach for operational risk in accordance with the relevant provisions of the "Capital Rules for Commercial Banks
+(Provisional)" issued by the former CBRC on 7 June 2012. Same as below.
+Note:
+percentage point
+Increased by 0.92
+percentage point
+14.71%
+Capital adequacy ratio
+percentage points
+Increased by 1.03
+12.16%
+13.19%
+13.79%
+704,337
+year as compared
+with the end of the
+previous year (%)
+Increase/decrease at
+the end of the current
+percentage point
+Increased by 0.34
+11.81%
+12.15%
+Core tier-1 capital adequacy ratio
+12.82
+Tier-1 capital adequacy ratio
+4,505,299
+floor requirements during the parallel run period)
+Risk-weighted assets (taking into consideration the
+8.62
+450,158
+Capital adequacy ratios under
+Operational risk weighted assets
+5,082,896
+Capital adequacy ratio
+14.59%
+13.62%
+31 December
+2020
+2021
+31 December
+Net tier-1 capital
+Net core tier-1 capital
+the Weighted Approach (note)
+(in millions of RMB, except for percentages)
+Capital adequacy ratios under
+The Group
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio
+and the capital adequacy ratio of the Group under the Weighted Approach were 11.17%, 13.19% and 14.71%
+respectively, representing an increase of 0.49, 1.03 and 0.92 percentage point respectively as compared with the
+end of the previous year.
+percentage point
+Increased by 0.94
+16.29%
+17.23%
+percentage point
+Increased by 0.97
+(in millions of RMB, except for percentages)
+Capital adequacy ratios under
+Chapter III Management Discussion and Analysis
+488,970
+In terms of underlying technology capabilities, we continued to promote the host and application cloud, laying
+a solid foundation for agile business development. As at the end of the reporting period, the project's progress
+exceeded 75%. Based on the six-level structure of data, analysis, products, services, operation and traffic, we
+systematically built technological support to empower extensive wealth management. The Company has obtained
+the qualification of digital RMB operation institution, and the digital RMB was officially launched on 4 January 2022
+to provide customers with digital wallet services.
+60,296
+19.02
+3,731,603
+4,441,186
+Of which: Credit risk weighted assets
+Market risk weighted assets
+17.18
+4,298,888
+5,037,500
+the parallel run period)
+consideration the floor requirements during
+Risk-weighted assets (without taking into
+18.42
+821,290
+972,606
+Net capital
+19.76
+694,184
+831,380
+Net tier-1 capital
+15.45
+610,092
+704,337
+Net core tier-1 capital
+year as compared
+with the end of the
+previous year (%)
+Increase/decrease at
+the end of the current
+2020
+31 December
+31 December
+2021
+In terms of cost reduction and efficiency enhancement, the remarkable results have been achieved for Al simulating,
+assisting and substituting human, and smart Al customer service, voice quality inspection, intelligent reviewing and
+other services have achieved a total of more than 6,000 staff replacement. The Company has established cooperative
+relations with 62 provident fund centers in respect of smart Al customer service, provided smart customer service
+for 26 provident fund centers, and introduced 41 various service interfaces of provident fund. Through measures
+such as technological improvement, resource management and reuse of old equipments, the Company saved cost
+exceeding RMB100 million in respect of IT infrastructure during the year. The Company systematically promoted the
+efficiency improvement of the science and technological team, which led to the increase of the scale of R&D output
+by more than 30% year-on-year. The Conch RPA (robotic process automation) platform independently developed by
+the Company has achieved a comprehensive replacement for foreign mature products, with a total of 2,000 scenario
+applications developed. The Company built the "Huidian Privacy (4) Computing Platform" and realised the
+interconnection with leading privacy computing manufacturers. This platform has been applied in multiple business
+scenarios and provided users with more comprehensive privacy protection services.
+75,595
+-20.24
+2.
+Operational risk weighted assets
+In view of the above, the Group will adopt the following measures to maintain a relatively good level of net interest
+margin in the industry. As for assets, the Group will continue to optimise the credit asset structure, strengthen
+loan pricing management, and further improve the risk pricing capability. Meanwhile, the Group will strengthen
+forward-looking judgments on market interest rates, improve the efficiency of capital use, and appropriately
+increase the allocation of bonds and high-yield financial institution assets. As for liabilities, the Group will continue
+to promote high-quality growth of deposits, prioritise the growth of low-cost core deposits, and consolidate the
+advantage of deposit costs. Meanwhile, the Group will flexibly arrange marketised funding sources and promote the
+steady growth in low-cost financial institution demand deposits.
+Net non-interest income
+During the reporting period, driven by the cyclic value chain of extensive wealth management, the total customer
+assets under management by the Group maintained rapid growth, which had propelled the simultaneous operations
+of asset management, asset custody, investment banking and other businesses. As a result, the Group realised the
+generation of income from multiple sources such as wealth management, asset management and asset custody,
+demonstrating the coordinated development of various businesses. In addition, the further deepening of layered
+management of wholesale customers and the integrated transformation of investment banking and commercial
+banking business had also brought new growth opportunities for wholesale cash management, trade finance,
+cross-border business and supply chain finance. During the reporting period, the Group achieved net non-interest
+income of RMB127.488 billion, representing a year-on-year increase of 21.13% and accounting for 38.47% of net
+operating income, up by 2.21 percentage points year-on-year. Among the Group's net non-interest income, net fee
+and commission income was RMB94.447 billion, representing a year-on-year increase of 18.82% and accounting for
+74.08% of net non-interest income; other net non-interest income amounted to RMB33.041 billion, representing a
+year-on-year increase of 28.25%.
+47
+48
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+The following is an analysis of the Group's net fee and commission income during the reporting period from the
+perspective of major items. Fee and commission income from wealth management amounted to RMB35.841
+billion, representing a year-on-year increase of 29.00%, of which income from agency distribution of funds
+amounted to RMB12.315 billion, representing a year-on-year increase of 36.20%, which was mainly attributable
+to the Company's long-term layout and various allocation measures in mutual fund business, leading to the further
+expansion of business advantages and growth in both trading and retention income, as well as the gradual increase
+in the share of retention income contribution thanks to the stable increase in existing scale; income from agency
+distribution of insurance policies amounted to RMB8.215 billion, representing a year-on-year increase of 42.80%,
+which was mainly attributable to the fact that the Company proactively responded to regulatory calls, promoted
+the return of agency distribution of insurance policies to the origin of protection, and focused on the development
+of protection insurance business; income from agency distribution of trust schemes amounted to RMB7.542 billion,
+representing a year-on-year decrease of 1.10%, which was mainly attributable to the decrease in existing business
+against the backdrop of suppression of financing trusts and control of real estate trusts business; income from
+agency sales of wealth management products 5 amounted to RMB6.292 billion, representing a year-on-year increase
+of 53.69%, which was mainly attributable to the expansion in advantages of CMB Wealth Management's products,
+construction of an open platform to offer products, as well as the admirable expansion in the sales scale of retail
+wealth management products; income from securities brokerage amounted to RMB1.281 billion, representing a
+year-on-year increase of 22.73%, which was mainly attributable to the increase in securities brokerage income of
+CMB International Capital and CMB Wing Lung Bank along with the rising trading volumes of the robust Hong
+Kong capital market during the first half of 2021; income from agency distribution of precious metals amounted
+to RMB196 million. Fee and commission income from asset management amounted to RMB10.856 billion,
+representing a year-on-year increase of 57.52%, which was mainly attributable to the growth in the income from
+fund management fees of China Merchants Fund and CMB International Capital and the fee income from wealth
+management products of CMB Wealth Management, all being subsidiaries of the Group. Commission income from
+custody businesses amounted to RMB5.433 billion, representing a year-on-year increase of 27.75%, which was
+mainly attributable to the scale expansion and continuous structural optimisation of custody businesses. Income
+from bank card fees amounted to RMB19.377 billion, representing a year-on-year decrease of 0.89%, which was
+mainly attributable to the decrease in offline transaction volumes of credit cards. Income from settlement and
+clearing fees amounted to RMB13.902 billion, representing a year-on-year increase of 9.89%, which was mainly
+attributable to the increase in the income of online payment.
+Looking forward to 2022, the Group will continue to focus on customer demands and promote the quality
+development of net non-interest income. The first is to continuously promote the overall planning of cyclic extensive
+wealth management value chain to accelerate digital transformation, platform transformation and ecological
+transformation, and truly gain insight into the wealth needs throughout the customers' full-life cycle from the
+perspective of maximising their income, so as to achieve the growth of and add value to their assets, and on this
+basis, promote the flywheel operations of the comprehensive integration of various businesses under the cyclic
+extensive wealth management value chain of "wealth management-asset management-investment banking", thus
+increasing the contribution of extensive wealth management income to the Group's income. The second is to
+synergise the development of traditional non-interest income by, on the one hand, making use of digital means and
+collaborative integration measures to increase the efforts in retail customer acquisition and promotion and promote
+the stabilisation and rebounding of the increase of both credit card income and debit card settlement income; on
+the other hand, taking the improvement of online level as an important starting point for wholesale business, deeply
+grasping the all-round basic financial needs of high-quality customers and penetrating into their various key sections
+such as payment collection, transaction, cash management, international settlement and trade financing, driving the
+growth of trading banking business and cross-border business income. The third is to strengthen market research
+and judgment, improve trading capability, and achieve a relatively stable and healthy growth in the income from
+financial market proprietary business during the volatile economic and policy cycles.
+In the retail business line, we piloted the system of enlarged job profiles to lift the job duties barriers among
+marketing, wealth management, retail loan business, credit card and other positions, which widened the career
+paths for employees while improving service efficiency. In the wholesale business line, we piloted a project-based
+operation and established a "virtual department" centering on core customers and the investment chain and
+industrial chain enterprises behind them, where members from customers, products, risk departments and different
+branches were jointly responsible for solving the core requirements of customers. We continued to deepen the
+communication mechanism between cadres and employees, promoted communication of cadres across business lines
+and institutions, and strengthened the process management of openness and integration of cadres.
+Income from agency sales of wealth management products refers to the income related to sales services provided for wealth management
+products of banks by the Group.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.
+Risk management and control for real estate sector
+49
+49
+We continued to build a light-model culture and introduced the "Simple Work Management Tips ()" to
+provide a methodology for grassroots managers to practice the "Simple Work Style ()" and help managers
+improve their "Simple Work Leadership ()". We also carried out the "Simple Work 100 (100)"
+activity to set an example for grassroot management for all employees as well as the "Simple Work Inspection (
+The State currently continues to adhere to the positioning of "housing is for living in, not for speculation" in the
+real estate industry and the guidance of stabilising land price, housing price and market expectations, accelerate
+the development of long-term rental housing market, promote the construction of affordable housing, uphold
+the combination of renting and purchasing and step up the establishment and improvement of a comprehensive
+long-term mechanism for real estate industry. In terms of actively preventing and resolving potential risks in the
+real estate industry, it emphasises "assigning the responsibilities to the local, financial regulatory and industry
+competent authorities, and asserting the primary responsibilities of enterprises for self-rescue". While supporting the
+commercial housing market to better satisfy the reasonable housing needs of homebuyers, the government adopts
+city-specific policy to promote the virtuous cycle and healthy development of the real estate market.
+"action to help the organisation in self-inspection and self-correction. The continuous cultural promotion
+enhanced cadres and employees' sense of recognition and willingness to practice the CMB culture. During the
+reporting period, the views of the internal forum "Egg Shell" exceeded 24 million times, and the employees put
+forward 3,624 suggestions, some of which have been embraced by the Company, and have been used to optimise
+our work and processes, so as to promote the rectification of problems and management improvement.
+Chapter III Management Discussion and Analysis
+Continuous evolution of the organisational model of openness and integration
+The Company built a "customer-centric" organisation and team. During the reporting period, the retail finance and
+corporate finance business lines were restructured to further rationalise the business logic and internal processes,
+thereby strengthening the customer acquisition and business cooperation. We continued to explore an integrated
+team, timely summarised the integration paradigm in key integration scenarios and kept iterating.
+China Merchants Bank
+Net interest margin
+The Group emphasised the risk prevention in the real estate sector. The Group optimised its internal credit policy in
+a dynamic manner according to the macro policies to the real estate industry, regulatory requirements and industrial
+developments in active response to the guidance of national policy in accordance with the overall strategy of "total
+volume control, focus on customers and regions, adjustment of structure, and strict management", and maintained
+a stable and orderly granting of credit loans to real estate industry. As at the end of the reporting period, the
+total balance of the businesses relating to real estate of which the Group assumed credit risks, such as actual and
+contingent credit, proprietary bond investments, and proprietary investment of non-standardised assets amounted
+to RMB511.489 billion, representing an increase of 3.48% as compared with the end of the previous year, of which
+the Company's corporate real estate loan balance was RMB355.977 billion, representing an increase of RMB13.657
+billion as compared with the end of the previous year and accounting for 6.78% of the Company's total loans and
+advances to customers, representing a decrease of 0.46 percentage point as compared with the end of the previous
+year, which was mainly granted to quality strategic customers; the total balance of the businesses of which the
+Group did not assume credit risks, such as wealth management funds, entrusted loans, agency distribution of trust
+schemes under the active management by cooperative institutions, and debt financing instruments with the Group
+as the lead underwriter, amounted to RMB412.078 billion, representing a decrease of 20.61% as compared with
+the end of the previous year. Affected by factors such as industry policy control and decline in the prosperity of real
+estate industry, the debt risk of some "high-debt, high-leverage and high-turnover" real estate enterprises increased
+during the reporting period. As at the end of the reporting period, the Company's non-performing loan ratio of
+corporate real estate loans was 1.39%, representing an increase of 1.16 percentage points as compared with the
+end of the previous year. The customer structure of real estate business, of which the Company assumed credit risks,
+has remained sound. Among which, the balance with customers featuring high credit rating accounted for 86.62%.
+In the future, the Group will continue to firmly implement relevant national policies on the real estate industry. With
+respect to the real estate credit business of which the Group assumes credit risks, the Group will continue to carry
+out total volume control and customer credit limit management, focus on central cities and strategic customers,
+constantly adjust the customer and region structure of real estate sector, further enhance the post-investment and
+post-loan management, strictly implement closed management requirements for real estate loans and strengthen the
+project risks monitoring and analysis. With respect to the real estate business of which the Group does not assume
+credit risks, the Group will adhere to the regulatory requirements to strengthen investor suitability management,
+disclose key risk information of products, and earnestly perform its corresponding supervision responsibilities. The
+Group will closely follow the macro policies on real estate sector and reinforce the research and judgment of the
+real estate risks. It is expected that against the backdrop of the current macro environment and industry policies, the
+quality of real estate assets of the Group will remain stable as a whole.
+1.
+3.9 Key Business Concerns in Operation
+Annual Report 2021
+In 2021, the net interest margin of the Group was 2.48%, representing a decrease of 1 basis point year-on-year;
+and the net interest margin of the Company was 2.53%, representing a decrease of 3 basis points year-on-year.
+Such decrease was mainly due to a decline in loan yields resulting from the cumulative impact of multiple cuts in
+the Loan Prime Rate (LPR) in the previous year. In order to maintain a stable net interest margin, the Group, on the
+one hand, continued to optimise the structure of both assets and liabilities and improve the efficiency of capital
+use on the asset side, resulting in a steady increase in the proportion of high-yield assets, while the low-cost core
+deposits on the liability side maintained a good growth momentum, and its proportion in interest-bearing liabilities
+increased further. On the other hand, the Group insisted on refined management of the cost of liabilities, including
+the year-on-year decrease in cost ratio of customer deposits, financial institution demand deposits and interbank
+certificates of deposits. The continued optimisation of the structure of both assets and liabilities, as well as the
+decline in the cost of liabilities, to a certain extent, had made up for the impact of the decline in loan yields.
+Looking forward to 2022, the Group will face greater challenges in maintaining a stable net interest margin. On the
+one hand, the downward adjustment of LPR in late 2021 and early 2022 and the policy stance in 2022 will continue
+to drive further reductions in financing costs for real economy, with downward pressure on loan pricing, while
+falling market interest rates will drive down non-credit asset yields. On the other hand, rising customer demand
+for higher deposit returns and the growing wealth attributes of deposits have resulted in intense competition for
+deposits, with subsequent costs expected to increase and remain rigid, squeezing the net interest margin. However,
+there are also some favorable factors. Firstly, the central bank lowered the deposit reserve ratios at the end of
+2021, which will further optimise the Group's asset and liability structure. Secondly, competitive market practice will
+be further regulated, allowing the Group to fully leverage its strength in comprehensive customer operations and
+services to boost deposit growth.
+performing
+loan ratio
+mentioned
+overdue
+loans
+(in millions of RMB, except for percentages)
+advances
+loans
+(%)
+loans
+mentioned
+special-
+Percentage
+of overdue
+502
+0.32
+1,727
+1.11
+Others(3)
+19,700
+1,349
+6.85
+153
+0.78
+1,358
+6.89
+Total loans and advances to customers
+5,252,286
+Loans and
+48,748
+43,540
+0.83
+55,673
+1.06
+31 December 2020
+Balance of
+Balance of
+non-
+Non-
+performing
+Balance of
+Percentage
+loans (%)
+of special-
+Balance of
+0.93
+loans
+0.61
+Corporate loans
+0.21
+2,836
+0.60
+Residential mortgage loans
+1,264,388
+3,736
+0.30
+1,516
+0.12
+1,014
+3,833
+Credit card loans
+746,559
+12,421
+1.66
+22,554
+3.02
+20,059
+2.69
+Consumer loans (2)
+0.30
+0.63
+3,013
+474,528
+1,758,951
+29,767
+1.69
+11,389
+0.65
+25,096
+1.43
+Discounted bills
+327,479
+459
+1.02
+0.14
+Retail loans
+2,643,953
+21,690
+0.82
+25,710
+0.97
+29,562
+1.12
+Micro-finance loans
+(%)
+1,595
+0.28
+Consumer loans (2)
+During the reporting period, the Company strengthened the control of its risks associated with key areas such as
+consumer financing business, local government financing platforms, and other industries under close surveillance.
+The overall asset quality was stable. In 2022, in active response to changes in external macro-economic situation, the
+Company will enhance the research and judgment on risk management and control in areas such as micro-finance
+loans, local government financing platforms and the industries under close surveillance for better risk prevention and
+control in key areas.
+Asset quality in key areas
+7.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+In 2022, the Company will continue to conduct in-depth research on the internal and external risk situation, enhance
+the ability of industry research and customer awareness, adjust the customer structure and business structure,
+reinforce the post-investment and post-loan management, constantly conduct early-warning screening in key areas
+and penetrating risk monitoring with control measures, strictly implement asset classification management to fully
+expose risks, make full loss provision, and standardise the disposal of non-performing assets by various methods and
+apply them in an active way such as recovery by collection, write-off and transfer, so as to strive to maintain overall
+stability of asset quality.
+During the reporting period, the Company steadily pushed forward the rectification of wealth management business
+and the disposal of existing assets according to the regulatory policies regarding the adjustments of the transitional
+period under the New Regulation on Asset Management. In 2021, the Company disposed of the eligible risky assets
+associated with its wealth management business by back-to-balance sheet arrangement and including such assets
+under the financial investments, completed the disposal of wealth management assets by back-to-balance sheet
+arrangement with a total principal amount of RMB11.004 billion and made asset loss provision of RMB11.004 billion
+based on the expected credit loss model. For the assets that have been restated in the balance sheet, the Company
+worked with CMB Wealth Management for active collection and disposal. As at the end of the reporting period, the
+balance of the principal amount of wealth management assets by back-to-balance sheet arrangement amounted to
+RMB20.976 billion, with asset loss provision of RMB20.750 billion.
+During the reporting period, the Company played an active role in the disposal of non-performing loans, taking
+various approaches to reduce and dispose of risk assets. During the reporting period, the Company disposed of
+non-performing loans amounting to RMB50.034 billion, of which RMB23.580 billion was written off; RMB13.163
+billion was recovered by collection and RMB10.601 billion was securitised; and RMB2.690 billion was disposed of by
+repossession, transfer, restructuring, upward migration, remission and other means.
+The Company has always adhered to prudent and stable customer selection and asset allocation, spurred by its
+sufficient risk compensation and strong capabilities of guarding against risks. As at the end of the reporting period,
+the balance of allowances for impairment losses on loans of the Company amounted to RMB239.185 billion,
+representing an increase of RMB10.969 billion as compared with the end of the previous year. The allowance
+coverage ratio was 490.66%, representing an increase of 47.15 percentage points as compared with the end of
+the previous year; the allowance-to-loan ratio was 4.55%, representing a decrease of 0.27 percentage point as
+compared with the end of the previous year; the credit cost ratio was 0.73%, representing a year-on-year decrease
+of 0.30 percentage point during the reporting period.
+During the reporting period, the Company recorded newly formed non-performing loans of RMB47.319 billion,
+representing a year-on-year decrease of RMB8.824 billion, with a non-performing loan formation ratio of 0.95%,
+down by 0.31 percentage point year-on-year. In terms of major business categories, the amount of newly formed
+non-performing corporate loans was RMB 10.976 billion, representing a decrease of RMB4.105 billion year-on-year;
+the amount of newly formed non-performing retail loans (excluding credit cards) was RMB7.137 billion, representing
+a decrease of RMB1.484 billion year-on-year; the amount of newly formed non-performing loans of credit cards was
+RMB29.206 billion, representing a decrease of RMB3.235 billion year-on-year. As for regions, the non-performing
+loans were mainly formed in Central China, Yangtze River Delta and Bohai Rim, but both the formation amounts
+and formation ratios of non-performing loans in various regions decreased year-on-year. As for industries, the
+formation of non-performing loans was mainly distributed in real estate industry, manufacturing industry, wholesale
+and retail industry, of which the formation amounts and formation ratios of non-performing loans to the industries
+such as real estate, mining, culture, sports and entertainment, accommodation and catering, and education
+increased year-on-year. From the perspective of customer base, formation of most of the non-performing loans were
+due from large-sized enterprises but both formation amounts and formation ratios of non-performing loans to the
+large-, medium- and small-sized enterprises decreased year-on-year.
+The following table sets out the asset quality of the Company's loans and advances by product type as of the date
+indicated.
+6. The formation and disposal of non-performing assets
+China Merchants Bank
+Annual Report 2021
+52
+51
+Refers to the small- and micro-sized enterprise loans + private industrial and commercial business operating loans + small- and micro-sized
+enterprise operating loans with a single account credit limit of RMB10 million, according to the appraisal caliber of the CBIRC, which is the
+full-scale RMB domestic caliber, excluding bill financing for the current period as compared with the caliber of the previous periods, with
+corresponding adjustments made to the comparable figures at the beginning of the period.
+7
+Looking ahead to 2022, in view of macroeconomic uncertainties with challenges in granting of loans, the Company
+will adhere to its strategic positioning of "One Body with Two Wings" and the strategic direction of "Light-model
+Bank" to strive for stable growth of credit assets by taking into account both the change in macroeconomic situation
+and its internal development needs. Specifically, retail loans are expected to maintain steady growth. The Company
+will continue to implement the regulatory policies and actively optimise the credit asset structure. The growth rate
+of residential mortgage loans will decrease while the micro-finance loans, consumer loans and credit card loans are
+expected to maintain a rapid growth, with further increase in the proportion of non-housing mortgage loans. The
+growth rate of corporate loans is expected to be the same as that in 2021. The Company will focus on the structural
+adjustment of corporate customers, driving credit investment in the industries and sectors of new growth engine,
+green economy, high-quality track manufacturing, regional advantageous and characteristic industries and self-
+controllable industries for ongoing optimisation of the structure of corporate credit.
+In terms of inclusive finance, the Company actively supported the development of small- and micro-sized enterprise.
+As at the end of the reporting period, the balance of SME inclusive finance loans of the Company amounted to
+RMB601.100 billion, representing an increase of RMB92.639 billion or 18.22% as compared with the beginning
+of the year, which was 7.19 percentage points higher than the growth rate of overall loans of the Company. The
+number of accounts with SME inclusive finance loan balance were 913,300, representing an increase of 443,800
+as compared with the beginning of the year. During the reporting period, the newly granted SME inclusive finance
+loans amounted to RMB435.426 billion and had an average interest rate of 5.28%.
+In 2021, the Company earnestly implemented the decisions and arrangements of Central Committee of the CPC
+and the State Council on supporting the small- and micro-sized enterprises, fully supported the relief of enterprises,
+effectively strengthened the credit support for enterprises in key areas of fighting against the pandemic and
+safeguarding supply and resumption of work and production, as well as small- and micro-sized enterprises and
+private industrial and commercial businesses greatly affected by the pandemic, and continued to carry out the policy
+for periodical deferment of repayment of the principal and interest. From 2020 to 2021, the Company handled
+a cumulative amount of RMB195.683 billion in the loans granted to the customers who applied for deferment
+of repayment of the principal and interest, of which RMB43.111 billion took place in the loans granted to the
+customers who applied for deferment of repayment of the principal and interest in 2021. As at the end of the
+reporting period, the balance of the loans granted to the customers who applied for deferment of repayment of the
+principal and interest amounted to RMB1.570 billion and asset quality was stable. It is expected that the borrower
+may repay the principal and interest normally in the future. In 2022, the People's Bank of China converted the
+extension facility for SME inclusive finance loans into the supporting facility for SME inclusive finance loans, and
+incorporated the credit loan support plan of SME inclusive finance loans into the refinancing scheme for agriculture
+business and SMEs. The Company will implement relevant requirements, make good use of two successive converted
+tools, and continue to strengthen its support for small- and micro-sized enterprises on the premise of risk prevention
+and control.
+In 2021, the Company recorded an overall steady growth in its loans. As at the end of the reporting period, the
+Company's total loans and advances to customers amounted to RMB5,252.286 billion, representing an increase of
+RMB521.903 billion or 11.03% as compared with the end of the previous year, among which, retail loans amounted
+to RMB2,941.020 billion, representing an increase of RMB297.067 billion or 11.24% as compared with the end of
+the previous year. The growth of residential mortgage loans slowed down, but the growth of micro-finance loans,
+consumer loans and credit card loans contributed to the continuous and steady growth of the Company's retail
+loans. Corporate loans amounted to RMB1,882.161 billion, representing an increase of RMB123.210 billion or 7.00%
+as compared with the end of the previous year. The slowdown in the year-on-year growth rate was mainly due to
+the decline in the financing demand from corporate customers. To respond to the challenge of insufficient effective
+credit demand, the Company actively promoted the structural adjustment of corporate customers, supported the real
+economy development, and increased the loan granting to key areas such as new growth engine, green economy
+and high-quality manufacturing industries.
+Loan business
+Chapter III Management Discussion and Analysis
+5.
+31 December 2021
+Balance of
+non-
+Corporate loans
+(%)
+loans
+loans (%)
+loans
+(%)
+loans
+advances
+(in millions of RMB, except for percentages)
+loans
+Balance of
+overdue
+mentioned
+loan ratio
+performing
+Loans and
+of overdue
+Balance of
+Percentage
+Percentage
+of special-
+Balance of
+special-
+Non-
+performing
+mentioned
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+3,488
+0.62
+1,792
+0.32
+3,076
+0.55
+Residential mortgage loans
+1,364,518
+3,806
+0.28
+560,565
+4,928
+3,782
+118,945
+Credit card loans
+840,253
+13,844
+1.65
+25,700
+3.06
+26,818
+3.19
+0.36
+Micro-finance loans
+1.25
+36,761
+The core deposits represent the internal management indicator for the Company's deposits, excluding large-denomination certificates of
+deposit, structured deposits and other high-cost deposits.
+6
+Faced with the challenges of a changing external environment for deposits, the Company responded to the pressure
+of slowing deposit growth and promoted the continuous optimisation of deposit structure through measures such
+as deposit classification management, assessment guidance and increased efforts in customer expansion. During the
+reporting period, the Company's average daily balance of core deposits was RMB5,003.180 billion, representing an
+increase of 18.35% as compared with the previous year, and accounting for 87.26% of the average daily balance
+of customer deposits, representing an increase of 5.13 percentage points as compared with the previous year;
+the average daily balance of demand deposits was RMB3,725.347 billion, representing an increase of 18.92% as
+compared with the previous year, and accounting for 64.98% of the average daily balance of customer deposits,
+representing an increase of 4.11 percentage points as compared with the previous year. As at the end of the
+reporting period, the balance of structured deposits of the Company amounted to RMB266.317 billion, representing
+a decrease of 0.27% as compared with the end of the previous year, and the proportion of structured deposits was
+4.36%, representing a decrease of 0.58 percentage point as compared with the end of previous year.
+Looking forward to 2022, with the basic macroeconomic stance of "prioritising stability" and "making steady
+progress", the role of prudent monetary policy and proactive fiscal policy will become more prominent. It is
+expected that the external environment for the growth of commercial bank deposits will be improved marginally.
+However, the trend of deposit concentration to the leading banks is expected to continue and the competition
+will remain fierce. The Company will still face pressure from both scale growth and cost control. To cope with the
+above challenges and maintain high-quality growth of deposits, the Company intends to start from the following
+aspects: firstly, grasp the external opportunities, seize the investment and financing capital operation chain and
+enhance deposit derivation of real economy; secondly, ensure the operations of deposit growth in terms of quantity
+and quality through internal management initiatives, and adhere to the leading position of core deposit growth
+while continuing to strengthen the quantity and price control on high cost deposits such as structured deposits and
+large-denomination certificates of deposit to maintain a higher proportion of demand deposits, so as to maintain the
+advantage of relatively low deposits costs; thirdly, count on the ongoing growth of customer base to expand deposit
+funding sources.
+As at the end of the reporting period, the balance of the Company's deposits from customers amounted to
+RMB6,112.677 billion, representing an increase of RMB704.750 billion or 13.03% as compared with the end of the
+previous year, which was mainly driven by the increase of low-cost core deposits. The growth rate of the Company's
+customer deposits decreased as compared with the previous year, mainly due to the following reasons: firstly, the
+M2 growth rate declined, which was 9.0% in 2021, representing a decrease of 1.1 percentage points as compared
+with the previous year, and the increment in deposits from financial institutions was less than the same period of
+the previous year; secondly, the uncertainty of economic growth increased as the profitability of enterprises had not
+yet fully recovered. The insufficiently activated corporate funds and weak growth of demand deposits, as well as
+the weakened corporate investment willingness and the declined financing demand resulted in a decrease in deposit
+derivation; thirdly, fiscal expenditures and bonds issuance of local governments generally lagged behind, leading to
+a slowdown in capital flow.
+Deposits from customers
+Chapter III Management Discussion and Analysis
+4.
+China Merchants Bank
+Annual Report 2021
+50
+1.31
+10,456
+0.56
+18,912
+1.00
+Discounted bills
+429,105
+9
+Retail loans (1)
+2,941,020
+24,082
+0.82
+33,075
+1.12
+155,984
+1,458
+24,666
+385
+Focusing on the mainstay of building the cyclic extensive wealth management value chain, the Company deeply
+promoted the digital transformation and development of the Bank and the upgrade of the 3.0 business model.
+During the reporting period, the information technology expenses amounted to RMB13.291 billion, up by 11.58%
+year-on-year, and the ratio of the information technology expenses to the Company's net operating income was
+4.37%.
+Fintech
+During the reporting period, the Company upgraded its supply chain business model featuring "providing services by
+all branches in a collaborative manner to one enterprise and its industrial chain ()", to a model featuring
+"providing services to one enterprise and its industrial chain through national layout (-)", which aims to
+address the difficulty of financing for core enterprises and their upstream and downstream segments along industrial
+chains while integrating the Company's resources across branches and business lines with a further focus on
+customers to form a bank-wide customer service network that meets customer needs. As at the end of the reporting
+period, the Company served 222 core enterprises through such business mode, covering 16,149 suppliers, among
+which 13,314 suppliers were granted the financing support, with the amount of granting loans of RMB159.8 billion.
+In addition, leveraging the advantages of Fintech, the Company realised the online migration of the whole process
+of the accounts receivable of dual factoring business, which greatly improved the efficiency of settlement and
+factoring facility and shortened the duration for granting loans from days to hours, while adopting differentiated
+service schemes for manufacturing, retail and wholesale, logistics and other industries for significant breakthroughs
+in the operation depth of core enterprises and the coverage of upstream and downstream enterprises. As at the
+end of the reporting period, the number of core enterprise customers increased by 29.74% year-on-year, and the
+number of upstream and downstream customers increased by 58.39% year-on-year.
+In terms of bill financing, the Company helped micro-, small- and medium-sized enterprises address the difficulty of
+high financing cost by leveraging advantages of integrating the whole bill products such as settlement, acceptance,
+discount, bills pool, pledge, transfer discount and rediscount. During the reporting period, the Company vigorously
+promoted the development of commercial acceptance bill business. The commercial acceptance bill discounting
+business significantly increased by 76.10% throughout the year and jumped to the first in the banking industry (data
+from the Commercial Bank Bill Business Association). In the meantime, the Company actively drove the supply chain
+bill business, advanced accounts receivable securitisation from the source through optimising products and systems
+with constant iteration to support the development of micro-, small- and medium-sized enterprises. During the
+reporting period, the bill business of the Company served more than 140 thousand customers.
+In terms of matched deals, centering on the complex and diversified investment and financing needs of customers,
+the Company took this as a starting point to continuously enhance our capability for multi-channel capital and
+asset organisation and introduce customers' financing demands to various capital parties in market transactions, so
+as to open up complete and reliable institutional investment and financing channels and strive to achieve efficient
+matching between investing and financing on the market. As at the end of the reporting period, the balance of
+matched deals included in FPA exceeded RMB300 billion.
+Chapter III Management Discussion and Analysis
+10.
+China Merchants Bank
+Annual Report 2021
+The eight compositions of non-traditional financing include: asset operation, proprietary non-standardised corporate investments, financing
+wealth management, debt financing instruments with the Company as the lead underwriter, matching transactions, financial leasing, cross-
+border coordination financing and leading syndicated loans.
+Traditional financing comprises of general corporate loans and commercial bills discounting (including transfer-out of outstanding bills),
+acceptance, letters of credit, financial guarantees and non-financial guarantees.
+Some financing wealth management businesses were eliminated during the period because they ceased to meet the scope of FPA, resulting in
+the same-caliber adjustment to the data at the beginning of the period with the balance of the adjusted FPA at the beginning of the period of
+RMB4,207.120 billion, of which amount of traditional financing amounted to RMB2,245.767 billion and amount of non-traditional financing
+amounted to RMB1,961.353 billion.
+12
+11
+10
+In terms of debt financing instruments as the lead underwriter, starting from the needs of strategic customers, the
+Company accurately captured the financing pain points of customers to give full play to the advantages of direct
+financing services for setting up a comprehensive bond underwriting service system. During the reporting period, the
+Company historically broke through the RMB500 billion benchmark in the underwriting of non-financial corporate
+debt financing instruments, outperforming the market growth rate by 16 percentage points and ranking third in the
+banking industry for the first time (WIND data).
+As at the end of the reporting period, the Company's balance of aggregate financing products to corporate
+customers (FPA) was RMB4,898.714 billion 10, representing an increase of RMB691.594 billion over the beginning of
+the year, among which, the balance of traditional financing 11 was RMB2,557.652 billion, representing an increase of
+RMB311.885 billion over the beginning of the year; the balance of non-traditional financing 12 was RMB2,341.062
+billion, representing an increase of RMB379.709 billion over the beginning of the year. The balance of
+non-traditional financing accounted for 47.79% of the balance of FPA, representing an increase of 1.17 percentage
+points over the beginning of the year. During the reporting period, the Company boosted the transformation
+of customer services, facilitated the development of the real economy with the service concept of "integrating
+investment banking and commercial banking" and made several achievements.
+With adherence to focusing on customer needs, leveraging its own credit resources and multi-channel fund
+organisation ability, through linkage and cooperation with internal and external institutions of the Group,
+and starting from multiple dimensions such as bond underwriting, wealth management funds, cross-border
+coordination financing, proprietary investment and bill financing, the Company provided corporate customers with
+three-dimensional, comprehensive and multi-level financing support to cater to the indirect and direct financing
+demands of customers in whole balance sheet and full-life cycle.
+Transformation of corporate customer services
+9.
+In recent years, the regulatory documents on systemically important domestic banks and in specific areas such as
+the "Provisional Measures for the Implementation of the Recovery and Disposal Plan of Banking and Insurance
+Institutions (£11 ££££‹ƒ»)" have been issued in succession. The international
+regulatory reform has continued to advance, and the final reform plan of Basel III will be fully implemented. Against
+such backdrop, the Company will continue to uphold the strategic direction of "Light-model Bank", and focus on
+the construction of the cyclic extensive wealth management value chain while constantly optimising capital allocation
+strategy to strengthen asset-liability portfolio management, as well as improving capital return management
+mechanism with the application of the economic value added (EVA) and the risk-adjusted return on capital (RAROC)
+and other valuation indicators to enhance the efficiency of capital use, tracing the progress of international capital
+regulatory reform, continuing to implement the internal capital adequacy assessment procedures (ICAAP), keeping
+a dynamic balance of supply and demand of capital, sticking to the principles in capital supplement that fund
+generation and accumulation shall be mainly from internal resources, with capital replenishment through external
+resources as additional assistance, comprehensively planning the use of various capital instruments and achieving
+fund-raising through various channels and ways to ensure the smooth operation of capital adequacy ratio.
+", the PBOC and the CBIRC jointly published the first list of domestic banks of systematic importance in China
+in October 2021, and simultaneously issued the "Ancillary Regulatory Provision for Systematically Important Banks
+(Trial) (Œ£í¬}£¥())". The Company is in the third group on the list, facing additional
+regulatory requirements such as 0.75% of supplementary capital and 0.375% of supplementary leverage ratio.
+Currently, the Company's capital adequacy ratio, leverage ratio, liquidity and other operating indicators at all levels
+are maintained at a high level, and shall satisfy the additional regulatory requirements.
+Following the issuance of the "Assessment Methods for Systemically Important Banks (Rí
+The Company adhered to the development strategies of marketisation, branding and internationalisation, and
+constantly promoted the innovation and development of assets securitisation business to provide room for capital
+saving. During the reporting period, the Company issued a total of 13 asset securitisation projects through the
+interbank market with a total issue size of RMB62.128 billion. The underlying assets included credit card loans, auto
+installment loans, residential mortgage loans and non-performing loans.
+Increase Fintech investment and strive to build Digital Bank. The Fintech Innovation Project Fund focused on
+the six major directions of C side ecological construction, B side ecological construction, digital operation, digital
+management, technological infrastructure, and innovation and incubation. It continued to support the acquisition
+of new capabilities and exploration of new models, and actively created an innovation atmosphere of openness
+and inclusiveness. During the reporting period, 559 new Fintech innovation projects were launched, and 587 new
+projects were put into operation. As at the end of the reporting period, the number of Bank's Fintech innovation
+projects launched and put into operation reached an aggregate of 2,665 and 1,961, respectively. The Fintech
+Innovation Project Fund has become an incubator and propeller for the new models of the Bank.
+Chapter III Management Discussion and Analysis
+Transform the talent structure to adapt to Digital Bank. The Company continued to increase efforts to
+introduce Fintech talents, set up Fintech elite training camps and attract students from STEM (science, technology,
+engineering, mathematics) majors to join through open and experiential recruitment, laying a solid foundation for
+the reserve of Fintech talents. At the same time, the Company established an internal training and cultivation system
+for Fintech talents, driving for the building of personnel teams such as product managers, operation managers, data
+analysts and R&D engineers for a coordinated and smooth talent structure with reasonable echelons, and constantly
+strengthening the Fintech awareness of all employees of the Bank to foster their digital thinking. As at the end
+of the reporting period, the number of R&D personnel of the Group reached 10,043, representing an increase of
+13.07% as compared with the end of the previous year.
+58
+1.23
+As at the end of the reporting period, the balance of total assets under management from retail customers of the
+Company amounted to RMB10,759.170 billion, representing an increase of 20.33% as compared with the end of
+the previous year. Among which, the balance of total assets under management from the Sunflower-level and above
+customers amounted to RMB8,836.409 billion, representing an increase of 20.30% as compared with the end of the
+previous year. As at the end of the reporting period, the balance of deposits from retail customers of the Company
+amounted to RMB2, 168.157 billion, representing an increase of 14.15% as compared with the end of the previous
+year and continuously ranking first among national small- and medium-sized banks according to data released by
+the PBOC. During the reporting period, the demand deposits accounted for 70.12% of the daily average balance
+of deposits from retail customers of the Company. As at the end of the reporting period, a total of 174,000,000
+All-in-one Cards had been issued by the Company for retail customers, up by 10.13% as compared with the end of
+the previous year.
+As at the end of the reporting period, the Company had 173 million retail customers (including debit and credit
+card customers), representing an increase of 9.49% as compared with the end of the previous year, among which,
+the number of Sunflower-level and above customers (those with minimum daily average total assets of RMB500,000
+for each month) reached 3,672,000, representing an increase of 18.38% as compared with the end of the previous
+year.
+During the reporting period, the Company took "creating value for our customers" as its original aspiration,
+integrated online and offline operations, created an open wealth platform, and further enhanced its product
+innovation and refined management capabilities under the framework of the cyclic extensive wealth management
+value chain. While realising the unity of customer interests and bank interests, the Company constantly broadened
+service boundaries, which achieved good results in customer group expansion and operation. The balance of retail
+customers and total assets under management from retail customers maintained rapid growth.
+Retail customers and total assets under management from retail customers
+During the reporting period, the profit before tax from the retail finance business of the Company amounted to
+RMB76.949 billion, representing an increase of 21.07% as compared with the previous year. Net operating income
+from the retail finance business amounted to RMB177.318 billion, representing an increase of 14.34% as compared
+with the previous year and accounting for 58.33% of the net operating income of the Company. Among the income
+from retail finance, the net interest income amounted to RMB115.991 billion, representing an increase of 12.75%
+as compared with the previous year and accounting for 65.41% of the net operating income from retail finance;
+the net non-interest income amounted to RMB61.327 billion, representing an increase of 17.46% as compared with
+the previous year while accounting for 34.59% of the net operating income from retail finance and 57.68% of the
+net non-interest income of the Company. During the reporting period, the fee and commission income from retail
+wealth management of the Company was RMB33.750 billion, representing an increase of 30.61% as compared
+with the previous year and accounting for 56.61% of the net fee and commission income from retail finance; the
+Company recorded a fee income of RMB19.228 billion from retail bank cards, representing a decrease of 0.85% as
+compared with the previous year.
+Business overview
+3.10.1 Retail finance business
+3.10 Business Operation
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Refers to the technical units that can be reused.
+15
+Refers to a visual business analysis platform that serves managers at all levels.
+14
+Refers to the three-level management structure comprising the bottom standard system, middle-level process specification and top-level
+decision-making analysis, and one-stop intermediate business management platform.
+13
+Deepen the transformation of technology structure and build digital technology system that adapts to
+the cyclic extensive wealth management value chain. On the one hand, the Company continuously built
+an open infrastructure of a "CMB Cloud ()" and two middle-offices (data middle-office and technology
+middle-office) to break the system and data silos for constant advancement in enterprise-level capabilities in order
+to maximise data value. As at the end of the reporting period, there were 2,811 shared components 15 of technology
+middle-office in the Company, of which 1,962 shared components were released during the reporting period. The
+bank-wide threshold for data usage was further lowered, and the number of personnel using big data accounted
+for about 40% of total number of employees of the Company. On the other hand, the Company continuously
+reinforced the construction and promotion of RPA (Robotic Process Automation), applet platform, low code platform
+and other tools to reduce the threshold of using technical tools for business personnel and empower staff for higher
+working efficiency in a digital way, thereby raising their sense of gain. The Company launched Conch RPA, a tool
+platform that supports users' rapid development and deployment, which can replace manual work to complete
+tasks with clear rules and high repeatability all year round unceasingly. It significantly enhanced business processing
+efficiency and staff happiness because they can invest the saved time in more creative and valuable work whilst
+it also effectively reduced the operational risk and operating cost. At present, Conch RPA has covered numerous
+business scenarios of the Head Office and branches and subsidiaries, such as daily office, foreign exchange business,
+payroll service and identification of counterfeit currencies. Nearly 60% of the personnel who use Conch RPA for
+self-development are business personnel.
+Enhance digital operation continuously and improve the efficiency of operation and management. The
+Company constantly promoted the online credit operations. It replaced the original offline manual operations
+through system construction in various steps such as pre-loan due diligence, in-loan approval and post-loan
+management. The online migration rate of the whole process of credit operations of the Company increased to
+89.46%, representing a year-on-year increase of 17 percentage points. It reduced the manual entry operations
+of staff by means of automatic assigning by the system in the information filling process. The automation rate of
+filling in and approving basic customer information increased to 88.47%, representing a year-on-year increase of
+28 percentage points. It built an intelligent analysis report generating system for operational risk. The generation
+efficiency of monthly analysis reports increased by 42.86% year-on-year and the operational efficiency of risk line
+personnel greatly improved. The Company built an intelligent financial management system to further optimise
+the intelligent budget system, continuously drove the construction of the "3+1" intermediate business intelligent
+management system 13 and the three-tier manager views 14, and set up a full-perspective customer comprehensive
+operation evaluation system and a full-level institutional operation monitoring system, which empowered the refined
+management throughout the Bank. While actively promoting machine audit to replace manual audit, the Company
+explored and promoted the "three noes (=)" financial reimbursement mode of "no paper invoices, no manual
+audit and no trouble reimbursement (¼ • \ •)", which improved the efficiency by 52% as
+compared with the traditional paper invoice reimbursement mode. Moreover, the Company accelerated the digital
+construction of cloud taxation to realise tax declaration with one click by making use of direct linkage between
+our Shenzhen institutions and tax authorities, along with continuous expansion of the application of Invoice Cloud.
+Financial integrated service platforms were established to strengthen financial management while enhancing
+staff experience, building an integrated new ecosystem for win-win cooperation among "business, finance and
+customers".
+Upgrade customer service continuously based on "people + digitalisation" and explore intelligent service
+mode for the future banking industry. Taking the needs of users as the starting point, the Company built a
+wealth brain and created intelligent wealth management consulting services with ongoing enhancement in the
+personalised services. During the reporting period, "Al Xiao Zhao (AI)", an intelligent wealth assistant, was
+launched for 24/7 wealth accompanying service. "Al Xiao Zhao" was designed based on big data technology, which
+can better understand customers and products through knowledge precipitation and machine training, providing
+customers with a brand-new experience of comprehensive wealth management services such as income enquiry,
+rise and fall analysis, interpretation of market hotspots, product recommendation and asset allocation suggestions.
+During the reporting period, the Company's relationship managers established online business relationships with
+Golden Card Holder customers, Sunflower customers and other customers through the accessing functions of the
+APPS, serving 12,640,000 customers, representing a year-on-year increase of 35.52%. The transaction amounts were
+RMB561.190 billion, representing a year-on-year increase of 18.76%.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+57
+China Merchants Bank
+Annual Report 2021
+59
+56
+(3)
+(2)
+(1)
+Notes:
+1.16
+54,658
+0.79
+37,558
+1.09
+56
+4,730,383
+Total loans and advances to customers
+2.86
+1,132
+1,882,161
+241
+2.69
+1,062
+39,533
+Others(3)
+1.43
+1,702
+0.32
+In view of the severe and complex external market environment, the Company further strengthened the post-loan management and heightened
+the asset classification standards. Firstly, loans overdue for more than 60 days were downgraded to non-performing loans. Secondly, the timing
+of recognising credit card loans as overdue loans was adjusted according to regulatory requirements. Thirdly, for retail borrowers with overdue
+or other risk signals of the Bank and other banks, all their loans in the Company were further adjusted to special-mentioned loans in strict
+accordance with regulatory requirements. Affected by the above factors, the amount of non-performing retail loans and the special-mentioned
+rate and overdue rate of retail loans increased.
+Following the further specification on the requirements of regulatory authorities for internet joint consumer loans and changes in the external
+environment, the Company took the initiative to make structural optimisation of consumer loans, actively adjusted the pilot internet joint
+consumer loan business on a small scale at the early stage, focused on high-quality consumer group with higher comprehensive contributions
+and superior asset quality performance, and vigorously developed proprietary consumer loans. During the reporting period, the Company
+included internet joint consumer loans under the statistical caliber of other retail loans, and the data at the beginning of the year were
+adjusted in accordance with the same statistical caliber.
+51,457
+53
+Consists primarily of commercial housing loans, automobile loans, house decoration loans, education loans, internet joint consumer loans
+and other personal loans secured by monetary assets, and the data at the beginning of the year were adjusted in accordance with the
+same statistical caliber. The increase in the non-performing ratio of other retail loans from the beginning of the year was mainly due to the
+suppressing in the scale of internet joint consumer loans. At the same time, the Company strictly identified the classification standards for this
+type of loans to strengthen credit risk management.
+55
+The statistical caliber of the industries under close surveillance has been changed, and the figures at the beginning of the year have been
+adjusted with the same caliber.
+The 15 industries include coal, coal chemical, coal trade, iron and steel, steel trade, basic chemical, commonly used metal ore mining,
+nonferrous metal smelting and calendaring, shipbuilding, plain glass, ocean freight, textile and chemical fiber, fertilizer manufacturing,
+machine tool and synthetic material manufacturing.
+9
+8
+With the approval of the PBOC and the CBIRC, the Company issued Undated Additional Tier 1 Capital Bonds in
+China's national inter-bank bond market with an issue size of RMB43 billion on 7 December 2021. The funds raised,
+after deducting the necessary issuance fees, have been used to supplement the Company's additional Tier 1 capital
+based on applicable laws and regulatory approvals. For details, please refer to the relevant announcements published
+on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company. The Company will
+continuously improve the level of shareholder returns through various methods such as improving the efficiency of
+capital utilisation and optimising the structure of assets and liabilities.
+The Company continued to optimise its business structure and to enhance capital management. During the reporting
+period, the Company satisfied the various capital requirements imposed by the CBIRC, with relatively adequate
+capital buffer.
+Capital management
+8.
+During the reporting period, the Company continued to classify the customers and cap the total number by the
+principle of categorising them into three types, namely whitelist customers, maintained customers and controlled
+customers from 15 industries under close surveillance that were greatly affected by supply-side structural reforms,
+overcapacity or the "dual carbon" policy. Among which, for the "whitelist" customers such as leading enterprises in
+the industries and regional quality enterprises, appropriate credit increase support would be given on the premise
+of controllable risk; for the "maintained" customers with relatively stable risks and acceptable operations, we will
+focus on listed entities, core enterprises within the group and companies with sound performances, maintaining the
+current customer base and iterating gradually, and the optimal allocation of customers and asset structure would
+be realised by means of total amount control and elimination of the inferior and selection of the superior; for the
+"control" customers such as zombie enterprises and zombie-like enterprises, enterprises with high leverage and high
+debts, single account quota management strategy would be implemented. As at the end of the reporting period, the
+business financing exposure to the industries under close surveillance conducted by the Company (calculated on the
+full statistical caliber) amounted to RMB142.027 billion, representing an increase of RMB19.405 billion as compared
+with the beginning of the year, which was mainly granted to the quality strategic customers and customers on
+the whitelist at Head Office and branches. The non-performing loan ratio of industries under close surveillance
+was 4.35%, down by 1.83 percentage points as compared with the beginning of the year. Affected by the risk
+exposure and constant shrinking business scale of individual existing customers, the non-performing loan ratios
+of industries including coal, iron and steel, and coal trade increased as compared with the beginning of the year,
+while the non-performing loan ratios of other industries decreased as compared with the beginning of the year. In
+light of the basic customer groups falling into the industries under close surveillance of the Company are mainly
+strategic customers and customers on the whitelist at Head Office and branches, with clear advantages in scale,
+cost and market as well as relatively strong ability to resist external risks, it is expected that the risks associated
+with the industries will be generally controllable in 2022. Subsequently, the Company will dynamically adjust the
+credit policy in related fields, taking into consideration national strategies such as the "dual carbon" target planning
+and implementation, industrial policies such as energy "dual control", financial regulatory policies and the actual
+operation of the market.
+The Company adhered to the principle of prudence and stability, and maintained steady growth of risk-weighted
+assets subject to maintaining the risks under control. As at the end of the reporting period, the growth rate of
+risk-weighted assets (having taken into consideration the floor requirements during the parallel run period) under the
+Advanced Measurement Approach of the Company was 12.82%; the ratio of the Company's risk-weighted assets
+(taking into consideration the floor requirements during the parallel run period) under the Advanced Measurement
+Approach to total assets was 58.42%. During the reporting period, the risk-adjusted return on capital (RAROC,
+before tax) under the Advanced Measurement Approach was 26.52%, significantly higher than the cost of capital.
+As at the end of the reporting period, the Core Tier 1 capital adequacy ratio of the Company under the Advanced
+Measurement Approach and the Weighted Approach increased as compared with the end of the previous year, thus
+achieving the endogenous growth of capital.
+Chapter III Management Discussion and Analysis
+Risk management and control for industries under close surveillance
+54
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+Risk management and control for consumer financing business
+54
+Risk management and control for local government financing platform business
+The Company resolutely implemented the State's requirements to continue strengthening local governments'
+debts management, while preventing and defusing the risks on local governments' implicit debts and further
+regulating the financing platforms as well as the relevant requirements of investments and financing activities
+conducted by local state-owned enterprises. The Company strictly performed legal procedures, and was committed
+to operating in compliance. As at the end of the reporting period, the balance of risk exposure of our businesses
+with local government financing platforms of the Company (calculated on the broad statistical caliber) amounted
+to RMB261.681 billion (including businesses such as actual and contingent credit, bond investments, proprietary
+investments and fund investments of wealth management products), representing an increase of RMB13.384
+billion as compared with the end of the previous year. Among which, the balance of loans to domestic companies
+amounted to RMB123.526 billion, representing an increase of RMB8.624 billion as compared with the end of
+the previous year, and accounted for 2.35% of the total loans and advances granted by the Company, down by
+0.08 percentage point as compared with the end of the previous year. As at the end of the reporting period, the
+non-performing loan ratio of the local government financing platform business was 0.63%, up by 0.08 percentage
+point as compared with the end of the previous year. In 2022, the Company will continue to adhere to commercial
+principles, resolutely get rid of the mindset that the government will guarantee the fallback, correctly understand
+the government's role and responsibilities to enterprises and projects, strictly implement various regulatory policies,
+carefully select its business based on the coverage of its debts by the projects and operating cash flow of customers
+in accordance with the overall principle of "supporting preferential clients in selective areas in compliance with
+regulatory requirements and through credit limit management, emphasising self-compensation and through
+city-specific policies". Besides, for the general bond financing of local government, the Company will select the
+regional issuers with more developed economy and stronger debt bearing capacity; for the special bonds of local
+government, the Company will choose the projects listed in the national key planning and construction to carry
+out the bond investment business on the premise of full risk assessment. For local governments' implicit debts
+management, the Company will continue to improve the supporting management mechanism for implicit debts,
+strictly implement the management and control requirements of the relevant policies with rigorous frequent
+investigations on the risk of implicit debts, and require all operating institutions to strictly prohibit the addition of
+local government implicit debts or participate in the false mitigation of local government implicit debts. Against the
+backdrop that the national fiscal and financial policies remain stable, it is expected that the quality of the Company's
+assets granted to local government financing platforms is expected to remain stable.
+China Merchants Bank
+Annual Report 2021
+During the reporting period, the Company consistently focused on high-quality customers to deeply explore the
+upgrading consumption scenarios and the real comprehensive consumption scenarios of individuals or families
+encouraged by national policies for a steady development of consumer financing business. Benefiting from the
+continued domestic economic recovery, the optimisation and adjustment of the customer base structure of consumer
+financing and the asset structure of the Company, as well as the enhancement of the risk management and control
+ability of joint debts, the key risk indicators of consumer financing of the Company have improved as compared with
+the end of the previous year while the scale and proportion of the Company's consumer financing business under
+collection procedure have recovered to the level prior to the pandemic with overall risk situation being stable and
+positive. As of the end of the reporting period, the non-performing loan ratio of the Company's consumer financing
+business (including credit cards) was 1.55%, down by 0.05 percentage point as compared with the end of the
+previous year; the percentage of special-mentioned loans was 2.63%, down by 0.02 percentage point as compared
+with the end of the previous year; the percentage of overdue loans was 2.87%, up by 0.36 percentage point as
+compared with the end of the previous year, which was mainly due to the adjustment to timing of recognising credit
+card loans as overdue loans. Looking forward to 2022, given that the evolving pandemic at home and abroad will
+still have short-term impact to the employment, income and consumption of residents, in addition to factors such as
+further speeding up of the identification and mitigation of risks associated with joint debts by financial institutions,
+it is expected that the short-term risk management and control of consumer financing business will be under certain
+pressure. The Company will closely follow the changes in the external environment, adhere to a prudent and sound
+risk preference, focus on value-based customer operations, continuously optimise customer base and asset structure,
+reinforce the risk prevention and control at the product promotion end, strictly control the usage of consumption
+loans, proactively dispose of the non-performing assets, and strive to maintain a relative stability in asset quality of
+consumer financing business.
+As at the end of the reporting period, the Company had 37,786,600 customers who held wealth products,
+representing an increase of 29.68% as compared with the end of the previous year. During the reporting period,
+under the background of market fluctuations throughout the year, the Company took the initiative to actively
+adjust the asset allocation structure and increase the supply of wealth management products according to the
+changes in customers' risk appetite. As at the end of the reporting period, the balance of retail wealth management
+products amounted to RMB3,003.852 billion, representing an increase of 35.48% as compared with the end of the
+previous year. The Company achieved the sales of non-monetary mutual funds of RMB608.035 billion, representing
+a decrease of 0.44% as compared with the previous year. The Company recorded RMB415.141 billion in agency
+distribution of trust schemes, representing a decrease of 11.51% as compared with the previous year mainly due to
+the fact that the Company took the initiative to adjust the business direction under heightened real estate supervision
+and the policy background of "Houses are for living in and not for speculative investment" and "Returning to the
+origin of finance". The Company recorded RMB77.073 billion in premiums from agency distribution of insurance
+policies, representing a decrease of 8.26% as compared with the previous year. The decrease was mainly due to the
+Company's active response to regulatory policies, market trends and customer demand, furthering transformation
+of regular premiums, optimising product structure and increasing the promotion of regular premium business with
+high-value contribution, which has led to a slow-down in the single premium business with higher contribution in
+total premium. During the reporting period, the Company recorded a fee and commission income from retail wealth
+management business of RMB33.750 billion, among which income from agency distribution of funds amounted to
+RMB12.795 billion, income from agency distribution of insurance policies amounted to RMB7.976 billion, income
+from agency distribution of trust schemes amounted to RMB6.910 billion, income from agency sales of wealth
+management services amounted to RMB5.874 billion and income from agency distribution of precious metals
+amounted to RMB195 million. For details of the reasons of changes in fee and commission income from wealth
+management, please refer to 3.9 "Net non-interest income" in this chapter.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+Refers to the customer group of wealth products (including wealth management, mutual funds, private equity funds, insurance, precious
+metals, large-denomination certificates of deposit and other products) traded on the CMB APP in the current year.
+16
+)", the online wealth manager, which enhanced the efficiency and dimensions of online communication and
+interaction. "Advisor Xiao Zhao" provided 19,225,600 times of online consultations during the reporting period,
+representing an increase of 85.85% as compared with the previous year.
+Thirdly, the Company developed the operation capabilities for hundreds of millions of customers by launching the
+intelligent wealth management assistant "Al Xiao Zhao (AI)", which aimed to create 24/7 wealth management
+services "being professional, friendly, intelligent as well as personalised". At the same time, the Network Operation
+Service Center expanded the managing scope of relationship managers, established deep connection with more
+customers through traffic management, and upgraded the service experience with the "Advisor Xiao Zhao (
+Secondly, the Company took the initiative to lower the threshold of wealth management and joined the new era of
+wealth management together with tens of millions of users. During the reporting period, the Company launched
+"Zhao Zhao Bao ()", a wealth management service for pocket money that allows users to subscribe using
+one cent, taking into account the yield and liquidity needs. The Company also built a "Duobao Family ()"
+product series including "Yue Yue Bao (AA)", "Ji Ji Bao ()" and "Ban Nian Bao (*)" to enrich the
+spectrum of duration varieties for retail customers to choose from.
+Firstly, the Company enriched online education scenarios for investors by working with partners to enhance the
+width and depth of customer services, so as to create a new field for the operations of young customers. During the
+reporting period, 52.21% of the wealth trading customers 16 on the CMB APP were under 35 years old.
+During the reporting period, under the national goal of firmly promoting the "common prosperity" among all its
+people, the Company focused on the overall planning of constructing a cyclic extensive wealth management value
+chain, and gave full play to the advantages of its wealth management professional services and online services,
+actively promoted the platform of wealth management, assisted customers in achieving asset preservation and
+appreciation, and made wealth management accessible to ordinary people.
+Chapter III Management Discussion and Analysis
+With respect to its bond underwriting business, the Company strove to build an all-round service system for bond
+issuance enterprises to achieve growth in both quantity and quality of business. During the reporting period, the
+bonds with the Company as the lead underwriter amounted to RMB746.416 billion, ranking third in the industry
+(data from the National Association of Financial Market Institutional Investors). At the same time, the Company
+actively responded to the national requirements for energy conservation and emission reduction, and supported rural
+development and construction. During the reporting period, the first batch of debt financing instruments involving
+various related fields were launched nationwide.
+China Merchants Bank
+Annual Report 2021
+60
+Chapter III Management Discussion and Analysis
+69
+With respect to its depository service, the Company's security and future margin depository services were in stable
+operation, with third-party depository services extending to 104 securities companies and 14,235,900 customers
+secured at the end of the reporting period. In addition, the Company entered into cooperation with 88 securities
+companies on margin trading and short selling business, securing 513,100 customers at the end of the reporting
+period. Also, the Company entered into cooperation with 58 securities companies on stock options business,
+securing 40,800 customers at the end of the reporting period, and entered into cooperation with 138 future
+companies on fund transfer, securing 301,900 customers at the end of the reporting period.
+With respect to its financial institution asset and liability business, the Company continued to deepen the operations
+of financial institution customers, and actively expanded low-cost high-quality financial institution liabilities based
+on the cyclic value chain of extensive wealth management and the needs of liquidity management of the Bank.
+During the reporting period, the daily average balance of financial institution deposits of the Company amounted
+to RMB748.460 billion, representing a year-on-year increase of 24.41%. Among them, the daily average balance
+of financial institution demand deposits from fund clearing, settlement and depository service amounted to
+RMB618.904 billion, representing a year-on-year increase of 23.72%.
+Financial institution business
+With respect to its market transactions (matching services) business, leveraging the respective strengths of various
+licensed financial institutions in the market, the Company strove to build a circle of friends for market transaction
+funding parties, continued to create an open and integrated investment and financing matching model, and
+provided integrated and multi-channel solutions for the diversified and complex business needs of its customers.
+During the reporting period, the business scale of market transactions (matching services) of the Company amounted
+to RMB307.629 billion, representing a year-on-year increase of 40.65%.
+With respect to its corporate wealth management business, the Company has built a comprehensive service system
+including asset allocation and investment advisory for "cash cow (+)" enterprises. In response to the needs of
+wealth management corporate customers, the Company has created a full-chain service system covering pre-sale
+service, in-sale service and after-sale service. During the reporting period, the Company's average daily balance of
+corporate wealth management products was RMB425.286 billion, representing a year-on-year increase of 19.09%.
+The number of customers was 70,400, representing a year-on-year increase of 7.48%.
+With respect to its M&A financing business, the Company organised credit assets focusing on the needs of
+high-quality listed companies, state-owned enterprises and other key customers for industrial integration, mergers
+and acquisitions and restructuring. During the reporting period, the overall scale of the M&A market decreased
+year-on-year, but the Company's M&A business continued to grow, with remarkable results in syndicated
+distribution, that the Company achieved M&A financing of RMB203.636 billion, representing a year-on-year
+increase of 28.53%. Focusing on the complex business needs of the capital market, the Company implemented 200
+M&A financing projects throughout the year, including a series of high-profile M&A projects, which enhanced the
+influence of the Company in the M&A market.
+Wealth management
+Fourthly, the Company provided tailor-made professional allocation solutions for customers in different wealth
+stages and with different risk appetites based on the actual needs of customers. During the reporting period, the
+Company constructed the "CMB TREE Asset Allocation System (TREEÌLIN¾)”, which divided retail
+wealth management products into four categories, namely active money management, security management,
+prudent investment and aggressive investment. Through analysing customers' assets and investment behaviors, the
+Company formulated a scientific and reasonable "Zhaocai Points ()" scoring system, which, combining with
+market conditions, provided professional wealth management advices for customers with different wealth attributes.
+Private banking
+63
+Against the background of building the cyclic extensive wealth management value chain, the Company focused
+on the changes in the needs of private banking customers, and shifted to provide more diversified "individual,
+family, enterprise and society" 17 comprehensive services to private banking customers and their enterprises, in
+contrast with providing retail services to high-net-worth customers which the Company originally emphasised on.
+During the reporting period, the Company continued to deepen the transformation and upgrading of the private
+banking business by utilising its rich resources with the adherence to the concept of "openness and integration".
+On the basis of steadily promoting the chain-like customer acquisition, the Company further strengthened the
+business collaboration between departments within the Bank, strengthened business cooperation with subsidiaries
+and third-party partner institutions, guided public and private resources to continuously promote the development
+of integrated customer acquisition, and built a more open product platform satisfying the comprehensive and
+diversified financial needs of customers. In addition, the Company strengthened the management of full-life cycle
+of products, continuously promoted the construction of the online and digital capability system of private banking,
+and actively promoted the improvement of business operation efficiency, management efficiency and comprehensive
+customer service experience.
+Chapter III Management Discussion and Analysis
+The Company has established the corporate customer service system featuring segmentation and classification-based
+management, as well as professional and dedicated management in respect of strategic customers, institutional
+customers, financial institution customers, cross-border customers, Qian Ying Zhan Yi (F) customers and
+basic customers. During the reporting period, the Company continued to focus on professional operations of
+strategic customers of the Head Office and branches, acquisition of high-quality corporate customers and in-depth
+operations of existing customers. As at the end of the reporting period, the total number of corporate customers of
+the Company was 2,317,100. The number of newly acquired corporate customers during the reporting period was
+381,600, contributing daily average deposits of RMB200.514 billion, among them, 22,900 newly acquired corporate
+depositors contributed daily average deposit of more than RMB500,000, and such increase achieved a new high.
+Wholesale customers
+During the reporting period, the Company achieved profit before tax from wholesale finance of RMB61.354 billion,
+representing an increase of 20.85% as compared with the previous year. The net operating income from wholesale
+finance of the Company was RMB131.140 billion, representing an increase of 12.35% as compared with the
+previous year, and accounting for 43.14% of the net operating income of the Company. Among them, net interest
+income of wholesale finance business amounted to RMB87.397 billion, representing an increase of 7.80% as
+compared with the previous year, and accounting for 66.64% of the net operating income of wholesale finance; the
+net non-interest income of wholesale finance amounted to RMB43.743 billion, representing an increase of 22.71%
+as compared with the previous year, and accounting for 33.36% of the net operating income of wholesale finance
+business, and 41.15% of the net non-interest income of the Company.
+Business overview
+3.10.2 Wholesale finance
+As to risk management, the Company continued to strengthen the construction of risk control system, while taking
+into account of the differentiation of regional and industrial economic situation, so as to effectively improve risk
+management capabilities. Firstly, in terms of customer group selection, the Company insisted on standing in stable
+industries and preferentially selecting high-quality customers with a job and income as the major business targets and
+focused on areas with rapid economic development. Secondly, in terms of construction of quantitative risk control
+capability, the Company realised the rapid iteration of machine learning model through iterative decision-making
+platform and model platform, enhanced the application efficiency in business scenarios in order to promote the
+coverage of the risk models to all processes and all products. Thirdly, in terms of post-loan management capabilities,
+while constantly improving the level of digital post-loan management, the Company strictly controlled the fund flow
+of loans, implemented full-life cycle quantitative risk monitoring and classified management for customers, so as to
+ensure stable asset quality and compliance in the use of funds.
+As to the quality of assets, during the reporting period, the Company managed to maintain a stable asset quality
+for retail loans by constantly optimising its strategies for risk management. In view of the severe and complex
+external market environment, the Company further strengthened the post-loan management and tightened the
+asset classification standards. Firstly, the loan overdue for more than 60 days was downgraded to non-performing
+loan. Secondly, for borrowers with overdue or other risk signals within and outside the Bank, all their loans in the
+Company were further adjusted to special-mentioned loans in strict accordance with regulatory requirements. As
+at the end of the reporting period, the balance of the special-mentioned retail loans (excluding credit card loans)
+of the Company amounted to RMB7.375 billion, of which the balance of non-overdue loans accounted for more
+than 70%. The increase in the amount of special-mentioned loans was mainly affected by the increase in the
+amount of non-overdue loans, while the downgrade rate of special-mentioned loans into non-performing loans
+remained in a downward trend. The special-mentioned loan ratio was 0.35%, up by 0.18 percentage point as
+compared with the end of the previous year. As at the end of the reporting period, the balance of non-performing
+retail loans (excluding credit card loans) amounted to RMB10.238 billion, and the non-performing loan ratio was
+0.49%, which was basically the same as that at the end of the previous year. Among which, the non-performing
+ratio of micro-finance loans was 0.62%, down by 0.01 percentage point as compared with the end of the previous
+year; the non-performing ratio of consumer loans was 1.02%, down by 0.21 percentage point as compared with
+the beginning of the year. Excluding credit cards, the mortgage and pledged loans accounted for 77.86% of the
+Company's new non-performing retail loans formed during the reporting period, the mortgage and pledge rate of
+above mortgage and pledged loans as at the end of the reporting period was 31.69%. Given that the vast majority
+of such new non-performing retail loans were fully secured by collaterals, the risk was under control.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+As to business development, during the reporting period, the Company actively implemented the requirements of
+the national real estate loan concentration management and regional real estate control policies, supported the
+residents' reasonable needs for their own homes, so as to realise the sound development of housing mortgage
+loan business. At the same time, while making efforts to control and manage risks and maintaining stable asset
+quality, the Company took the initiatives to adjust the business structure by increasing the loans to small- and
+micro-sized enterprises and consumer finance business. With respect to the micro-finance loans business, the
+Company relied on Fintech to explore product and service innovation, continuously improved the level and efficiency
+of financial services for small- and micro-sized enterprises for better financial support to the real economy. As to
+consumer loan business, the Company strictly controlled the use of capital, carefully identified quality customers
+and met the demand on consumer financing in a reasonable manner. As at the end of the reporting period, the
+Company recorded a balance of residential mortgage loans of RMB1,364.518 billion, representing an increase
+of 7.92% as compared with the end of the previous year. The balance of micro-finance loans amounted to
+RMB560.565 billion, representing an increase of 18.13% as compared with the end of the previous year. The
+balance of consumer loans amounted to RMB 155.984 billion, up by 31.14% as compared with the beginning of the
+year. As at the end of the reporting period, the Company had 9,789,300 retail loan (excluding credit card loans)
+customers, representing an increase of 21.17% as compared with the end of the previous year. The rapid expansion
+of customer base was mainly attributable to the light model of customer acquisition through online platform.
+As at the end of the reporting period, the total retail loans of the Company amounted to RMB2,941.020 billion,
+representing an increase of 11.24% as compared with the end of the previous year and accounting for 56.00%
+of the Company's total loans and advances to customers, up by 0.11 percentage point as compared with the end
+of the previous year. Among which, the total amount of the Company's retail loans (excluding credit card loans)
+reached RMB2, 100.767 billion, representing an increase of 10.72% as compared with the end of the previous year,
+accounting for 40.00% of total loans and advances to customers of the Company and representing a decrease of
+0.11 percentage point as compared with the end of the previous year.
+Retail loans
+During the reporting period, the Company adhered to an innovation-driven and technology-driven approach, and
+promoted the upgrading of products and services from the perspective of customers. In particular, firstly, the
+Company continuously optimised the customer base structure, reconstructed the customer acquisition combination
+model of credit card business. At the same time, it constructed a young customer acquisition and operation system
+by gaining insight into the needs of young customers and launching the "FIRST Graduate Credit Card" for college
+graduates. Secondly, it continuously improved the customer payment experience by developing functions such
+as "One-click Binding (-)" and "One-click Withdrawal (-)". At the same time, online transaction
+operation was intensified. Through activities such as "Cashback Rebate ()" and "10 Yuan Storm (+
+)", the Company was able to mobilise a sizeable customer base in a continuous and efficient way. Thirdly, the
+Company promoted key behaviors of new customers such as card activation, binding and first payment with credit
+card based on the full-life cycle of users, and in combination with the scenarios of meal coupons and movie tickets,
+launched the "two-coupon gift ()" product integrating customer acquisition and operation. Fourthly, the
+level of intelligent services was enhanced. The Company adhered to a decentralisation strategy of service interaction
+by taking technology as the driving force, to precisely match customer needs, flexibly connect service channels, and
+comprehensively improve service interaction efficiency, experience as well as value. In addition, the Company further
+deepened the operation of the CMB Life APP. For details of the CMB Life APP, please refer to 3.10.3 "Distribution
+channels" in this chapter.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+62
+61
+"Individual, family, enterprise and society" specifically refers to the needs of individuals, families, enterprises and the society.
+17
+During the reporting period, the Company continued to optimise its customer base and asset structure of the
+credit card business, adhered to the principle of risk prudence, strictly implemented the asset classification policy
+which classified all credit card loans overdue for more than 60 days as non-performing loans. At the same time,
+the Company strengthened the collection efficiency and stabilised the risk level in 2021. During the reporting
+period, RMB29.206 billion of new non-performing loans were formed from credit cards, representing a decrease of
+RMB3.235 billion as compared with the previous year. As of the end of the reporting period, the non-performing
+ratio of credit card loans was 1.65%, down by 0.01 percentage point as compared with the end of the previous
+year. During the reporting period, the Company's credit card business was transformed into a "stable and
+low-volatility" business model. The proportion of low- and medium-risk assets continued to increase, forming a
+more reasonable and robust portfolio structure with assets in the range of high, medium and low interest rates
+so as to achieve double-digit growth in loan scale while maintaining asset quality. In the future, the Company
+will continue to deepen the transformation through constantly optimising the customer base structure and asset
+structure, consolidating its business foundation and strengthening the resilience of its portfolio, so as to realise the
+dynamic and balanced development of "quality, efficiency and scale" in the credit card business.
+As at the end of the reporting period, the Company had issued an aggregate of 102.4160 million active credit cards,
+representing an increase of 2.90% as compared with the end of the previous year, and there were 69.7394 million
+active credit card users, representing an increase of 4.54% as compared with the end of the previous year. The
+balance of credit card loans was RMB840.301 billion, representing an increase of 12.55% as compared with the end
+of the previous year. The percentage of revolving balances of credit cards was 20.90%. During the reporting period,
+the credit card transactions of the Company amounted to RMB4,763.617 billion, representing an increase of 9.73%
+as compared with the previous year. Interest income from credit cards amounted to RMB59.645 billion, representing
+an increase of 5.87% as compared with the previous year. Non-interest income from credit cards amounted to
+RMB27.109 billion, representing an increase of 3.57% as compared with the previous year.
+Credit cards
+As at the end of the reporting period, the Company had 122,064 private banking customers (retail customers of
+the Company with minimum total daily average assets of RMB10 million per month), representing an increase of
+22.09% as compared with the end of the previous year; total assets under management from private banking
+customers amounted to RMB3,393.904 billion, representing an increase of 22.32% as compared with the end of the
+previous year; total assets per account amounted to RMB27.8043 million, representing an increase of RMB51,600 as
+compared with the end of the previous year. As at the end of the reporting period, the Company had 168 private
+banking centers in 92 domestic cities and 6 overseas cities, and has established a three-dimensional service network
+for high-net-worth customers.
+China Merchants Bank
+Annual Report 2021
+During the reporting period, the Company continued to consolidate the customer base of bill business. Focusing on
+the key products of bill business, it optimised processes and innovated products with customer experience as the
+core, further strengthening its digital inclusive financial service capabilities.
+Investment banking business
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+99
+66
+95
+65
+Since the underlying data is subject to adjustment or elimination as a result of change in classification of certain
+enterprises after they have grown larger in scale at the beginning of the year, the caliber of our large-, medium-
+and small-sized enterprises business at the beginning of the year was adjusted as compared to the end of the
+previous year. As at the end of the reporting period, the balance of the Company's loans granted to domestic
+large-sized enterprises amounted to RMB1,557.580 billion, representing an increase of 9.72% as compared with
+the beginning of the year, and accounting for 87.00% of our total loans granted to domestic enterprises, down
+by 0.02 percentage point as compared with the beginning of the year; the non-performing loan ratio was 1.28%,
+down by 0.37 percentage point as compared with the beginning of the year. The balance of the Company's loans
+granted to domestic medium-sized enterprises amounted to RMB104.505 billion, representing a decrease of 21.51%
+as compared with the beginning of the year, and accounting for 5.84% of our total loans granted to domestic
+enterprises, down by 2.32 percentage points as compared with the beginning of the year; the non-performing loan
+ratio was 3.44%, down by 0.07 percentage point as compared with the beginning of the year. The balance of
+the loans granted to domestic small-sized enterprises amounted to RMB128.135 billion, representing an increase
+of 63.09% as compared with the beginning of the year, and accounting for 7.16% of our total loans granted to
+domestic enterprises, up by 2.34 percentage points as compared with the beginning of the year; the non-performing
+loan ratio was 0.74%, down by 0.94 percentage point as compared with the beginning of the year.
+As at the end of the reporting period, total corporate loans of the Company amounted to RMB1,882.161 billion,
+representing an increase of 7.00% as compared with the end of the previous year and accounting for 35.84%
+of total loans and advances to customers of the Company, representing a decrease of 1.34 percentage points as
+compared with the end of the previous year. Among them, the balance of the medium- and long-term loans to
+domestic enterprises amounted to RMB1,229.548 billion, representing an increase of 21.40% as compared with
+the end of the previous year and accounting for 68.68% of the total loans to domestic enterprises, representing an
+increase of 6.59 percentage points as compared with the end of the previous year. The non-performing loan ratio
+of our corporate loans was 1.31%, representing a decrease of 0.38 percentage point as compared with the end
+of the previous year; the weighted average default probability of the risk exposure of the domestic non-defaulting
+corporate customers was 0.72%, down by 0.02 percentage point as compared with the end of the previous year.
+The quality of corporate loan assets was stable.
+Corporate loans
+With regards to its basic customers, the Company created an online and offline integrated service model based on
+"Al + manual", with the middle-office of the Head Office and branches as the main guide and data-driven as the
+core, to provide digital operation services for millions of small-, medium- and micro-sized enterprise customers.
+During the reporting period, the Company served 18,290,000 customers through various online channels, which
+effectively improved its efficiency of customer service. As at the end of the reporting period, the Company had
+978,400 corporate customers for withholding transactions, representing an increase of 118,400 customers over the
+end of the previous year. During the reporting period, the transaction amount was RMB1.50 trillion, representing a
+year-on-year increase of 42.83%.
+During the reporting period, the Company actively responded to the national policy orientation, steadily
+optimised the corporate loan structure, focused on strengthening financial support and investment in high-quality
+manufacturing, green economy, strategic emerging industries and other fields, and continued to pay attention
+to business opportunities such as mixed ownership reform of state-owned enterprises and refinancing of listed
+companies. At the same time, for key regulated and control areas such as real estate and local government financing
+platforms, the Company strictly implemented loan granting control in accordance with regulatory guidelines. As at
+the end of the reporting period, the balance of loans to manufacturing of the Company was RMB320.060 billion,
+representing an increase of RMB45.380 billion as compared with the end of the previous year and accounting
+for 17.00% of the total corporate loans of the Company; the balance of green loans 20 of the Company was
+RMB263.842 billion, representing an increase of RMB55.254 billion as compared with the beginning of the year and
+accounting for 14.02% of the total corporate loans of the Company; the balance of loans to strategic emerging
+industries was RMB219.154 billion, representing an increase of RMB47.739 billion as compared with the end of the
+previous year and accounting for 11.64% of the total corporate loans of the Company. For further details of loans
+extended to the sectors which are subject to the strict regulation of the nation, such as the real estate industry and
+the local government financing platforms, please refer to section 3.9.
+With regards to its Qian Ying Zhan Yi (F) customers, focusing on customer needs, the Company integrated
+various service resources, upgraded the services for Qian Ying Zhan Yi customers, and provided customers with
+multi-dimensional services such as "talent management + capital support + industry integration" based on digital
+services, striving to improve the full life cycle, differentiated and comprehensive service capabilities for Qian Ying
+Zhan Yi customers, and continuously deepen the acquisition of Qian Ying Zhan Yi customers and operation. The
+Company participated in and supported the 10th China Innovation & Entrepreneurship Competition (++)
+) by joining hands with the Torch Center of the Ministry of Science and Technology (C),
+the Shenzhen Stock Exchange, the Shanghai Stock Exchange and the Beijing Stock Exchange to provide high-quality
+financial services for participating enterprises. At the same time, focusing on customers of to-be-listed enterprises,
+the Company worked with stock exchanges, governments, intermediaries, private equity and other listing service
+ecological partners to provide customers of to-be-listed enterprises with comprehensive service solutions covering
+ICPT from multiple dimensions such as "channel + product + service". As at the end of the reporting period, the
+number of Qian Ying Zhan Yi customers of the Company reached 31,713.
+China Merchants Bank
+Annual Report 2021
+The number of branch-level strategic customers is that of the corporate customers as the branch-level strategic customers served by the
+Company.
+China Merchants Bank
+Annual Report 2021
+The number of strategic customers under the Head Office is that of the group customers as the strategic customers under the Head Office
+served by the Company.
+19
+18
+With regards to its cross-border customers, returning to the origin of serving customers, the Company leveraged on
+our advantages of full licenses on providing services to NRA, FTN and OSA accounts, innovatively designed product
+portfolio from the perspective of customers, provided full life-cycle service plans for domestic and overseas markets,
+and further strengthened the flywheel linkage of internal and external ecological partners through the online
+product system covering settlement, trading and financing, with a view to creating a cross-border business service
+platform on the cyclic value chain of extensive wealth management and improving the Company's comprehensive
+service capabilities and differentiated competitive advantages. As at the end of the reporting period, the Company
+had 74,553 corporate customers in respect of international settlement, representing a year-on-year increase of
+14.36%.
+With regards to its financial institution customers, on the basis of understanding the industry attributes and
+clarifying customer profiles, the Company included its financial institution customers into the Company's ecosystem
+of cyclic value chain of extensive wealth management. While improving financial value, the Company focused more
+on the platform value of financial institution customers, made full use of the professional capabilities of financial
+institution customers to serve the Bank's strategy, so as to more effectively support the development of retail and
+corporate businesses.
+With regards to its institutional customers, the Company actively served national ministries and commissions
+such as finance, human resources and social security, housing and development, healthcare security, ecological
+environment and customs, participated in promoting the construction of information platforms, and strove for
+breakthroughs in the qualifications of Head Office-to-Head Office cooperation. In response to the needs of local
+governments, the Company provided comprehensive services of "financing of capital + financing of intelligence +
+financing of technology (++)”, assisted in solving practical problems such as government financing,
+housing security, labor security, low-carbon environmental protection and convenient household affairs, and
+seized the opportunity of low-cost financial capital retention and traffic acquisition. During the reporting period,
+among the special debts issued nationwide, projects served by the Company amounted to RMB1.42 trillion, with a
+coverage rate of 39.58%, the Company's market share for special debts reached a new high, and retained deposits
+of RMB665.939 billion via capital for bond issuance. At the same time, taking the special debts service as an
+opportunity, the Company explored regional investment and financing planning and research consulting services for
+local governments, and participated in the implementation of major regional projects. It exported Fintech capabilities
+to industry authorities, solving technical pain points and improving user experience, and continued to deepen the
+construction and promotion of convenience service platforms, with branch coverage of social security, healthcare
+security and provident fund inquiry scenarios exceeding 50%. The Company has set up occupational annuity inquiry
+scenarios in four provinces, so as to "let the people run fewer errands ("while attracting more
+high-quality retail customers. Taking China Merchants Group's "trillion pension platform ()" as an
+opportunity, the Company opened up the "client-side, asset-side and capital-side" of pension business, and helped
+speed up the positioning of "One Body with Two Wings (-)" flywheel. Our entrusted annuity and annuity
+account management licenses have been reviewed by the national authority. As at the end of the reporting period,
+our entrusted enterprise and occupational annuities amounted to RMB138.234 billion, and the number of enterprise
+annuity accounts under management reached 2,088,800. During the reporting period, the Company had 43,100
+institutional customers, with an average daily deposit balance of RMB967.570 billion.
+In terms of strategic customers under the Head Office, the Company optimised and upgraded the service model for
+strategic customers under the Head Office by mobilising resources across the Bank, deepening the overall awareness
+on customers and their industries through systematic operations of the enterprise itself, its industrial chain and
+investment chain, achieving breakthroughs in operations, and ultimately achieving the optimisation of customer
+structure of the Bank. As at the end of the reporting period, the number of the strategic customers under the Head
+Office of the Company was 32618, increasing by 38 as compared with the end of the previous year; the balance
+of daily average proprietary deposits amounted to RMB979.145 billion, increasing by 19.71% as compared with
+the beginning of the year; the balance of general loans amounted to RMB832.539 billion, increasing by 15.58%
+as compared with the beginning of the year. As for branch-level strategic customers, the Company established an
+account management system and a supply chain business system to effectively acquire customers in batches and
+promote the in-depth operations of branch-level strategic customers. As at the end of the reporting period, the
+Company had 6,87419 branch-level strategic customers, increasing by 732 as compared with the end of the previous
+year. The daily average balance of the proprietary deposits amounted to RMB594.515 billion. The balance of general
+loans amounted to RMB274.589 billion.
+Chapter III Management Discussion and Analysis
+During the reporting period, focusing on the operation scenarios of strategic customers and institutional customers,
+the Company expanded the upstream and downstream ecosystem, built digital processes and intelligent risk control
+through data connection and risk modeling, improved online, automatic level and risk control capabilities of the
+entire product process, and created a digital financing product system for small- and medium-sized enterprises with
+"channel, scenario and online". Going deep into the industry, we created a new model of vertical supply chain for
+the industry, and provided data financing innovation services for customers in the automobile industry supply chain
+through our "Zhang Quan Chi ()" product, realising digitisation of scenario interaction, online operation
+process and intelligent risk control. In the meantime, the Company provided data financing innovation services for
+customers in the new retail industrial chain through "Shang Chao Dai ()", creating an easy-to-operate online
+business process which may grant loans on the day of account opening. Focusing on government procurement,
+export tax rebate, medical insurance settlement and other scenarios, the Company iteratively optimised our "Zheng
+Cai Dai ()" and "Tuishui Kuaidai ()" products, and developed medical insurance scenarios with "Yi
+Bao Dai ()". We continued to optimise the credit business process, and realised functions such as online
+credit authorisation, registration of companies and natural persons through mobiles, collateral and evaluation, and
+initiation of rating to improve customer experience.
+The main purpose of the Company's syndicated loan business is to enhance interbank cooperation and information
+sharing, and to spread the risks associated with large-amount loans. As at the end of the reporting period, the
+balance of syndicated loans of the Company amounted to RMB304.358 billion.
+Bill business
+At the same time, the Company continued to strengthen the anti-money laundering compliance construction for
+cross-border finance, deeply practice the concept of compliance leading the healthy development of business, and
+establish and improve the "risk-oriented" management system. The Company focused on promoting the end-to-end
+process optimisation of anti-money laundering for international business from the two directions of "full-process
+online" and "comprehensive integration", and emphasised on anti-money laundering system construction, money
+laundering risk assessment, anti-money laundering publicity and education, etc., thereby building a solid line of
+defense for compliance.
+The Company strove to build a cross-border product system, and continued to increase investment in order
+to improve the digital service capabilities of cross-border finance services, thereby forming an online product
+system covering settlement, transaction and financing. During the reporting period, the Company completed the
+optimisation of 47 function points such as outbound remittance for online corporate banking, full margin deposit
+online and capital project digitisation, and obtained the exclusive pilot qualification for digital services for capital
+projects. By conducting research and development and system construction for a number of deposit products in local
+and foreign currencies, the Company further improved its cross-border deposit product system.
+The Company gave full play to the advantages of full-license service for three types of non-resident accounts, and
+innovatively design product solutions. Through the two-wheel drives of "residents + non-residents", "online +
+personalisation", "recurring projects + capital projects", "investment banking + commercial banking" and others,
+the Company further strengthened the flywheel linkage of internal and external financial ecological partners, and
+formulated full life-cycle service plans covering domestic and overseas markets.
+During the reporting period, the Company integrated service resources, centralised the management of cross-border
+business and offshore business and other international financial businesses, and continued to build a comprehensive
+cross-border finance service system, providing customers operating globally with a "resident + non-resident"
+package of comprehensive finance services. As at the end of the reporting period, the Company's corporate
+international settlement amounted to USD369.854 billion, representing a year-on-year increase of 44.75%. The
+business volume of foreign exchange settlement and sales of corporate customers amounted to USD157.574 billion,
+representing a year-on-year increase of 32.88%.
+Cross-border finance business
+Through innovation of trade financing products and online basic financing products, the Company solved the
+pain points of enterprises while improving customer experience. Firstly, through the combined marketing plan
+of "factoring bills", we solved the problem regarding the difficulty in collecting payments from small- and
+medium-sized enterprises along the supply chain under the scenario of credit sales + bill settlement. During the
+reporting period, the volume of supply chain financing business amounted to RMB612.008 billion, representing a
+year-on-year increase of 49.75%. Secondly, we launched "Shan Dian Yi Fu ()" for domestic letter of credit
+to realise online automatic negotiated payment financing, and the business processing time was shortened from 2
+days to 15 minutes. Thirdly, we comprehensively improved the function of electronic letter of guarantee. Following
+the launch of the full-margin electronic letter of guarantee, the Company upgraded it and launched the 2.0 version
+of "Instant Issuance of Letter of Guarantee (1)" to achieve online opening of bid guarantee under bank
+credit. During the reporting period, the business volume of domestic letter of guarantee amounted to RMB124.605
+billion, representing a year-on-year increase of 32.67%. Fourthly, relying on big data technology and advantages,
+we made use of enterprise transaction data such as transfer and remittance and invoice in the supply chain,
+combined them with credible data from the government regarding taxation and social security, etc., and launched
+data financing products to further solve financing difficulties of small- and medium-sized enterprises. During the
+reporting period, the business volume of the Company's domestic trade financing amounted to RMB776.644 billion,
+representing a year-on-year increase of 29.26%.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+68
+67
+Focusing on the large-scale payment collection business, the Company served enterprises with whole-process fund
+settlement management. During the reporting period, the Company had 972,700 active customers for corporate
+collection, with a collection amount of RMB75.49 trillion, representing a year-on-year increase of 16.20% and
+21.50%, respectively. In order to enhance the Company's competitiveness in fund settlement management and
+improve the unpleasant experience of repeated system connections, overlapping of product functions and repeated
+redirection due to the dispersion of traditional payment collection products, the Company integrated multiple key
+fund settlement channels such as aggregated collection, All-in-one Net Payment (-), Transaction Keeper (
+), CMB APP, CMB Corporate APP, Cloud Bill (), etc., to create an omni-channel online and offline fund
+settlement product for sales management, B-end (business) and C-end (customer) payment collection management,
+fund management and payment management "Corporate Cashier (1)". During the reporting period,
+the transaction amount of Corporate Cashier amounted to RMB2.13 trillion, representing a year-on-year increase of
+130.61% as compared with the total transaction amount of various settlement channels before the integration.
+The Company continued to strengthen the export of financial technology, focused on the digital transformation
+and upgrading of industrial chain and enterprise customers, and created differentiated competitive advantages
+in the field of "enterprise service + financial service". Based on its own experience in the process of digital
+transformation, the Company created corresponding products with its financial technology capabilities, thereby
+forming a competitive advantage of "offering our customised services and having edge over the peers to achieve
+the integration of business and finance ( · \¤££ · ☀t)" in aspects such as corporate financial
+management, contract order management, employee connections, invoice management and account reconciliation.
+Based on "CBS+" treasury management open platform, the Company created a full ecological chain of enterprise
+services, improved the platform's connectivity through super direct application, and created products such as Invoice
+Cloud () and electronic contract signing (7), so as to serve the collaborative needs of upstream and
+downstream industries. At the same time, sales cloud (), equity incentives, cloud reconciliation () and
+other products were used to solve the pain points of digital transformation for enterprises in key scenarios such as
+sales, employee incentives and reconciliation. During the reporting period, the Company provided "CBS+" treasury
+management open platform services to 3,815 group customers. The number of companies under the treasury
+management reached 144,900, representing a year-on-year increase of 41.78%. During the reporting period, the
+number of transactions of various accounts under the treasury management reached 42.1913 million, representing
+a year-on-year increase of 58.96%. As at the end of the reporting period, the number of contracted customers on
+Invoice Cloud was 106,457, increasing by 845.61% as compared with the end of the previous year. The number of
+customer invoices under management was 12.3560 million, increasing by 217.01% as compared with the end of the
+previous year.
+-
+During the reporting period, the Company focused on the full-cycle fund settlement management of enterprise
+operations, creating an operation model featuring segmentation and classification of customers and establishing a
+transaction banking product and service system from the perspective of customers.
+Transaction banking business
+During the reporting period, the Company focused on the capital opportunities of key businesses in the market
+to organise for the acquisition of high-quality customers emphasising on both quantity and quality, and realised
+stable growth in corporate deposits. As at the end of the reporting period, the balance of corporate customer
+deposits amounted to RMB3,944.520 billion, representing an increase of 12.43% as compared with the end of the
+previous year; the daily average balance amounted to RMB3,765.840 billion, representing an increase of 12.02% as
+compared with the previous year; the demand deposits accounted for 62.29% of the balance of the daily average
+deposits from our corporate customers, up by 4.89 percentage points as compared with the previous year. During
+the reporting period, the average cost ratio of deposits from corporate customers was 1.62%, down by 13 basis
+points as compared with the previous year.
+Corporate customer deposits
+The second was to continuously implement the bill rediscounting monetary policy of the PBOC, actively support
+corporate financing through rediscounting to accurately drive the real economy. Affected by the policy that the
+proportion of bill rediscounting conducted by the PBOC for local legal person financial institutions shall not be less
+than 50%, the business volume of bill rediscounting in various regions of the Company, being a national joint-stock
+bank, has been restricted. During the reporting period, the business volume of bill rediscounting amounted to
+RMB177.189 billion, representing a year-on-year decrease of 8.17%. As at the end of the reporting period, the bill
+rediscounting balance of the Company amounted to RMB65.413 billion, the market share of which ranked first in
+the industry (data from the China Banking Association).
+During the reporting period, the Company continued to strengthen the integrated trading and investment research
+mechanism of the Head Office and branches and transactions regarding discounted bills transferred to other
+financial institutions, which further enhanced the stickiness of our financial institution customers. The discounted
+bills transferred to other financial institutions amounted to RMB1,248.831 billion, representing a year-on-year
+growth of 28.07%, ranking second in the market in terms of business volume (data from the China Banking
+Association).
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+adjusted on the same basis.
+20 According to the statistics of the special statistical system for green loans of the PBOC, and with the figures at the beginning of the year
+The first was to continuously consolidate the customer base, with the main business indicators ranking among the
+top in the market. During the reporting period, the Company had 140,878 customers of bill business, representing
+a year-on-year increase of 20.80%, and its bills direct discounting business amounted to RMB1,250.787 billion,
+representing a year-on-year increase of 6.14%, ranking second in the market in terms of business volume (data
+from the China Banking Association). In particular, the Company had 18,036 customers of bills online discounting
+business, representing a year-on-year increase of 19.27%. Micro-, small- and medium-sized enterprise customers
+accounted for 94%. At the same time, the operations of supply chain customers of the Company were effective, and
+the commercial acceptance bill discounting business showed a good developing trend. During the reporting period,
+the volume of commercial acceptance bill discounting business of the Company amounted to RMB186.120 billion,
+representing a year-on-year increase of 76.10%, with a market share of 15.28% (data from Shanghai Commercial
+Paper Exchange Corporation Ltd.), representing a year-on-year increase of 5.05 percentage points. Our volume of
+commercial acceptance bill discounting business ranked first in the market (data from the Commercial Bank Bill
+Business Association). As at the end of the reporting period, the bill discounting balance of the Company amounted
+to RMB429.105 billion, representing an increase of 31.03% from the end of the previous year.
+During the reporting period, the Company focused on key customer groups, made every effort to build a
+systematic service capability for the capital market around the cyclic value chain of extensive wealth management,
+strengthened the concept of "risk control first", and emphasised on bond underwriting, M&A financing and various
+innovative businesses, with a view to building an investment banking business ecosystem and promoting the steady
+development of its investment banking business.
+64
+3.10.5 Overseas branches
+Established in 1993, CMB International Capital is a wholly-owned subsidiary of the Company in Hong Kong,
+with a registered capital of HK$4.129 billion. At present, the business scope of CMB International Capital and its
+subsidiaries mainly covers corporate finance, asset management, wealth management, stocks and structured finance.
+As at the end of the reporting period, the total assets of CMB International Capital amounted to HK$51.931 billion,
+and its net assets amounted to HK$12.154 billion. During the reporting period, it realised a net profit of HK$1.780
+billion.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+Financial markets business
+During the reporting period, the situations of the domestic and foreign economies and financial market were
+complex. Under the combined effect of the ups and downs of global pandemic, uneven economic recovery and the
+impact of credit default events, the bond market interest rate showed a downward trend in general.
+With respect to RMB bond investment, through in-depth research and analysis of domestic and foreign macro
+economic situations and policies, the Company anticipated market trends and captured market opportunities while
+effectively controlling market risks and credit risks. During the reporting period, based on the overall judgment of a
+volatile market in 2021, the Company took the initiative to increase investment, maintain high positions in accounts
+and extend the duration in the first half of the year. In the third quarter, the yield dropped significantly, and the
+profit was settled. At the same time, the range trading operation was carried out, and the positions and duration
+were further increased in the fourth quarter. For the whole year, while obtaining stable allocation income from
+underlying positions, the Company obtained spread income through trading operation, which effectively improved
+the overall income of the portfolio. In terms of foreign currency bond investment, the Company appropriately
+adjusted the industry structure of bonds in the portfolio based on its judgment on the international economic
+situation and market trends, further improving portfolio quality and ensuring profitability of the portfolio. In
+addition, the Company actively explored the application of quantitative technology in the fixed income field, and the
+interest rate bond duration strategy has been implemented in real situations.
+With respect to foreign exchange transactions, the Company conducted in-depth research on the operating
+characteristics of the global foreign exchange market under the pandemic situation, and actively grasped the rhythm
+of the two-way fluctuations in the RMB exchange rate. With stable trading exposure management and flexible
+market-making strategies, the Company achieved satisfactory results in related businesses.
+With respect to precious metals trading, the Company focused on exploring investment and trading opportunities in
+the relevant precious metal market under the changes in the international economic and political situations. Through
+multi-dimensional trading strategies, the Company captured the downward trend of international gold price during
+the year to achieve good returns on investment transactions.
+With respect to customer transaction business, the Company actively promoted the concept of exchange rate risk
+neutral management to corporate customers, and customised exchange rate risk management plans for customers.
+At the same time, it actively used Fintech to serve customers, continued to enrich the types of transactions that
+customers can use to manage risks, and facilitated the settlement and sale of foreign exchange funds for customers
+through online transactions, providing customers with a green channel for exchange rate risk management. The
+"CMB Hedging ()" service system was further improved, and both the number of customer transaction
+customers and the trading volumes continued to grow.
+During the reporting period, the trading volumes of RMB exchange rate swaps amounted to USD808.621 billion,
+representing a year-on-year increase of 4.69%. The trading volumes of transaction services to the corporate
+customers amounted to USD217.217 billion, representing a year-on-year increase of 27.88%, which was mainly
+because the Company expanded the volume of foreign exchange business of customers by promoting the exchange
+rate risk-neutral concept to corporate customers. In addition, the Company continued to actively participate in the
+bilateral opening up of the bond market. It was among the first batch to participate in the Southbound Trading
+under Bond Connect, and was once again awarded the "Excellent Market Maker of Bond Connect (
+"award by Bond Connect Company Limited.
+73
+74
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+3.10.3 Distribution channels
+24
+The Company provides products and services via multiple distribution channels. The distribution channels of the
+Company mainly consist of physical distribution channels and e-banking channels.
+Physical distribution channels
+The Company mainly focuses on the market in China. The Company's distribution network primarily covers major
+cities in Mainland China, as well as Hong Kong, New York, London, Singapore, Luxembourg, Sydney and other
+international financial centers. As at the end of the reporting period, the Company had 143 branches and 1,770
+sub-branches, one dedicated branch-level operation center (credit card center), one representative office, 2,812 self-
+service centers, 6,592 self-service machines and 14,746 visual counters in more than 130 cities of Mainland China.
+The Company also has a branch in Hong Kong; a branch and a representative office in New York, the United States;
+a branch in London, the UK; a branch in Singapore; a branch in Luxembourg; a representative office in Taipei and a
+branch in Sydney, Australia.
+E-banking channels
+Major retail e-banking channels
+CMB APP
+During the reporting period, the Company released CMB APP 10.0, launched the diversified service for wealth
+management such as Zhao Zhao Bao Family, released the intelligent wealth assistant "Al Xiao Zhao" for the
+upgrading of whole life-cycle investment and financing services. The Company launched an open wealth
+management platform to co-build an ecosystem with wealth partners. Meanwhile, the Company continued to
+improve the capabilities of digital middle-office system and enhance its platform-based and intelligence strengths to
+facilitate the operation of the Bank.
+As at the end of the reporting period, the aggregate number of users of CMB APP amounted to 170,000,000.
+During the reporting period, the maximum number of daily active users of CMB APP reached 17,540,700 and the
+number of logins to the CMB APP was 7.622 billion in the year, with a monthly average individual logins of 11.42.
+The number of monthly active users was 65,416,900 as at the end of the period. During the reporting period, CMB
+APP had 1.914 billion transactions and a total transaction amount of RMB59.62 trillion, up by 6.16% and 45.73%
+respectively, as compared with the corresponding period of the previous year.
+CMB Life APP for credit card
+During the reporting period, CMB Life APP continued to upgrade its products and services to create value for users.
+The Company introduced wealth management services such as "Zhao Zhao Bao ()" into the CMB Life APP
+in an effort to make wealth management accessible to ordinary people, launched a number of popular marketing
+activities such as "Cashback Rebate, Daily Koi (&A · AAR)", "Golden Months of September and October,
+Daily Rebate (л£R+ · XX}&F)", "Free Chicken Leg for Mobile Payment (" and "10 yuan Storm
+(+)", mobilising a sizeable customer base in a continuous and efficient way, so that MAU could maintain a
+high level of stability while optimising its structure for closer connection with customer management.
+Thirdly, we continued to build the "custody plus (+)" value-added service system to improve customer
+experience. The Company always focused on customer needs, created value with professionalism, and served
+customers with platform thinking. Focusing on customers' pain points, it provided differentiated value-added service
+support through Fintech empowerment. The Company continued to build an investment and research integrated
+auxiliary platform, covering diversified needs such as customer asset allocation, business management and
+compliance and risk control.
+As at the end of the reporting period, the aggregate number of users of CMB Life APP amounted to 127,000,000.
+During the reporting period, the maximum number of daily active users of CMB Life APP reached 7,477,300 and
+the number of monthly active users was 45,934,400 as at the end of the period. In terms of the number of online
+activity of users, CMB Life APP was in the front rank among other credit card APPS in the banking industry.
+Network operation service
+Secondly, our market share in key innovative businesses was high, forming competitive advantages in custody
+business with CMB's characteristics. As the Company continued to improve its research capabilities and quick
+response capabilities for innovative businesses, giving full play to its professional advantages and providing
+professional and all-round comprehensive service support for custody customers, it actively supported the supply-side
+structural reform of the State. During the year, the Company managed 7 of the first batch of 9 public REITs projects
+in China, accounting for 77.78% of the market share, which initially formed a leading advantage in the public
+REITS field. In addition, the Company maintained its leading position in the industry in terms of market share in the
+sub-custody businesses of newly approved innovative index mutual funds, MOM and FOF funds throughout the year.
+At the same time, the Company actively participated in the pilot program of pension wealth management, launched
+the first batch of exclusive commercial pension insurance products under custody, thereby practicing inclusive
+finance and contributing to the construction of the third pillar of China's pension system.
+During the reporting period, the Company's custody business achieved both the scale of operation and quality of
+income. While continuing to optimise the business structure and making key breakthroughs in innovative products,
+the Company continued to deepen the operations of custody customers, improve the capability of custody customer
+acquisition and comprehensive service and improve its custody risk management system, thereby operating the
+custody business of the Bank in a safe and stable manner.
+79
+70
+0
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+With respect to interbank clearing, as at the end of the reporting period, there were 255 customers which
+participated indirectly through the Company in the RMB Cross-border Interbank Payment System (CIPS), ranking first
+among all small- and medium-sized banks in China and second in the industry (according to the data released by the
+CIPS).
+With respect to the businesses on interbank online service platform, through the interbank online service platform
+"Zhao Ying Tong ()", the Company provided financial institutions with online sales and trading services of
+various products and assets throughout the market, creating a cooperation ecosystem among financial institutions.
+As at the end of the reporting period, the number of financial institution clients on the "Zhao Ying Tong" platform
+of the Company reached 2,973, and during the reporting period, the online business volume amounted to
+RMB1,588.691 billion, increasing by 43.45% as compared with the end of the previous year.
+Asset management business
+As at the end of the reporting period, the total asset management business of CMB Wealth Management, China
+Merchants Fund, CMB International Capital and CIGNA & CMAM, all being subsidiaries of the Company, amounted
+to RMB4.31 trillion 21, representing an increase of 14.92% as compared with the end of the previous year, among
+which the balance of wealth management products under management by CMB Wealth Management amounted
+to RMB2.78 trillion 22, representing an increase of 13.47% as compared with the end of the previous year; the scale
+of asset management business of China Merchants Fund amounted to RMB1.35 trillion, representing an increase
+of 16.70% as compared with the end of the previous year; the scale of asset management business of CMB
+International Capital amounted to RMB97.4 billion, representing an increase of 11.76% as compared with the end
+of the previous year; the scale of asset management business of CIGNA & CMAM amounted to RMB85.3 billion,
+representing an increase of 41.35% as compared with the end of the previous year.
+During the reporting period, CMB Wealth Management solidly advanced various tasks. In terms of promoting
+business transformation, firstly, it complied with regulatory requirements to complete the rectification plan for the
+transition period of the New Regulation on Asset Management. As at the end of the reporting period, the balance of
+new products 23 was RMB2.60 trillion, representing an increase of 56.63% as compared with the end of the previous
+year, and accounting for 93.53% of the balance of wealth management products, up by 25.77 percentage points
+as compared with the end of the previous year. The remaining old products were used to take up case assets that
+had been approved by the regulatory authorities. In the future, CMB Wealth Management will monitor the assets in
+accordance with the disposal plan and complete the disposal of case assets in a steady and orderly manner through
+various methods. Secondly, in accordance with the requirements of the Notice on Standardising the Management
+of Cash Management Wealth Management Products (the "New Cash Regulations"), CMB Wealth Management
+carried out the transformation of cash products. The average duration of assets was reasonably reduced, and
+customers were guided to increase the allocation of non-cash products. It is expected that cash products will achieve
+steady transformation after the transition period of the New Cash Regulations. In terms of improving its risk
+management, CMB Wealth Management strengthened the review of key industries and large customers, improved
+the concentration risk control of single credit entity, strengthened the compliance risk assessment of new products
+and new business strategies, formulated market risk emergency plans for wealth management products, and
+improved its efficiency and capability to respond to market risk emergencies. In terms of enriching its product
+system, CMB Wealth Management focused on customer needs to create wealth management products with
+distinctive features. The scale of fixed income+, multi-asset and equity products grew steadily. At the same time,
+it continued to deepen the cooperation with JPMorgan Asset Management (Asia Pacific) Limited. Leveraging their
+respective advantages in fixed income and global equity investment, both parties jointly issued four products.
+21
+The total asset management business of China Merchants Fund and CMB International Capital include the data of their subsidiaries.
+22
+23
+The balance is the sum of customers' principal in the off-balance sheet wealth management products and the changes in net value of net-
+value products as at the end of the reporting period.
+New products are wealth management products in compliance with the relevant provisions of the New Regulation on Asset Management.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+During the reporting period, China Merchants Fund further improved its investment and research capabilities,
+deepened customer operations, enriched product layout, and strengthened risk compliance protection. Its business
+development achieved "steady progress", and its scale of asset management increased rapidly. Among which,
+the scale of its non-monetary mutual funds reached RMB548.345 billion, representing an increase of 55.40% as
+compared with the end of the previous year. In respect of strengthening the construction of its investment and
+research system, China Merchants Fund established the investment and research value of "duty, dedication and
+openness" and set up an industrial chain team to promote the transformation from in-depth research to investment.
+In respect of serving customers through multiple channels, during the reporting period, the scale of newly
+issued products of China Merchants Fund exceeded RMB a hundred billion. China Merchants Fund created the "Rui
+()" series funds of fixed income + brand, and cultivated tens of millions of customers of China Merchants Fund
+by strengthening the operational advantages of its Internet platform. While strengthening the professional service
+capabilities of its institutional business, its pension business continued to develop well. In respect of improving the
+layout of products, China Merchants Fund took into account market demand, characteristic tracks and balanced
+strategies in order to improve the layout of its mutual fund products, launching the first batch of innovative products
+such as STAR & CHINEXT 50 (50), Public MOM (MOM) and Enhanced ETF (ETF). At the same
+time, China Merchants Fund focused on promoting its public REITS business, and won 5 new projects during the
+reporting period. At the same time, it actively carried out pilot fund investment advisory business and obtained the
+qualification for pilot investment advisory business in June 2021. In respect of strengthening its risk control and
+compliance protection, China Merchants Fund continued to sort out risk indicators in key areas, carried out risk
+map construction, while improved its risk identification and early warning capabilities, and strengthened liquidity risk
+monitoring of key funds. There were no major risk compliance incidents occurred during the reporting period.
+During the reporting period, CMB International Capital actively gave full play to its professional ability of asset
+organisation, proactively integrated into the cyclic value chain of extensive wealth management, upgraded the
+linkage mechanism of investment banking and commercial banking, and further broadened the access channels for
+high-quality projects and investors, continuously expanding the brand effect among different types of customers
+at home and abroad. In respect of domestic equity investment fund business, the investment efficiency and
+industry influence continued to improve. During the year, there are 7 new domestic and overseas listed projects,
+and the investor structure continued to be optimised. CMB International Capital was ranked 5th in the "2021 Top
+100 Private Equity Investment Institutions in China (20211003)" by Zero2IPO. In respect
+of the overseas asset management business, the medical innovation series funds, fixed-income FOF funds, debt
+series funds and other products of CMB International Capital all realised gains against the market volatility in Hong
+Kong's capital market. Bond grading funds, Fintech funds, consumer equity funds, special opportunity funds, new
+growth driver funds and other diversified products have improved the service ability to comprehensively allocate
+assets for customers, driving the further optimisation of customer structure.
+Since its commencement on 18 October 2020, CIGNA & CMAM has taken into account the characteristics of
+insurance asset management business and the resource endowment of its shareholders to seize the strategic
+opportunities of the cyclic value chain of extensive wealth management and determine the company's position
+as a stable long-term capital management institution. The two core capabilities of "large-scale asset allocation
+and comprehensive risk management" gave full play to the advantages of long-term capital investment and the
+creation of differentiated insurance bond investment banking products, fully integrating into the Group's flywheel.
+During the reporting period, firstly, it carried out the entrusted management by focusing on the main business of
+CIGNA & CMB Life Insurance, achieved the investment objectives, and helped CIGNA & CMB Life Insurance improve
+investment returns with professional investment, thereby feeding back to the product creation. Secondly, it centered
+around the asset allocation demand for insurance funds and pension funds, focused on promoting long-term asset
+organisation, and proactively carried out investment and financing business cooperation with the Head Office and
+branches of the Company and other subsidiaries of the CMB, thereby driving the flywheel of asset organisation with
+long-term capital investment.
+71
+72
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+Asset custody business
+As at the end of the reporting period, the balance of assets under custody of the Company was RMB19.46 trillion,
+representing an increase of 21.25% compared to the end of the previous year, and maintained second in the
+domestic custody industry in terms of scale of custody and ranked first in terms of increment according to the data
+released by the China Banking Association. During the reporting period, the Company realised a custodian fee
+income of RMB5.396 billion, representing a year-on-year increase of 28.02%.
+Firstly, the Company continued to optimise its business structure, and improve the proportion of key businesses as
+well as its industry rankings. As at the end of the reporting period, the scale of custody of mutual fund amounted
+to RMB1.97 trillion, representing an increase of 44.27% as compared with the end of the previous year, and its
+proportion in the custody business of the Bank increased by 1.61 percentage points as compared with the end of
+the previous year. The scale of custody of mutual fund ranked fifth in the industry, up by two places (data from the
+China Banking Association). Commission income from mutual fund custody business amounted to RMB2.662 billion,
+representing a year-on-year increase of 84.86% and accounting for 49.33% of commission income from the Bank's
+custody business, representing a year-on-year increase of 15.17 percentage points. Among the mutual funds newly
+issued during the year, the Company managed a total of 253 funds with a total size of RMB406.765 billion, ranking
+first in the industry in terms of both number and size (WIND data). As at the end of the reporting period, the scale
+of insurance custody amounted to RMB1.66 trillion, representing an increase of 46.42% as compared with the end
+of the previous year. In addition, as at the end of the reporting period, the Company ranked first in the industry in
+terms of the scale of bank wealth management, trust, asset management of securities companies and custody of
+special fund accounts (data from the China Banking Association).
+The Company's Network Operation Service Center provides instant, comprehensive, prompt and professional services
+to its customers through caring methods such as telephone, network and video.
+During the reporting period, the Company continued to boost the construction of various featured function
+scenarios of CMB Corporate APP, aiming to provide customers with interactive and friendly one-stop services. Firstly,
+it facilitated the scenario construction of business special section, and launched the electricity payment function for
+State Grid enterprises and the customs duties payment function. Secondly, it connected with the CMB Zhao Dai (
+)APP and docked with the Instant Loan for Small- and Micro-Sized Enterprises () to provide fully online
+inclusive loans for CMB Corporate APP users. Thirdly, it launched the function of "Multiple Corporate Account
+View" in the legal entity version and "Individual + Corporate Banking" comprehensive service solutions of the CMB
+Corporate APP. Fourthly, it innovated and launched the function of corporate business card and corporate income
+and expense report to provide convenient management for wholesale customers' collection and payment. Fifthly, it
+accelerated the construction of special section for Head Office and branches to create online special sections for key
+scenarios such as tax payment, e-government affairs and international business. Sixthly, it built an "activity center",
+which gathered the popular tasks and activities inside CMB Corporate APP, to help customers better understand
+and use various functions of CMB Corporate APP by guiding them to complete various prize tasks. As at the end of
+the reporting period, the number of customers of CMB Corporate APP reached 1,234,800, of which monthly active
+customers reached 600,200. During the reporting period, the number of transactions made by customers through
+CMB Corporate APP amounted to 31,542,900, representing a year-on-year increase of 95.05%, with a transaction
+value of RMB777.787 billion, representing a year-on-year increase of 128.33%.
+The percentage of services undertaken by intelligent robots in all types of remote inquiries (including phone calls and online text).
+In 2021, our New York Branch overcame the difficulties of the pandemic and tapped deeply into the potential
+of cross-border business between China and the United States, with the aim of enhancing the comprehensive
+service capability of its cross-border financial platform, achieving restorative growth in operating profit. During the
+reporting period, our New York Branch realised a net operating income of USD93,260,500 and a profit before tax of
+USD53,174,500.
+Singapore Branch
+Established in 2013, the Singapore Branch of the Company is positioned as a significant cross-border financial
+platform in Southeast Asia. Based in Singapore and expanding to Southeast Asia, the Singapore Branch, which
+focusing on two major businesses, namely cross-border finance and wealth management, strives to provide all-round
+non-stop solutions for cross-border finance to the Chinese companies "going global" and the companies "brought
+in" located in Singapore and other Southeast Asian countries. Its major services and products include: funds
+settlement, deposit service, foreign exchange trading, coordination financing, trade financing, M&A loans, syndicated
+loans, real estate trust leveraged financing and delisting financing. In terms of wealth management business, with
+the Private Banking (Singapore) Center was officially launched in April 2017 to provide private banking products and
+value-added services with integrated investment and financing solutions, such as cash management, asset allocation
+and heritage of wealth to high-net-value customers.
+In 2021, in the face of the ongoing pandemic and the complex and changing market environment, the Singapore
+Branch continued to optimise its cross-border business development with an effective integration of its corporate
+and private banking services to achieve synergy and strove to overcome the impacts of low interest rate, low growth
+and reduction of cross-border business, so as to ensure stable and orderly development of business. During the
+reporting period, the Singapore Branch realised a net operating income of USD18,779,300 and a loss before tax of
+USD12,702,800 as a result of the provision.
+77
+78
+China Merchants Bank
+Annual Report 2021
+Luxembourg Branch
+Chapter III Management Discussion and Analysis
+Established in 2015, the Luxembourg Branch of the Company is positioned as an important cross-border financial
+platform in European continent. It provides diversified services including corporate deposits, corporate loans, project
+financing, trade financing, M&A financing, M&A advisory, bond underwriting and asset management for the
+Chinese enterprises "going global" and the enterprises "brought in" from Europe. It is committed to establishing an
+operational platform of the Company in Europe on the basis of the superior businesses of the parent bank combined
+with the special advantages of Europe.
+In 2021, the Luxembourg Branch strove to overcome the impacts brought about by the pandemic, adjusted the
+development strategy in time by strengthening cooperation with domestic and overseas financial institutions while
+making remarkable efforts to expand its business and financing channels, with which it has achieved sound business
+development. During the reporting period, our Luxembourg Branch realised a net operating income of €12,483,300
+and a profit before tax of €4,663,300.
+London Branch
+Established in 2016, the London Branch of the Company is the first branch approved to be established in the
+United Kingdom among all the PRC joint-stock commercial banks and also the first branch established in the
+United Kingdom directly by a bank in Mainland China since the founding of the PRC. It currently conducts
+corporate banking business and private banking business. With respect to corporate banking business, it provides
+customers with diversified corporate banking products and services, such as deposits, loans (including bilateral
+loans, syndicated loans and cross-border M&A financing) and trade finance products, such as making payments on
+behalf of customers (11) and forfeiting (1). It also engages in interbank transaction of funds, bonds and
+foreign exchange trading, and conducts funds clearing and asset transfer with other financial institution customers.
+The private banking business currently provides basic services such as settlement, fixed deposit, foreign exchange
+transactions, mortgage loans and insurance referrals to meet the needs of our high-net-value customers for cross-
+border business and value-added services.
+In 2021, the London Branch adapted quickly to the external environmental changes by taking a firm hold of the
+opportunities emerging from the mutual investment business in China and the UK and reinforcing the development
+of its cross-border services and products while maintaining a tight control of risks and strengthening compliance
+management, with which it had secured steady business growth. During the reporting period, the London Branch
+achieved a net operating income of USD20,469,800 and a profit before tax of USD8,341,700.
+Sydney Branch
+Established in 2017, the Sydney Branch of the Company is the first branch approved to be established in Australia
+among all the PRC joint-stock commercial banks. It proactively participates in Sino-Australian cross-border investment
+and financing services, trade financing and settlement, exploitation of mineral resources and the development of
+quality infrastructure projects, and provides supporting services for "going-global" customers to lay out in Australia
+and New Zealand and for "brought-in" foreign leading enterprises to develop in China. At the same time, it
+steadily carried out private banking business in compliance with laws and regulations, and met the private banking
+customers' needs for global service and the cross-border non-financial value-added service. The establishment of the
+Sydney Branch further expanded and improved the Company's global presence, forming a global service network
+across four continents: Asia, Europe, America and Australia.
+In 2021, the Sydney Branch overcame the impacts brought by the pandemic, providing its customers with high-
+quality financial services. During the reporting period, the Sydney Branch achieved a net operating income of
+AUD33,592,200 and a profit before tax of AUD9,768,500.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.10.6 Major subsidiaries
+The Company strictly abides by the relevant provisions of the Company Law of the People's Republic of China,
+the Commercial Bank Law of the People's Republic of China, the Guidelines on Management and Regulation
+of Consolidated Financial Statements of Commercial Banks, the Corporate Governance Guidelines for Banking
+and Insurance Institutions and other laws and regulations, exercises shareholders' rights in compliance with laws
+and regulations, and continues to improve the management of subsidiaries. During the reporting period, the
+Company implemented comprehensive and ongoing management of subsidiaries in terms of corporate governance,
+capital management, risk management and financial management; strengthened the strategic management of
+subsidiaries based on the overall strategy of the Group; gave full play to the synergy of comprehensive operation
+to drive subsidiaries to integrate into the cyclic value chain of extensive wealth management, and to facilitate the
+coordinated development of subsidiaries and the Group.
+CMB Wing Lung Bank
+Founded in 1933, CMB Wing Lung Bank has a registered capital of HK$1.161 billion, and is a wholly-owned
+subsidiary of the Company in Hong Kong. The principal operations of CMB Wing Lung Bank and its subsidiaries
+comprise deposit-taking, lending, private banking and wealth management, investment, securities, credit cards, NET
+banking, "CMB WLB Wintech (À¤£í¯¯¶0)” mobile banking, global cash management, syndicated loans,
+corporate loans, documentary bills, leasing and hire purchase loans, foreign exchange, insurance agency, mandatory
+provident fund, insurance brokerage and general insurance underwriting, property management and trustee,
+nominee and asset management services. At present, CMB Wing Lung Bank has one head office, 32 branches
+and private banking centers in Hong Kong, four branches and sub-branches in Mainland China, one branch in
+Macau, and one branch located respectively in Los Angeles and San Francisco, the United States, as well as one
+representative office in Bangkok.
+During the reporting period, CMB Wing Lung Group realised an attributable profit to shareholders of HK$3.032
+billion and a net operating income of HK$6.465 billion, of which net interest income was HK$4.190 billion and net
+non-interest income was HK$2.275 billion. The cost-to-income ratio was 40.69%. As at the end of the reporting
+period, the total assets of CMB Wing Lung Group amounted to HK$389.075 billion. Total equity attributable to
+shareholders amounted to HK$44.848 billion. Total loans and advances to customers (including trade bills) amounted
+to HK$204.413 billion. Deposits from customers amounted to HK$293.061 billion. The loan-to-deposit ratio was
+65.60%. The non-performing loan ratio (including trade bills) was 0.63%. For detailed financial information on
+CMB Wing Lung Group, please refer to the 2021 annual results of CMB Wing Lung Bank, which is published on the
+website of CMB Wing Lung Bank (www.cmbwinglungbank.com).
+CMB Financial Leasing
+CMB Financial Leasing was established in 2008 and wholly owned by the Company with a registered capital of
+RMB12.0 billion (including RMB6.0 billion upon transfer of capital reserve into share capital during the reporting
+period). CMB Financial Leasing has adhered to its operation and development strategy of "professionalisation,
+internationalisation and digitalisation", carried out the mission of "supporting national strategy, serving the real
+economy and promoting industrial upgrading", and launched the financial solutions for the ten industries of
+aviation, shipping, energy, infrastructure, equipment manufacturing, environment, healthcare and cultural tourism,
+public transportation and logistics, smart interconnection and integrated circuit as well as leasing. It satisfies the
+lessees' different needs in respect of equipment procurement, sales promotion, asset revitalisation, balancing of tax
+liabilities and improvement of financial structure.
+As at the end of the reporting period, the total assets of CMB Financial Leasing amounted to RMB226.562 billion,
+and its net assets amounted to RMB25.484 billion. It realised a net profit of RMB2.891 billion during the reporting
+period.
+The Company diversified its online service support with the application of new technologies such as multimedia
+integration and multi-screen interaction to further cater to customers' online service demands and interaction
+habits, enhanced the fluency and precision of service with intelligent technology in assisting in accurate problem
+positioning and service judgment in the manual service, earnestly implemented services for elderly customers with
+fast access and one-stop exclusive manual service while strengthening customer voice analysis and constantly driving
+the improvement of pain points for a more pleasant customer service experience. During the reporting period,
+the Company achieved a success rate of 97.56% of remote online omni-channel connection for manual services,
+a remote online omni-channel 20-second manual response rate of 94.37%, and a remote online omni-channel
+customer satisfaction rate of 97.61%. The Company continued to accelerate the development of intelligent services,
+further construct online service scenarios, improve the training system of intelligent robots, enhance machine
+learning and algorithm optimisation and constantly explore the boundaries of robot capability with Fintech. During
+the reporting period, our intelligent self-services accounted for²4 78.29%.
+Established in 2008, the New York Branch of the Company is the first branch of Chinese banks approved in the
+U.S. since the US Foreign Bank Supervision Enhancement Act in 1991. The New York Branch is located in the global
+financial center and is committed to establishing a cross-border financial platform characterised by coordination
+between China and the U.S., so as to offer diversified and all-round banking services for the companies and high-
+net-value private banking customers in China and the U.S..
+New York Branch
+CMB International Capital
+Established in 2002, the Hong Kong Branch is the first branch duly established overseas by the Company, which
+may engage in comprehensive commercial banking businesses. With regard to corporate banking business, the
+Hong Kong Branch provides diversified corporate banking products and services, such as deposits, settlement, trade
+financing, bilateral loans, syndicated loans, cross-border M&A portfolio solutions, asset management and asset
+custody, and engages in transaction of funds, bond trading and foreign exchange trading with financial institutions,
+and conducts funds clearing and asset transfer with financial institution customers. With respect to retail banking,
+the Hong Kong Branch may provide cross-border personal banking services and private wealth management services
+for individual customers in Hong Kong and Mainland China. Featured products include "Hong Kong All-in-one Card"
+and "Hong Kong Bank-Securities Express".
+In 2021, the Hong Kong Branch adjusted its business strategy, focusing on maintaining stability under tremendous
+external pressure such as global low interest rate, ongoing pandemic and closure of Hong Kong-mainland China
+border. While the traditional cross-border business was severely impacted, the Hong Kong Branch worked hard to
+develop featured businesses such as "private wealth management", "asset custody" and "asset management",
+and
+made every effort to reduce the amplitude and impact of business fluctuations in the face of adversities. During the
+reporting period, the Hong Kong Branch realised a net operating income of HK$1.824 billion and a profit before tax
+of HK$1.268 billion.
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+Smart service system
+The Company continued to optimise its smart service network with the two major Apps, being "CMB APP" and
+"CMB Life APP" as the core, covering Network Operation Service Center and visual counters at our outlets. During
+the reporting period, the Company further strengthened the Al service and closed-loop service capabilities of
+the smart customer service assistant of CMB APP and the smart customer service assistant of CMB Life APP and
+continued to develop smart service products for our customers. Meanwhile, the Company insisted on the strategy
+of decentralised service interaction established by taking Fintech as the driving force, to precisely match customer
+needs, enrich service interaction modes and contents, and optimise such experience. During the reporting period,
+leveraging a variety of Internet channels for its branding and business promotion, the Company established the
+image of "professional and reliable wealth partner" with quality service content to facilitate business communication
+and strengthened the first brand of wealth management for constant enhancement of the Company's online
+marketing promotion value and brand reputation. In addition, the Company continued to explore ways to reach out
+to the Generation Z25 and conducted high-frequency interaction with young users to form in-depth communication
+with young people.
+Major wholesale e-banking channels
+During the reporting period, the Company introduced the "corporate digital service system" to deploy and link up
+the Company's top seven online service channels for corporate customers and to open up the data and user system,
+customers can enjoy services with no impediment for one-time registration. The Company officially launched two
+major systematic scenario-based service plans of "digital financial manager" and "digital business assistant" to
+reconstructed the corporate service ecosystem and realised the upgrading from single customer service to industrial
+chain cluster customer service with a view to becoming the closest digital transformation partner of customers. As at
+the end of the reporting period, the Company had 2,178,100 wholesale customers on the e-banking channels, with
+a coverage rate of 94.00% and 1,562,900 monthly active customers.
+During the reporting period, the Company launched the new U-Bank11 version by revamping the visual page with
+an innovative user interaction mode featuring multi-screen interaction and order push, whilst newly launched the
+scenario-based special section service model for international business and supply chain to improve user experience.
+The Company initiated the "Light Bank" plan, which greatly optimised the user experience, and created a rather
+"light" online basic customer service channel to improve the interactive friendliness of electronic channels. The plan
+encouraged customers to visit the counter once and handle more than 90% of their business online, and offered
+opening of 6 service packages, so as to turn its online corporate banking service into an "easy-to-use, intelligent
+and open" digital service platform. As at the end of the reporting period, the number of online corporate banking
+customers of the Company reached 2,122,400, of which the number of monthly active customers was 1,273,300.
+The total number of online corporate banking transactions of the Company reached 283 million, representing a
+year-on-year increase of 13.87%, and total value of transactions amounted to RMB150.68 trillion, representing a
+year-on-year increase of 19.59%, during the reporting period.
+CMB Corporate APP
+25
+People born between 1995 and 2009, or collectively the generation that has been greatly influenced by technological products such as the Internet,
+instant messaging, smartphones and tablet computers.
+75
+Online corporate banking
+China Merchants Bank
+Annual Report 2021
+Annual Report 2021
+76
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+As for the brand building efforts with Digital Bank, the Company held innovative application competitions related to
+the "CMB Cloud ()", blockchain, robotic process automation, intelligent finance, and office open platform to
+encourage the whole bank to provide innovative solutions and stimulate innovation vitality from the perspective of
+customers. During the reporting period, the Company was presented with a second prize and 4 third prizes in the
+selection of the 2020 Fintech Development Awards held by the People's Bank of China.
+In terms of business system construction, the scientific and technological support of the cyclic value chain of
+extensive wealth management was strengthened to accelerate the construction of system platform and ecosystem.
+The Company released CMB APP 10.0 version, launched "Duo Bao Family ()" wealth management services
+including "Yue Yue Bao (A)", "Ji Ji Bao (*)", "Ban Nian Bao (*)", upgraded "Zhao Cai Hao (
+)", an open wealth management platform, to open up the online operation ability to external partners, and
+released the new online intelligent wealth assistant "Al Xiao Zhao" while exploring the new model of "people +
+digitalisation". It released Xin Fu Tong () 3.0, which empowered the corporate digital transformation and
+vigorously promoted the capacity-building of corporate digital services so as to greatly increase the work efficiency
+of enterprises in attendance, calculation of salary and tax, and payroll. The Company opened up the last-mile digital
+transformation of branches, promoted the data cloud of 44 branches nationwide, and empowered the development
+of branches through branch special sections, tool platforms and engineering management systems.
+Hong Kong Branch
+In terms of business assurance, on the basis of the overall growth of output and the comprehensive acceleration
+of the "cloud + middle office" structural transformation, the overall operation of our information system remained
+sound and stable, with industry-leading availability of the core accounting system and backbone network. During
+the reporting period, the server room in phase I of Shenzhen Pinghu Cloud Data Center successfully commenced
+operation with the layout of three data centers in Shenzhen and Shanghai and the software centers in Shenzhen,
+Hangzhou and Chengdu to support the future development of Digital Bank.
+During the reporting period, the Company centered around "14th Five-Year Plan" to build the "Strongest Digital
+Bank", vigorously practiced the methodology of "openness and integration" and strove to build the industry
+leading information system under CMB 3.0 model to fully support the business transformation into 3.0 model while
+strengthening the core competitiveness of Fintech.
+Chapter III Management Discussion and Analysis
+3.10.4 IT and R&D
+In terms of Fintech infrastructure, with the steady progress of cloud migration and switching, the cloud service
+capability has reached a new level, taking the industry leading position in private cloud, artificial intelligence,
+blockchain and other aspects. The Company upgraded the digital middle-office and technology middle-office to give
+play to digital asset precipitation and burden reduction empowerment, while researching and developing robotic
+process automation, which greatly reduced the research and development threshold, to facilitate the processing of
+a large number of repetitive and well-defined tasks effectively, efficiently and at low cost across the Bank and its
+subsidiaries. It launched the smart audit platform and achieved the intelligent audit of various complex businesses
+by using artificial intelligence technology. 14 new scenarios were added to the blockchain, and the blockchain
+ecosystem was further expanded.
+3.11.1 Credit risk management
+± · )”, stuck to the concept of balanced returns and risks and the prudent business strategy in which risks
+can ultimately be covered by capital, implemented a unified credit risk preference, optimised the life-cycle credit risk
+management processes, continuously upgraded credit risk management tools, and fully improved risk management
+standard, so as to prevent and reduce credit risk loss.
+Credit risk refers to the risk arising from a bank's borrowers or counterparties failing to perform its obligations as
+agreed. Adhering to its management philosophy of "Quality Goes First Based on Compliance and Risk Control (Â
+HAR · ABA★ ·)", and with the goal of "fostering a leading risk management bank", the Company
+promoted the risk management culture of "staying healthy, rational, proactive and comprehensive (
+Chapter III Management Discussion and Analysis
+The Company adhered to a prudent risk culture and risk preferences, deepened the "curing the root cause'
+transformation of risk management, strengthened the leading position of risk management, and steadily promoted
+the construction of a risk management system that adapted to the characteristics of extensive wealth management
+business under the principles of "Comprehensive, Professional, Independent and Balanced Management". The Risk
+and Compliance Management Committee of the Head Office is responsible for reviewing and determining the most
+significant bank-wide risk management policies on risk preferences, strategies, policies and authorisations approved
+by the Board of Directors.
+82
+2
+81
+During the reporting period, in the face of the recurrence of the pandemic along with the complex and ever-
+changing economic environment at home and abroad and the increasing risk in bank operations, the Company
+established an overall risk management system compatible with the value loop of extensive wealth management in
+accordance with the requirements of the 3.0 model transformation while tackling and preventing all kinds of risk
+head-on.
+During the reporting period, the Company followed up closely on the macroeconomic and financial situation, strictly
+adhered to the bottom line of risks and addressed both the cause on the surface and the root cause to ensure stable
+asset quality. Firstly, the Company thoroughly implemented the requirements of the 3.0 model transformation,
+established the risk management system for extensive wealth, carried out differentiated management for different
+types of businesses, and achieved phased results. Secondly, the Company adhered to the customer-oriented
+principle, focused on the direction of high-quality asset organisation, and promoted the adjustment of customer
+structure. Relying on the self-organisation of the industry, it focused on the industrial chain and investment chain
+of core customers and regional characteristic industries, continuously improved industry recognition, implemented
+customer list management, fully promoted the investment of high-quality assets in related fields such as new growth
+engines, manufacturing industry and green finance, and continuously consolidated the customer base. Thirdly, the
+Company adhered to the bottom line of risks and continued to deepen the "curing the root cause" transformation
+of risk management. While strictly controlling asset quality and maintaining leading advantages, it strictly
+prevented risks in key areas, established a risk monitoring system coordinated by the Head Office and branches for
+customers with large transaction value, implemented "different policy for each group" for key customer groups
+and "different policy for each account" for key customers, and carried out dynamic risk investigation to improve
+the level of refined risk management. Fourthly, the Company consolidated the foundation and strengthened the
+basic risk management. It further improved the early warning system, optimised the risk consolidation management
+mechanism, and strengthened the main responsibility of risk management of the first line of defense. While
+continuously improving the qualification management of corporate asset business, it formulated position manuals
+and working standards, enhanced team building and improved risk management capabilities. Fifthly, the Company
+expanded channels for and improved the efficiency of non-performing asset disposal. It implemented list-based
+management of key projects, intensified the recovery of non-performing assets by cash collection while continuously
+promoting the write-off of non-performing assets. The Company made use of a number of methods to mitigate risk
+assets and achieved the effective and efficient disposal of non-performing assets based on compliance regulations.
+Sixthly, the Company adhered to the guidance of financial technology and accelerating the digital transformation
+of risk management. It established a long-term mechanism for extensive wealth risk data and centralised system
+management, promoted the application of financial technology, and improved the efficiency of business services and
+risk management.
+China Merchants Bank
+Annual Report 2021
+For more information about the Company's credit risk management, please refer to Note 60(a) to the financial
+statements.
+The investment scope of the trading book of the Company focused on RMB bonds. In general, prudent investment
+management strategies were adopted by the Company and the risk exposure was dynamically adjusted by means
+of bond trading, derivative hedging, etc., and all interest rate risk indicators of the trading account remained within
+the target range according to changes in the market.
+In accordance with the Management Measures for Large-Scale Risk Exposure of Commercial Banks (CBIRC Order
+2018 No. 1) (À¤£í¯★¤ªÂ£ÌÌ) (20181)) issued by the CBIRC, large-scale risk
+exposure refers to the credit risk exposure (including various credit risk exposures in the banking book and trading
+book) to a single customer or a group of related customers of a commercial bank that exceeds 2.5% of its net Tier
+1 capital. The Company has incorporated large-scale risk exposure management into its overall risk management
+system, continued to improve customer credit management requirements, continued to streamline risk exposure
+measurement rules, dynamically monitored changes in large-scale risk exposures by way of financial technology, and
+reported regularly on large-scale risk exposure indicators and related management work to regulatory authorities, so
+as to effectively control customer concentration risks. As at the end of the reporting period, other than customers
+with regulatory exemption, single non-financial institution customers, group non-financial institution customers,
+single financial institution customers and group financial institution customers of the Company that reached the
+standards of large-scale risk exposure were all in compliance with the regulatory requirements.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.11.3 Country risk management
+Country risks represent the risks of economic, political and social changes or developments in a country or region
+that may cause borrowers or debtors in that country or region to be unable or unwilling to fulfill their obligations
+to banks, or incur loss to commercial presences of the Company in that country or region, or other loss to the
+Company in that country or region. Country risk may arise from deteriorating economic conditions, political and
+social upheavals, nationalisation or expropriation of assets, and government repudiation of external indebtedness,
+foreign exchange controls and currency depreciation in a country or region.
+The Company strictly implemented relevant regulatory requirements and followed the principles of soundness and
+prudence, established a country risk management system compatible with strategic objectives, risk profile and
+complexity, and incorporated country risk management into its overall risk management system so as to promptly
+identify, measure, evaluate, monitor, report, control and mitigate country risks, assess the country risk ratings in a
+regular manner and implement limit management, while guiding business to tilt in favor of low-risk countries. Major
+matters involving country risk management strategies and policies were submitted to the Board for consideration
+and approval. In 2021, under the background of continuously spreading pandemic overseas and the complex
+and changeable international political and economic situations, the Company strengthened risk monitoring and
+management in priority countries, dynamically updated country risk ratings based on risk changes, and strictly
+restricted business growth in high-risk countries. As at the end of the reporting period, the Company has made
+adequate allowances for country risks in accordance with the regulatory requirements. As a result, the country risks
+will not have a material effect on the operations of the Company.
+3.11.4 Market risk management
+The Company's market risk arises from trading book and banking book, and the interest rate risk and exchange rate
+risk are the major market risks faced by the Company.
+Interest rate risk management
+Trading book
+The Company uses volume indicators, market risk value indicators (VaR, covering interest rate risk factors of various
+currencies and durations relating to trading book business), interest rate stress testing loss indicators, interest-
+rate-sensitive indicators and accumulative loss indicators, to measure, monitor and manage the interest rate risk
+of trading book. The interest rate risk factors used for risk measurement cover all businesses under the trading
+book, and are comprised of around 140 interest rate indicators or bond yield curves. VaR includes general VaR and
+stressed VaR, which are both calculated using the historical simulation method and adopt a confidence coefficient
+of 99%, an observation period of 250 days and a holding period of 10 days. The interest rate stress testing
+scenarios include the parallel move, steep move and twisted change of interest rates at various degrees and various
+unfavorable market scenarios designed on the characteristics of investment portfolios. Among which, the extreme
+interest rate scenario may move up to 300 basis points and cover the extremely unfavorable conditions of the
+market. Major interest rate sensibility indicator reflects the duration of bonds and the change in the market value of
+bonds and interest rate derivatives PV01 (when an interest rate fluctuates unfavorably by 1 basis point). As for daily
+risk management, the annual scope of authorisation and the market risk limits for the interest rate risk businesses
+under the trading book are set in accordance with the risk appetite, operation plan and risk prediction of the Board
+of Directors at the beginning of the year for which the Market Risk Management Department is responsible for daily
+monitoring and continuous reporting.
+In 2021, under the combination of "economic downturn + monetary steady + credit contraction", the RMB interest
+rate showed an overall downward trend. As of the end of the reporting period, the 1-year treasury bonds fell by 23
+basis points from the end of the previous year to 2.24%, and the 10-year treasury bonds fell by 37 basis points to
+2.78% from the end of the previous year. As for the USD interest rate, with the gradual recovery of the US economy
+from the pandemic, after nearly two years of monetary easing policies, the US has gradually withdrawn from
+quantitative easing, and the overall interest rate showed a significant upward trend. As of the end of the reporting
+period, the US 1-year treasury bonds rose by 29 basis points from the end of the previous year to 0.39%, and the
+10-year treasury bonds rose by 59 basis points from the end of the previous year to 1.52%.
+83
+3.11.2 Management of large-scale risk exposure
+3.11 Risk Management
+3.10.7 Major joint ventures
+During the reporting period, the Company acquired 14.8559% equity interests of Bank of Taizhou Co., Ltd. ("Bank
+of Taizhou") held by Ping An Trust Co., Ltd. and Ping An Life Insurance Company of China, Ltd. for a share transfer
+consideration of RMB3.121 billion. Upon the completion of the transaction, the Company held 24.8559% equity
+interests of Bank of Taizhou. For details, please refer to the relevant announcements dated 19 March 2021 and 31
+May 2021 published on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+Bank of Taizhou, an associate of the Company, was established in Taizhou, Zhejiang province in 2002 with a
+registered capital of RMB1.8 billion. As at the end of the reporting period, the Company had 24.8559% shares of
+Bank of Taizhou. Bank of Taizhou is engaged in commercial banking business approved by the CBIRC, such as taking
+public deposits, granting loans and interbank lending.
+60
+84
+80
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+CMB Wealth Management
+CMB Wealth Management was officially launched in 2019. Its business scope includes issuance of wealth
+management products, wealth management consulting and advisory, and other businesses approved by the CBIRC.
+At the beginning of December 2021, the CBIRC officially approved the matters related to the capital increase and
+the change of registered capital of CMB Wealth Management, and agreed that JPMorgan Asset Management
+(Asia Pacific) Limited shall contribute RMB2.667 billion to subscribe for 10% of the equity interests of CMB Wealth
+Management. Upon completion of the capital increase, CMB Wealth Management will be owned as to 90% and
+10% by the Company and JPMorgan Asset Management (Asia Pacific) Limited respectively, and its registered capital
+will be increased to approximately RMB5.556 billion from RMB5.0 billion.
+As at the end of the reporting period, the total assets of CMB Wealth Management amounted to RMB12.097 billion,
+and its net assets amounted to RMB10.678 billion. During the reporting period, it realised a net operating income of
+RMB5.203 billion and a net profit of RMB3.203 billion.
+China Merchants Fund
+Established in 2002, China Merchants Fund has a registered capital of RMB1.31 billion. As at the end of the
+reporting period, the Company held 55% of China Merchants Fund's equity interests. The business scope of China
+Merchants Fund covers fund establishment, fund management and other operations approved by the CSRC.
+As at the end of the reporting period, the total assets of China Merchants Fund amounted to RMB10.149 billion,
+and its net assets amounted to RMB6.991 billion. It realised a net profit of RMB1.603 billion during the reporting
+period.
+CIGNA & CMAM
+As at the end of the reporting period, the total assets of Bank of Taizhou amounted to RMB316.172 billion and its
+net assets amounted to RMB26.441 billion. During the reporting period, Bank of Taizhou realised a net profit of
+RMB4.228 billion.
+CIGNA & CMAM was established in 2020 with a registered capital of RMB500 million and is an indirectly owned
+subsidiary of the Company, which is owned as to 87.3458% and 12.6542% by CIGNA & CMB Life Insurance,
+a joint venture of the Company, and CMB International Capital, a subsidiary of the Company, respectively. The
+scope of business of CIGNA & CMAM includes entrusted management of client's funds, issuance of insurance asset
+management products and asset management related consultation business.
+CMB Europe S.A.
+The establishment of CMB Europe S.A. was approved in May 2021 with a registered capital of €50 million. It is a
+wholly-owned subsidiary of the Company in Europe and is the regional head office of the Company in continental
+Europe. CMB Europe S.A. will be fully integrated into the Company's extensive wealth management system and
+leverage its full license to provide its customers with a wide range of financial products and services such as cross-
+border financing, M&A finance, private banking, investment management, financial markets, bond underwriting,
+trade finance, etc., as well as operation and allocation of the global assets of its corporate and individual customers.
+As at the end of the reporting period, the total assets of CMB Europe S.A. amounted to €49 million, with net assets
+of €49 million.
+CIGNA & CMB Life Insurance
+CIGNA & CMB Life Insurance, a joint venture of the Company, was established in Shenzhen in 2003 with a
+registered capital of RMB2.8 billion. As at the end of the reporting period, the Company held 50% of CIGNA &
+CMB Life Insurance's equity interests. CIGNA & CMB Life Insurance is mainly engaged in insurance businesses such
+as life insurance, health insurance and accident injury insurance, as well as the reinsurance of the above insurances.
+As at the end of the reporting period, the total assets of CIGNA & CMB Life Insurance amounted to RMB108.815
+billion, and its net assets amounted to RMB11.129 billion. During the reporting period, CIGNA & CMB Life Insurance
+realised a net profit of RMB1.182 billion.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+Merchants Union Consumer Finance
+Merchants Union Consumer Finance, a joint venture of the Company, was established in Shenzhen in 2015 with a
+registered capital of RMB10.0 billion (including RMB6.131 billion upon transfer of capital reserve and undistributed
+profits into registered capital during the reporting period). Merchants Union Consumer Finance is mainly engaged in
+the granting of personal consumer loans. At present, the Company directly holds 50% equity interests of Merchants
+Union Consumer Finance.
+As at the end of the reporting period, the total assets of Merchants Union Consumer Finance amounted to
+RMB149.698 billion and the net assets were RMB14.038 billion. It realised a net profit of RMB3.063 billion during
+the reporting period.
+China Merchants T-Bank
+On 11 December 2020, the CBIRC officially approved the establishment of China Merchants T-Bank, an independent
+direct-marketing bank, jointly established by the Company and Wangyin Online (Beijing) Business Service Co., Ltd.,
+with a shareholding of 70% and 30%, respectively. With a registered capital of RMB2.0 billion, China Merchants
+T-Bank is proposed to be a financial institution that legally conducts all types of commercial banking business
+through the Internet. Currently, the application for opening of China Merchants T-Bank is pending the approval
+of the CBIRC. Upon the formal establishment, China Merchants T-Bank will be a joint venture of the Company
+according to the corporate governance arrangement.
+3.10.8 Major associates
+Bank of Taizhou Co., Ltd.
+As at the end of the reporting period, the total assets of CIGNA & CMAM amounted to RMB661 million, with net
+assets of RMB537 million and a net profit of RMB50 million for the reporting period.
+China Merchants Bank
+Annual Report 2021
+For more information about the Company's liquidity risk management, please refer to Note 60(c) to the financial
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+3.11.8 Compliance risk management
+Compliance risk refers to the risk of being subject to legal sanctions, regulatory punishments, material financial
+losses, and reputational loss as a result of the failure to observe the laws, rules and standards. The Board of Directors
+of the Company is ultimately responsible for the compliance of the operating activities, and delegates the Risk and
+Capital Management Committee under the Board of Directors to supervise the compliance risk management. The
+Risk and Compliance Management Committee of the Head Office is the organisation to manage compliance risk of
+the whole company under the senior management. The Company set up three lines of defense for compliance risk
+management and the double-line reporting mechanism through the establishment of organisational management
+structure comprising the risk and compliance management committees, compliance supervisors, compliance officers
+and legal and compliance departments under the Head Office and its branches as well as compliance supervisors at
+branch and sub-branch levels, continuously improved risk management techniques and management procedures and
+established a complete and effective compliance risk management system to achieve effective control of compliance
+risks.
+During the reporting period, the Company strictly implemented the regulatory policies and requirements, and
+continued to improve the long-term mechanism for internal control and compliance management. The first was to
+formulate and release the "Guidelines on Internal Control and Compliance Work of the Bank in 2021" to make
+unified arrangements for the internal control and compliance management throughout the Bank. The second was
+to organise the "Year of Internal Control and Compliance Management Construction" activity in accordance with
+the requirements of the CBIRC and based on the actual situation of the Company. With reference to the issues
+identified in the rectification of market chaos, regulatory notification and self-examination since 2017, the Company
+conducted in-depth self-examination, self-correction and centralised rectification of repeated violations to eliminate
+hidden risks in a timely manner. The third was to timely publicise and interpret regulatory regulations and policies
+to accurately grasp the regulatory direction, effectively identify and evaluate compliance risks of new products,
+new businesses and major projects, and strictly follow and implement regulatory requirements. The fourth was to
+strengthen the refined management of policies, and continue to promote the upgrade and iteration of policy hub,
+while preparing policy diagrams to display the overall network of policy construction across the Bank in a visualised
+way so as to avoid repetitive systems or redundant management. The fifth was to enhance employee behavior
+management by continuously launching compliance education activities for top leaders, compliance officers and
+compliance supervisors, carrying out inspection on abnormal behaviors of employees on a quarterly basis, and
+strengthening the use of employee behavior management tools such as minor non-compliance points, list of non-
+compliance restrictions and due diligence upon departure from the Bank, so as to implement employee behavior
+management properly. The sixth was to strengthen joint inspection and rectification management by adopting an
+open and integrated approach, organise on-site joint inspection throughout the Bank, and actively promote the
+opening-up and sharing of the auditing "Hawk Eye" system across the Bank. The seventh was to increase investment
+in technology to empower internal control and compliance management, and comprehensively promote the digital
+transformation of internal control and compliance management.
+3.11.9 Money laundering risk management
+Money laundering risk refers to the risk that the Company may be used by the three types of activities such as
+"money laundering", "terrorist financing" and "proliferation financing" in the course of conducting business
+and managing operations. The Company has established a relatively sound money laundering risk management
+mechanism, including a governance structure with clear responsibilities from the Board and senior management to
+ordinary employees, a comprehensive system coverage, an effective risk assessment and monitoring system, scientific
+anti-money laundering data governance, and elements such as targeted management of customers or businesses
+associated with high risks, efficient anti-money laundering automated system support, independent inspection and
+auditing, and continuous and effective anti-money laundering compliance training, so as to provide guarantee for
+the Company's stable and compliance operations.
+87
+BB
+88
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+During the reporting period, the Company proactively fulfilled its anti-money laundering obligations and took
+various measures to ensure the effectiveness of its money laundering risk management. The first was to optimise
+the institution's money laundering risk assessment mechanism and incorporate institutional money laundering
+risk management practices into comprehensive risk management. The second was to further improve the anti-
+money laundering internal control system based on the actual situation of money laundering risks and business
+development. The third was to continue to carry out customer and product money laundering risk rating, strengthen
+risk management of customers and products associated with high risks, and continue to optimise the anti-money
+laundering business process. The fourth was to coordinate overseas institutions and subsidiaries to ensure the
+consistency of the Group's money laundering risk management and prevent money laundering risk from spreading
+across institutions. At the same time, the Company continued to increase scientific and technological investment in
+anti-money laundering, actively explored the application of Al technology in anti-money laundering, improved the
+system's risk control efficiency and external service capabilities, and enhanced the effectiveness of money laundering
+risk management.
+3.12 Outlook and Coping Tactics
+In 2021, China's banking industry showed an obvious upward trend, and continuously strengthened its support to
+real economy. The growth in scale and profitability was becoming a norm with generally stabilised asset quality and
+rather strong risk compensation capability.
+The banking industry is a typical cyclical industry, but it is currently in a critical period of structural change. For
+a longer period of time in the future, structural factors will replace cyclical factors and the banking industry will
+continue to face differentiation. With the continuous adjustment of economic structure and the continuous switch
+between new and old growth engines, the banking industry is compelled to accelerate the pace of "light capital”
+transformation and speed up the reshaping of differentiation strategy, so as to effectively control various risks and
+achieve quality development under a more complicated economic growth environment.
+Looking forward to 2022, while the global economy is expected to continue its recovery path with positive progress
+in COVID-19 vaccines and special drugs, it is still confronted by the threat of COVID-19 strain mutations. In
+general, the main contradiction in the US and European economies is high inflation rather than economic growth.
+As economic activities continue to return to normal, the supply-demand gap in the US and European economies
+is expected to narrow down. The focus of recovery will lean towards service industry, the spillover of commodity
+demand is expected to be reduced accordingly, and the supply constraints are expected to be restored endogenously,
+which will be significantly improved by mid-2022. Correspondingly, inflation in the US and Europe may remain high
+in the short term and is expected to enter a downward trajectory by mid-2022. However, the impact of COVID-19
+mutations and the "wage-price" spiral may continue to cause high inflation. Under the risk of high inflation, the US
+Federal Reserve will complete its bond purchase reduction in March 2022 and decide the timing and frequency of
+subsequent interest rate hikes depending on the inflation development.
+In contrast to the US and Europe, the main contradiction of China's economy in 2022 is the increasing downward
+pressure on the economy, which will ease the pressure on inflation. In terms of economic growth, although
+the current multiple supply constraints faced by China are expected to ease marginally, the overall demand is
+weak, the structure is significantly changing, the growth rate of external demand and real estate investment may
+drop significantly, the consumption will probably remain in weak recovery, the investment momentum in the
+manufacturing industry will decline marginally, and the infrastructure investment is expected to rise in a counter-
+cyclical cycle. The cross-cycle and counter-cyclical macro-control policies will be organically combined, and the fiscal
+policies and monetary policies will be coordinated to play the role of economic safety net. In terms of inflation, with
+the easing of supply constraints at home and abroad, the structural inflation pressure in China will be significantly
+reduced, and the year-on-year growth rate of PPI is expected to decline steadily. The year-on-year growth rate of CPI
+will increase due to the reversal of the hog cycle, but the overall trend will remain moderate.
+China Merchants Bank
+Annual Report 2021
+Chapter III Management Discussion and Analysis
+Under the current economic landscape, the Company intends to increase loans and advances to customers by
+approximately 11% and expects that the customer deposits will increase by approximately 12% in 2022.
+The Company believes that the growth potential of the traditional banking business model will be further narrowed
+down under the "threefold pressure" of economic development. In order to open up a new world for development,
+we need to comprehensively review our own business services not from the perspective of a bank but the perspective
+of customers by studying, grasping and solving customer pain points and needs. The 3.0 business model refers to
+the development model that shifts from the perspective of a bank to the perspective of customers. Under the severe
+and complicated external environment, the Company will further maintain its confidence and determination with
+regard to thinking, strategy and action, firmly establish the value of "Focus on Customer, Creating Value for our
+Customers", guide the implementation of strategy with our value, and continue to promote the 3.0 model. Specific
+strategies are as follows.
+The first is to upgrade the wealth management service system. The Company will focus on building customer-centric
+asset allocation capabilities to enhance the competitiveness of wealth management, and strive to solve problems
+including misleading sales orientation, unreasonable product structure, insufficient service access and inconsistent
+services. We will comprehensively promote the "original intention plan" which focuses on improving experience of
+both customers and employees and systematically improves wealth management capabilities, implement the "TREE
+Asset Allocation System", improve the execution capabilities of the middle-office, and facilitate the transformation
+of relationship managers to wealth management experts. In addition, the Company will accelerate the construction
+of the "people + digitalisation" operation system, strengthen the organic synergies among all channels such as
+outlets, the Network Operation Service Center and App, improve the capability of breakpoint operation, and pay
+close attention to service quality and experience in order to create an around-the-clock service network from being
+your companion to being your professional investment consultant.
+The second is to strengthen the integrated service of ICPT. Based on the enterprise's business logic, the Company
+will integrate the decentralised advantages of investment banking, commercial banking, private banking and
+technology and research services, effectively cover customers of different stages, different industries and different
+characteristics with differentiated and targeted services, thereby forming the unique integrated service characteristics
+of ICPT In line with the trend of ecological operation of strategic customers, the Company will, from the perspective
+of maximising customer value, explore system and mechanism innovation with project-based approach as the core,
+and integrate internal resources in order to plan for the overall layout of customer operation.
+The third is to accelerate the construction of the "six all" risk management system. The Company will further
+broaden the horizon of risk management, and transform from focusing on assets to focusing on the comprehensive
+chain of investors, products, cooperative institutions and underlying assets, thereby consolidating the centralised risk
+management system from the perspective of customers. In line with the trend of the optimising supply and demand
+pattern of traditional industries, the increasingly blurred nature of customers' industries and the ecology-based
+operation of customers, we will optimise the authorisation for industry and customer access and strengthen the
+process management of policy implementation, improve the flexibility and mobility of the organisational form and
+working mechanism of loan approval, eliminate the division of labor between the loan approval teams of the Head
+Office and those of branches, and establish the loan approval mode for different customer service scenarios in order
+to further standardise the perception across the Bank.
+The fourth is to accelerate the construction of digital operation model. The Company will make full use of digital
+means to improve the efficiency of customer service, and improve the capabilities to organise and apply digital
+awareness in order to analyse and solve pain points of customers. Focusing on key areas of digital application, we
+will increase investment in areas such as investment research, digital risk control, smart wealth management and
+open platform. Moreover, the Company will further consolidate the underlying technology foundation for digital
+application, promote the construction of cloud platform, strengthen the capabilities of technology middle-office
+and data middle-office, apply micro-services to systems, and turn micro-services to products in order to further
+consolidate the data foundation.
+89
+During the reporting period, the Company fully implemented the notice regarding the Measures for Reputational
+Risk Management of Banking and Insurance Institutions issued by the CBIRC, revised the reputational risk
+management measures, further improved the reputational risk management structure, and clarified the reputational
+risk responsibilities of all departments of the Head Office, branches and subsidiaries, consolidating the first line of
+defense. The Company carried out a number of inspections on high-risk areas and effectively prevented various risk
+events.
+Banking book
+Reputational risk refers to the risk that the Company might be negatively evaluated by relevant stakeholders, the
+public and the media due to behaviors of the Company and its employees or external incidents, thereby damaging
+the brand value of the Company, which is detrimental to the normal operation of the Company, or even market
+stability and social stability. Reputational risk management is an important part of the corporate governance and the
+overall risk management system of the Company, covering all activities, operations and businesses undertaken by
+the Company and its subsidiaries. The Company established and formulated the reputational risk management rules
+and system and took initiatives to effectively prevent the reputational risk and respond to any reputational incidents,
+so as to reduce loss and negative impact to the greatest extent.
+statements.
+The Company mainly adopts the re-pricing gap analysis, duration analysis, benchmark-correlated analysis, scenario
+simulation and other methods to measure and analyse the interest rate risk of banking book on a monthly basis. The
+re-pricing gap analysis mainly monitors the distribution of re-pricing duration and mismatch of assets and liabilities;
+the duration analysis monitors the duration of major product types and the change in the duration gap of assets
+and liabilities of the whole Bank; the benchmark-correlated analysis assesses the benchmark risk existing between
+different pricing benchmark interest rate curves, as well as between the different duration points on each of such
+curves based on the benchmark-correlated coefficients calculated using our internal models; the scenario simulation
+is the major approach for the Company to conduct interest rate risk analysis and measurement, which comprises a
+number of ordinary scenarios and stress scenarios, including the interest rate benchmark impact, the parallel move
+and the change in the shape of yield curves, the extreme changes in interest rates in history, and the most possible
+changes in interest rates in the future as judged by experts and other scenarios. The net interest income (NII) for the
+future one year and the changes in economic value (EVE) indicator are calculated through simulation of the scenario
+of changes in interest rates. The NII fluctuation ratio and the EVE fluctuation ratio of certain scenarios are included
+into the interest rate risk limit system of the whole Bank. In addition, the internal limit indicator system is included
+into the standardised measurement indicators set out in the Guidelines on the Management of Interest Rate Risk of
+Banking Book of Commercial Banks (Revised) issued by the CBIRC.
+During the reporting period, the Company adhered to the principle of neutral and prudent interest rate risk appetite,
+paid close attention to changes in the external environment and internal interest rate risk exposure structure, made
+prediction and analysis of the trend of credit and market interest rates based on the macro quantitative model, and
+flexibly adjusted the active management strategy for interest rate risk. The Company continuously analysed and
+evaluated the impact of changes in the LPR curve on the Company's interest rate risk after the LPR conversion, and,
+through the adjustments to the structure of on-balance sheet assets and liabilities and off-balance sheet interest rate
+derivatives, managed the interest rate risk as a result of the decline in LPR. As at the end of the reporting period,
+various on and off-balance sheet management measures were implemented as scheduled, and the interest rate
+risks were under control within the annual interest rate risk management and control target range of the Company.
+The results of stress test also showed that various indicators still stayed within the limits and pre-warning values of
+the Company, and the interest rate risk of the banking book was generally controllable.
+-
+Exchange rate risk management
+Trading book
+The Company uses risk exposure indicator, market risk value indicator (VaR, covering foreign exchange rate risk
+factors of various currencies related to transactions on the trading book), the exchange loss indicator under
+stress test, option-sensitive indicator and accumulated loss indicator to conduct risk measurement and monitoring
+management. As for risk measurement, the selected exchange rate risk factor is applied on spot prices, forward
+prices and volatilities in all transaction currencies under the trading book. Market value risk indicators comprise
+general market value at risk and stress market value at risk, and are calculated using historical simulation based on
+a confidence coefficient of 99%, an observation period of 250 days and a holding period of 10 days. Exchange rate
+stress test scenarios cover 5%, 10%, 15% or more adverse changes in every transaction currency against RMB, and
+changed volatility of foreign exchange options. Major option-sensitive indicators include Delta, Gamma, Vega and
+other indicators. For daily management, we set annual limits on authority associated with exchange rate risks under
+the trading book and relevant market exposure at the beginning of the year according to the risk appetite, business
+planning and risk forecast of the Board of Directors, and delegated the Market Risk Management Department to
+perform daily monitoring and on-going reporting.
+In 2021, the world's major economies were gradually recovering. The US Federal Reserve took the lead in releasing
+the tightening signal, driving the USD to return to the upward trend, and major non-USD currencies generally
+depreciated. However, the RMB exchange rate deviated from the USD index due to factors such as strong exports
+and continued easing of domestic USD liquidity, and showed an overall upward trend. As at the end of the reporting
+period, the central parity rate of RMB against the USD was 6.3757, representing an appreciation of approximately
+2.29% as compared to the end of the previous year. Judging from the fluctuations throughout the year, the RMB
+exchange rate experienced three stages: depreciation, followed by appreciation and then shock.
+Under this background, the Company mainly obtained spread income through foreign exchange trading business
+on behalf of customers, utilised system to dynamically monitor the exposure of trading and strengthened the
+monitoring of changes in the value of limit indicators such as sensitivity index and stop-loss. As at the end of the
+reporting period, all exchange rate risk indicators of trading book of the Company were within the target range.
+China Merchants Bank
+Annual Report 2021
+Banking book
+Chapter III Management Discussion and Analysis
+The Company mainly uses foreign exchange exposure analysis, scenario simulation analysis, stress test, and other
+methods for measurement and analysis of exchange rate risk of banking book of the Company. The foreign
+exchange exposure measurement uses the short-sided method, the correlation approach and the aggregation
+approach; scenario simulation and stress test analysis are two important exchange rate risk management tools of the
+Company for managing foreign exchange rate risk in respect of fluctuation of all currency exchange rates, including
+the standard scenario, historical scenario, forward scenario and stress scenario, including scenarios such as spot
+and forward exchange rate fluctuations and historical extreme exchange rate fluctuations of various currencies,
+each scenario could simulate the impact on the Company's profit or loss. The effects of certain scenarios on the
+profit and loss and its percentage to net capital as a limit indicator are taken as reference in the daily management.
+The Company conducts back-testing and assessment on relevant model parameters on a regular basis to verify the
+effectiveness of measurement models.
+The Company regularly measures and analyses foreign exchange exposure of banking book and scenario simulation
+results, monitors and reports exchange rate risk on a monthly basis under its quota limit framework, and adjusts its
+foreign exchange exposure accordingly based on the trend of foreign exchange movements, so as to mitigate the
+relevant foreign exchange risk of banking book. The Audit Department of the Company is responsible for overall
+auditing of our exchange rate risk.
+During the reporting period, the Company paid close attention to exchange rate movements, took initiative to
+analyse the impact of exchange rate changes in light of the macroeconomic conditions at home and abroad, and
+proposed a balance sheet optimisation program as a scientific reference for the management's decision-making.
+In 2021, the Company increased its efforts to monitor and analyse of foreign exchange exposure and imposed a
+stringent control over the scale of foreign exchange risk exposure. The Company was prudent about the exchange
+rate risk. As of the end of the reporting period, the size of the banking book of the Company's foreign exchange
+exposure was at a relatively low level. The exchange rate risk of the Company is generally stable with all the core
+limit indicators, general scenarios and stress testing results satisfying the regulatory limit requirement.
+For more information about the Company's market risk management, please refer to Note 60(b) to the financial
+statements.
+3.11.5 Operational risk management
+Operational risk refers to the risk of loss arising from inappropriate or failed internal procedures, incompetent
+personnel or IT systems, or external events. In view of the various aspects and wide range of operational risks, the
+Company's operational risk management will, based on the principles of cost-revenue matching and input-output
+balance, vigorously strengthen the establishment of operational risk management system, implement internal control
+system, continue to carry out various businesses steadily and reduce or prevent operational risk losses with a certain
+level of cost. In the process of operational risk management, within the risk limits set by the Board of Directors,
+the Company will, through measures such as further improving the risk management mechanism, strengthening
+risk prevention and control in key areas, conducting risk monitoring and pre-warning, improving assessment and
+evaluation mechanism, and cultivating operational risk prevention culture, so as to further improve operational risk
+management capabilities and effectiveness, and prevent and reduce operational risk losses.
+During the reporting period, in order to prevent loss arising from systematic operational risk and material operational
+risk, the Company continued to improve its operational risk management system. The first was to incorporate
+cooperative business into the overall risk management system, carry out classified and hierarchical management
+of cooperative institutions, and promote online management of cooperative and public business information. The
+second was to strengthen risk prevention and control in key areas, and continue to carry out risk investigation
+and management of private placement, deposit pledge loan business, capital supervision business of real estate
+enterprises and their related companies, P2P platform business and transactions with abnormal payment. The third
+was to improve management tools, and optimise the evaluation mechanism of operational risk and the economics
+of operational risk capital allocation plan. The fourth was to strengthen outsourcing risk management, prudently
+review outsourcing products, strengthen access management, and organise the Head Office and branches to
+randomly select projects for post-outsourcing evaluation. The fifth was to strengthen IT risk and business continuity
+management, formulate annual business continuity plans and business continuity management guidelines, and
+review the monitoring indicator system, so as to complete the security risk investigation of the Bank's information
+technology outsourcing and cooperative businesses. The sixth was to further improve the performance of
+the operational risk management system, and continue to promote the operational risk management system
+reconstruction project. The seventh was to increase the empowerment of subsidiaries and branches, and carry out
+video training for the operational risk management personnel of domestic and foreign branches and subsidiaries so
+as to improve operational risk management skills.
+85
+86
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2021
+3.11.6 Liquidity risk management
+Liquidity risk refers to the risk that the Company's unable to obtain sufficient funds at a reasonable cost in a
+timely manner to grow its assets, pay maturing debts and perform other payment obligations. The liquidity risk
+management of the Company is based on the principles of prudence, foresight and comprehensiveness, which is
+more appropriate for the current development stage of the Company. The current liquidity risk management policies
+and systems of the Company have basically satisfied the regulatory requirements and its own management needs.
+Based on the principle of separating policy-making, strategy implementation and supervision of liquidity risk
+management, the Company puts in place a governing framework under which the roles, responsibilities and
+reporting lines of the Board of Directors, the Risk and Capital Management Committee, the Board of Supervisors,
+senior management, designated committees and relevant departments are segregated to ensure the effectiveness of
+liquidity risk management.
+In 2021, the Central Bank maintained a prudent monetary policy and reasonably stable liquidity. Based on the
+macroeconomic and market trend analysis, the Company dynamically and quantitatively predicted future risk
+conditions, and deployed asset-liability management strategies in a forward-looking manner to balance the risks
+and returns. The first was to continue to promote the steady growth of deposits from customers and strengthen
+the control of key timings to guide the further decrease of liabilities and costs. The second was to strengthen
+the organisation and support of high-quality assets, so as to continuously optimise the asset structure and realise
+the stable operation of assets and liabilities. The third was to carry out active liability management through
+comprehensive and multiple channels, expand diversified financing channels, actively conduct open market
+transactions, improve treasury financing capabilities and play the role of a primary dealer. The fourth was to further
+improve the efficiency of capital use. Appropriately increasing investment in qualified and high-quality bonds,
+the Company maintained sufficient liquidity reserves. The fifth was to strengthen liquidity risk management for
+business lines, overseas branches and affiliates. The sixth was to test and improve the liquidity contingency plan and
+emergency plan, and effectively improve the ability to respond to liquidity risk events through regular liquidity risk
+emergency drills.
+As at the end of the reporting period, all liquidity indicators of the Company satisfied the regulatory requirements
+and the Company had sufficient funding sources to meet the needs of sustainable and healthy development of
+the business. 8% of the Company's total RMB deposits and 9% of the Company's total foreign currency deposits
+were required to be placed with the PBOC. The Company's liquidity indicators remained at healthy levels. Deposits
+maintained steady growth. Liquidity reserves were sufficient and overall liquidity was at a safe level.
+3.11.7 Reputational risk management
+The fifth is to strengthen the strategic implementation of the 3.0 model. The Company will build a team of cadres
+and employees with "values higher than KPI", strengthen the key role of management in value guidance, and
+improve the capabilities of management to understand and implement strategies, so that management will be able
+to "redefine tasks" and understand the strategic focus and business logic behind KPI. Moreover, the Company will
+vigorously advocate the "Simple Work Management Tips", optimise the evaluation standards of cadres, and take the
+practice of values as the primary standard for evaluating and choosing cadres.