The Chinese bank has reported a net profit of CNY26 billion ($3.8 billion) in the first half year, down 10% from a year ago,

The bank reported a 21.4% hike in its operating expenses to CNY71.3 billion mainly due to a 39.6% surge of impairment losses of credit and other assets; while operating income was up 9.5% to CNY102 billion, of which interest income rose by 5.6% to CNY64.9 billion and non-interest income increased 17.2% to CNY37.1 billion year-on-year (YoY).  

Structured deposits assets on the balance sheet were up 5.2% to CNY5.9 billion YoY, while structured deposits liabilities were up 6.3% to CNY5.2 billion.  

The balance of structured deposits has seen a plunge since the wrapper hit a CNY12 trillion in assets under management ($1.73 trillion) record high in April, which prompted concerns from regulators over arbitrage, bad debt and 'fake structures'.

Structured deposits began to gain momentum in China in late 2018 when the Chinese central bank and the China Banking and Insurance Regulatory Commission (CBIRC) prohibited banks from selling principal-guaranteed structured notes, known locally as asset management products.

Off balance sheet, asset management products, which include structured notes, were up 5.2% to CNY1.3 trillion as at 30 June. Accordingly, the bank collected commission income and fee of CNY2.4 billion, interest income of CNY509m and bore interest expenses of CNY310m.

The Beijing-based bank has been a top 10 distributors in China by market share in the past three years, SRP data shows. It has issued 132 products with a total sales volume of CNY13.5 billion in the past eight months, translating to a market share of 3.76%.

Citic bank has 66 live products, of which 65 are structured deposits - most of them have a tenor of less than one year. The exchange rates of USD/CAD, GBP/USD, EUR/GBP are the most popular underlyings.  

Derivatives

Derivatives assets were up 46.4% to CNY25.1 billion while the liabilities were up 46.3% to CNY24.6 billion attributable to a balance surge of interest rates-linked products.

Other asset classes such as interest rates derivatives grew by nearly 200% to CNY14.2 billion while currency derivatives were stable at CNY10.2 billion and precious metal derivatives rose 223% to CNY 691 billion. Credit derivatives only contributed CNY100m.

In terms of liabilities, interest rates, currency and precious metal derivatives made up 56.6% (CNY13.9 billion), 39.3% (CNY9.7 billion) and 4.1% (CNY1 billion), respectively. They all were not for hedging purposes except a sum of CNY66m from interest rates derivatives.

Click here to view the 1H20 report (in Chinese).