China Merchants Securities : THIRD QUARTERLY REPORT OF 2020

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

招 商 銀 行 股 份 有 限 公 司

CHINA MERCHANTS BANK CO., LTD.

(H Share Stock Code: 03968)

(Preference Share Stock Code: 04614)

THIRD QUARTERLY REPORT OF 2020

Pursuant to the regulations of the China Securities Regulatory Commission, the Company is required to publish a quarterly report for each of the first and third quarters.

The financial information set out in this quarterly report is unaudited and prepared in accordance with the International Financial Reporting Standards.

This announcement is made by the Company pursuant to Rule 13.09 and Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong).

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Third Quarterly Report of 2020 (H Share)

1 Important Notice

The Board of Directors, the Board of Supervisors, Directors, Supervisors and senior management of the Company confirm that the contents in this report are true, accurate, and complete and have no false representations, misleading statements or material omissions, and they will individually and collectively accept legal responsibility for such contents.

The 18th meeting of the Eleventh Session of the Board of Directors of the Company was held through voting by correspondence. The third quarterly report of 2020 of the Company was unanimously approved at the meeting. 17 out of 17 eligible directors attended the meeting.

All financial statements set out in this report are prepared in accordance with the International Financial Reporting Standards and are unaudited. The unaudited quarterly report prepared by the Company in accordance with the PRC Accounting Standards has been published on the website of Shanghai Stock Exchange. Unless otherwise stated, all monetary sums stated in this report are expressed in RMB. In the event of any discrepancies in interpretation between the English and Chinese versions, the Chinese version shall prevail.

"China Merchants Bank", "the Company" and "the Bank" mentioned in this report refer to China Merchants Bank Co., Ltd.; and "the Group" refers to China Merchants Bank Co., Ltd. and its subsidiaries.

Miao Jianmin, Chairman of the Board of Directors of the Company, Tian Huiyu, President, Wang Liang, an Executive Vice President and Chief Financial Officer, 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.

We have included in this report certain forward-looking statements with respect to the financial position, operating results and business development of the Company. 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 the Company believes that the expectations reflected in these forward-looking statements are reasonable, the Company gives no assurance that these expectations will turn into reality or prove to be correct. Therefore they should not be deemed as the Company'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 Company, and are subject to a number of uncertainties which may cause substantial differences from those in the actual results.

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Third Quarterly Report of 2020 (H Share)

2 General Information

2.1 Major accounting data and financial indicators of the Group

							Increase/decrease
							at the end of the
		At the end of the		At the end of	reporting period
		reporting period		last year	as compared to
		30 September		31 December	the end of
(in millions of RMB, unless otherwise stated)			2020		2019	last year (%)
Total assets			8,156,700		7,417,240	9.97
Equity attributable to shareholders of the Bank			703,306		611,301	15.05
Net assets per share attributable to ordinary
shareholders of the Bank (in RMB Yuan)			24.55		22.89	7.25
							Increase/decrease
							as compared to
							the corresponding
		January to		January to	period of
(in millions of RMB, unless otherwise stated)		September 2020	September 2019	last year (%)
Net cash generated from (used in)
operating activities			219,828		(53,732)	N/A
Net cash generated from (used in) operating
activities per share (in RMB Yuan)			8.72		(2.13)	N/A
							Increase/decrease
							during the period
							from January to
							September 2020 as
	The reporting					compared to the
		period				January to	corresponding
		July to	January to		September	period of
(in millions of RMB, unless otherwise stated)	September 2020	September 2020	2019	last year (%)
Net operating income	73,125	221,288		207,745	6.52
Net profit attributable to shareholders of the Bank	26,815	76,603		77,239	-0.82
Basic earnings per share attributable to ordinary
shareholders of the Bank (in RMB Yuan)	1.05	3.02		3.05	-0.98
Diluted earnings per share attributable to ordinary
shareholders of the Bank (in RMB Yuan)	1.05	3.02		3.05	-0.98
Annualised weighted average return on net assets							Decrease of 2.19
attributable to ordinary shareholders of the Bank (%)	17.40	17.00		19.19	percentage points

Note: The relevant indicators are calculated in accordance with the provisions of the "Rules on the Information Disclosure and Preparation of Companies Offering Securities to the Public No. 9 - Calculation and Disclosure of Return on Average Equity and Earnings per Share 《( 公開發行 證券的公司信息披露編報規則第9號- 淨資產收益率和每股收益的計算及披露》)". The Company issued non-cumulative preference shares in 2017 and perpetual bonds in July 2020, both are classified as other equity instruments. In addition, the Company completed the relevant approval procedures for the payment of dividends for offshore preference shares in the third interest-bearing year in September 2020. Therefore, when calculating earnings per share, return on average equity and net assets per share, the dividends on the offshore preference shares 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".

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Third Quarterly Report of 2020 (H Share)

2.2 Explanation on the differences between the financial statements prepared in accordance with the PRC Accounting Standards and the International Financial Reporting Standards

In the financial statements prepared by the Group in accordance with the PRC Accounting Standards and the International Financial Reporting Standards, there has been no difference in the net profit attributable to shareholders of the Bank for the reporting period ended 30 September 2020 and the equity attributable to shareholders of the Bank at the end of the reporting period.

2.3 Analysis of capital adequacy ratios

The Group continued to optimise its business structure and enhance capital management, and has satisfied various capital requirements of the Chinese banking regulatory authorities during the reporting period. During the reporting period, the various capital requirements imposed by the regulatory authority on the Group and the Company were that: the minimum capital requirements for the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core Tier 1 capital adequacy ratio were 8%, 6% and 5%, respectively. Based on the above-mentioned minimum capital requirements, further provision shall be made for reserve capital, counter-cyclical capital and additional capital, of which the reserve capital, counter-cyclical capital and additional capital were required to be 2.5%, 0% and 0%, respectively, which represented that the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core Tier 1 capital adequacy ratio of the Group and the Company during the reporting period should not be lower than 10.5%, 8.5% and 7.5%, respectively.

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 11.65%, 13.31% and 16.19%, respectively.

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Third Quarterly Report of 2020 (H Share)
					Increase/decrease
					at the end of the
					reporting period
	The Group	30 September	31 December	as compared to the
(in millions of RMB, except for percentages)	2020	2019	end of last year (%)
	The capital adequacy ratios under the
	Advanced Measurement Approach(1)
	Net core Tier 1 capital	588,418	550,339	6.92
	Net Tier 1 capital	672,507	584,436	15.07
	Net capital	817,926	715,925	14.25
	Core Tier 1 capital adequacy ratio	11.65%	11.95%	Decrease of 0.30
					percentage point
	Tier 1 capital adequacy ratio	13.31%	12.69%	Increase of 0.62
					percentage point
	Capital adequacy ratio	16.19%	15.54%	Increase of 0.65
					percentage point
	Information on leverage ratio(2)
	Total on and off balance sheet assets
	after adjustment	9,262,989	8,604,521	7.65
	Leverage ratio	7.26%	6.79%	Increase of 0.47
					percentage point

Notes:

1. 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 offshore branches and sub-branches 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 Limited, CMB International Capital Holdings Corporation Limited, CMB Financial Leasing Co., Ltd., CMB Wealth Management Company Limited and China Merchants Fund Management Co., Ltd.. During the parallel run period when the Advanced Measurement Approach for capital measurement 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. 2020 is the sixth year since the implementation of the parallel run period.
2. Since 2015, the leverage ratio shall be calculated based on the "Measures for Management of the Leverage Ratio of Commercial Banks (Revised)" promulgated by former CBRC on 12 February 2015. The leverage ratio of the Group was 6.52%, 6.88% and 6.79% as at the end of the second quarter of 2020, the end of the first quarter of 2020 and the end of 2019, respectively.

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Third Quarterly Report of 2020 (H Share)

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 11.14%, 12.91% and 15.86%, respectively.

			Increase/decrease
			at the end of the
			reporting period as
The Company	30 September	31 December	compared to the
(in millions of RMB, except for percentages)	2020	2019	end of last year (%)
The capital adequacy ratios under the
Advanced Measurement Approach
Net core Tier 1 capital	510,269	478,083	6.73
Net Tier 1 capital	591,503	509,336	16.13
Net capital	726,784	635,977	14.28
Core Tier 1 capital adequacy ratio	11.14%	11.48%	Decrease of 0.34
			percentage point
Tier 1 capital adequacy ratio	12.91%	12.23%	Increase of 0.68
			percentage point
Capital adequacy ratio	15.86%	15.27%	Increase of 0.59
			percentage point

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 10.43%, 11.92% and 13.63%, respectively.

			Increase/decrease
			at the end of the
			reporting period as
	30 September	31 December	compared to the
The Group	2020	2019	end of last year (%)
The capital adequacy ratios under the
Weighted Approach (Note)
Core Tier 1 capital adequacy ratio	10.43%	10.64%	Decrease of 0.21
			percentage point
Tier 1 capital adequacy ratio	11.92%	11.30%	Increase of 0.62
			percentage point
Capital adequacy ratio	13.63%	13.02%	Increase of 0.61
			percentage point

Note: 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.

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Third Quarterly Report of 2020 (H Share)

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 9.86%, 11.43% and 13.09%, respectively.

			Increase/decrease
			at the end of the
			reporting period as
	30 September	31 December	compared to the
The Company	2020	2019	end of last year (%)
The capital adequacy ratios under the
Weighted Approach
Core Tier 1 capital adequacy ratio	9.86%	10.09%	Decrease of 0.23
			percentage point
Tier 1 capital adequacy ratio	11.43%	10.75%	Increase of 0.68
			percentage point
Capital adequacy ratio	13.09%	12.53%	Increase of 0.56
			percentage point

2.4 Information on shareholders

2.4.1 Information on the shareholders of ordinary shares

As at the end of the reporting period, the Company had a total of 417,833 shareholders of ordinary shares, whose shareholdings are all not subject to trading moratorium.

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Third Quarterly Report of 2020 (H Share)

As at the end of the reporting period, the shareholdings of the top 10 shareholders of ordinary shares and the top 10 shareholders of ordinary shares whose shareholdings are not subject to trading moratorium of the Company were as follows:

						Number
				Percentage		of shares
			Number of shares	of total		subject to	Shares
Serial		Nature of	held at the end	share		trading	pledged
No.	Name of shareholder	shareholder	of the period	capital	Type of shares	moratorium	or frozen
			(share)	(%)		(share)	(share)
1	HKSCC Nominees Ltd.	Offshore legal	4,549,594,563	18.04	H Shares not subject to	-	Unknown
		person			trading moratorium
2	China Merchants Steam	State-owned	3,289,470,337	13.04	A Shares not subject to	-	-
	Navigation Co., Ltd.	legal person			trading moratorium
3	China Ocean Shipping	State-owned	1,574,729,111	6.24	A Shares not subject to	-	-
	Company Limited	legal person			trading moratorium
4	Hexie Health Insurance	Domestic legal	1,258,949,171	4.99	A Shares not subject to	-	-
	Co., Ltd. - Traditional -	person			trading moratorium
	Ordinary insurance products
5	Dajia Life Insurance Co., Ltd. -	Domestic legal	1,258,949,100	4.99	A Shares not subject to	-	-
	Universal products	person			trading moratorium
6	Shenzhen Yan Qing Investment and	State-owned	1,258,542,349	4.99	A Shares not subject to	-	-
	Development Company Ltd.	legal person			trading moratorium
7	China Merchants Finance Investment	State-owned	1,147,377,415	4.55	A Shares not subject to	-	-
	Holdings Co., Ltd.	legal person			trading moratorium
8	Shenzhen Chu Yuan Investment	State-owned	944,013,171	3.74	A Shares not subject to	-	-
	and Development Company Ltd.	legal person			trading moratorium
9	HKSCC Ltd.	Offshore legal	929,830,992	3.69	A Shares not subject to	-	-
		person			trading moratorium
10	China Securities Finance	Domestic legal	754,798,622	2.99	A Shares not subject to	-	-
	Corporation Limited	person			trading moratorium

Notes:

1. Shares held by HKSCC Nominees Ltd. are the total shares in the accounts of holders of H Shares of the Company trading on the transaction platform of HKSCC Nominees Ltd.. HKSCC Ltd. 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 A shares of China Merchants Bank acquired by investors through Shanghai-Hong Kong Stock Connect.
2. As at the end of the reporting period, of the aforesaid top 10 shareholders, HKSCC Nominees Ltd. is a wholly-owned subsidiary of HKSCC Ltd.; 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.. The Company is not aware of any affiliated relationships or party acting in concert among other shareholders.
3. The above shareholders of A shares did not hold the shares of the Company through credit securities accounts.

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Third Quarterly Report of 2020 (H Share)

2.4.2 Information on the shareholders of preference shares

As at the end of the reporting period, the Company had a total of 14 shareholders of preference shares (or their nominees), including 1 shareholder of offshore preference shares (or its nominee), and 13 shareholders of domestic preference shares. During the reporting period, the Company did not restore any voting right of the preference shares.

As at the end of the reporting period, the shareholdings of the top 10 shareholders of offshore preference shares (or their nominees) of the Company were as follows:

					Number of
				Increase/	shares held		Number of	Number
				decrease in	at the end	Percentage	shares subject	of shares
Serial		Nature of		the reporting	of the	of	to trading	pledged
No.	Name of shareholder	shareholder	Type of shares	period	period	shareholding	moratorium	or frozen
				(share)	(share)	(%)	(share)	(share)
1	The Bank of New York	Offshore legal	Offshore preference	-	50,000,000	100	-	Unknown
	Depository (Nominees) Limited	person	shares

Notes:

1. The shareholdings of shareholders of preference shares are calculated based on the information listed in the register of shareholders of preference shares maintained by the Company.
2. As the issuance is an offshore non-public issuance, the information listed in the register of shareholders of preference shares is the information on the nominees of the placees.
3. The Company is not aware of any affiliated relationship or party acting in concert among the above shareholders of preference shares and the top 10 shareholders of ordinary shares.
4. "Percentage of shareholding" represents the percentage of the number of offshore preference shares held by shareholders of preference shares to the total number of offshore preference shares.

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Third Quarterly Report of 2020 (H Share)

As at the end of the reporting period, the shareholdings of the top 10 shareholders of domestic preference shares of the Company were as follows:

				Increase/	Number		Number
				decrease	of shares		of shares	Number of
				in the	held at the	Percentage	subject to	shares
Serial		Nature of		reporting	end of	of	trading	pledged or
	shareholder	Type of shares	period	the period	shareholding	moratorium	frozen
No.	Name of shareholder
				(share)	(share)	(%)	(share)	(share)
1	China Mobile Communications	State-owned	Domestic	-	106,000,000	38.55	-	-
	Group Co., Ltd.	legal person	preference shares
2	CCB Trust Co., Ltd.	State-owned	Domestic	-	30,000,000	10.91	-	-
		legal person	preference shares
3	BOC Asset Management	Other	Domestic	-	25,000,000	9.09	-	-
	Co., Ltd. (中銀資產管理		preference shares
	有限公司)
4	China National Tobacco	State-owned	Domestic	-	20,000,000	7.27	-	-
	(Henan Province) Company	legal person	preference shares
	Ping An Property & Casualty	Other	Domestic	-	20,000,000	7.27	-	-
	Insurance Company of		preference shares
	China, Ltd.
6	China Everbright Bank	Other	Domestic	-2,000,000	17,000,000	6.18	-	-
	Company Limited		preference shares
7	China National Tobacco	State-owned	Domestic	-	15,000,000	5.45	-	-
	(Sichuan Province) Company	legal person	preference shares
	China National Tobacco	State-owned	Domestic	-	15,000,000	5.45	-	-
	(Anhui Province) Company	legal person	preference shares
9	China Construction Bank	State-owned	Domestic	-	10,000,000	3.64	-	-
	Corporation,	legal person	preference shares
	Guangdong Branch
10	China National Tobacco	State-owned	Domestic	-	5,000,000	1.82	-	-
	(Liaoning Province) Company	legal person	preference shares
	Changjiang Pension	State-owned	Domestic	-	5,000,000	1.82	-	-
	Insurance Co., Ltd.	legal person	preference shares
	China Resources SZITIC	State-owned	Domestic	-	5,000,000	1.82	-	-
	Trust Co., Ltd.	legal person	preference shares

Notes:

1. The shareholdings of shareholders of preference shares are calculated based on the information listed in the register of shareholders of preference shares maintained by the Company.
2. China National Tobacco (Henan Province) Company, China National Tobacco (Sichuan Province) Company, China National Tobacco (Anhui Province) Company and China National Tobacco (Liaoning Province) Company are wholly-owned subsidiaries of China National Tobacco Corporation. Save for the above, the Company is not aware of any affiliated relationship or party acting in concert among the above shareholders of preference shares or between the above shareholders of preference shares and the top 10 shareholders of ordinary shares.
3. "Percentage of shareholding" represents the percentage of the number of domestic preference shares held by shareholders of preference shares to the total number of domestic preference shares.

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Third Quarterly Report of 2020 (H Share)

2.5 Management discussion and analysis

2.5.1 Analysis of operating status of the Group

As at the end of September 2020, total assets of the Group amounted to RMB8,156.700 billion, representing an increase of 9.97% as compared with the end of the previous year; and its total liabilities amounted to RMB7,446.973 billion, representing an increase of 9.52% as compared with the end of the previous year. As at the end of September 2020, the Group's total loans and advances to customers amounted to RMB5,006.202 billion, representing an increase of 11.48% as compared with the end of the previous year. Total deposits from customers amounted to RMB5,495.129 billion, representing an increase of 13.43% as compared with the end of the previous year (the total amount of deposits or loans in section 2.5 of this report does not include interest receivable or payable).

For the period from January to September 2020, the Group realised a net profit attributable to shareholders of the Bank of RMB76.603 billion, representing a year-on-year decrease of 0.82%, and a net operating income of RMB221.288 billion, representing a year-on-year increase of 6.52%.

For the period from January to September 2020, the Group realised a net interest income of RMB138.535 billion, representing a year-on-year increase of 5.57% and accounting for 62.60% of the net operating income. For the period from January to September 2020, net interest spread and net interest margin of the Group were 2.43% and 2.51%, respectively, representing a year-on-year decrease of 11 basis points and 14 basis points, respectively; for the third quarter of 2020, net interest spread and net interest margin of the Group were 2.45% and 2.53%, respectively, representing a quarter-on-quarter increase of 6 basis points and 8 basis points, respectively.

For the period from January to September 2020, the Group realised a net non-interest income of RMB82.753 billion, representing a year-on-year increase of 8.14%, accounting for 37.40% of the net operating income. Among the net non-interest income, net fee and commission income amounted to RMB63.277 billion, representing a year-on-year increase of 10.70%, accounting for 28.59% of the net operating income, and representing a year-on-year increase of 1.08 percentage points; other net non-interest income amounted to RMB19.476 billion, representing a year-on-year increase of 0.59%.

For the period from January to September 2020, the cost-to-income ratio of the Group was 29.97%, representing a year-on-year increase of 0.79 percentage point.

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As at the end of September 2020, the balance of non-performing loans of the Group amounted to RMB56.466 billion, representing an increase of RMB4.191 billion as compared with the end of the previous year; the non-performing loan ratio was 1.13%, down by 0.03 percentage point as compared with the end of the previous year; and the allowance coverage ratio of non-performing loans was 424.76%, down by 2.02 percentage points as compared with the end of the previous year; the allowance-to-loan ratio was 4.79%, down by 0.18 percentage point as compared with the end of the previous year.

2.5.2 Analysis of operating status of the Company

Both our deposits and loans grew steadily. As at the end of September 2020, total assets of the Company amounted to RMB7,650.575 billion, representing an increase of 9.92% as compared with the end of the previous year; and its total liabilities amounted to RMB6,986.091 billion, representing an increase of 9.47% as compared with the end of the previous year. As at the end of September 2020, the Company's total loans and advances to customers amounted to RMB4,659.064 billion, representing an increase of 11.54% as compared with the end of the previous year, among which, corporate loans, retail loans and discounted bills accounted for 38.43%, 55.32% and 6.25%, respectively. As at the end of September 2020, the Company's total deposits from customers amounted to RMB5,266.935 billion, representing an increase of 13.74% as compared with the end of the previous year, among which, demand deposits and time deposits accounted for 61.33% and 38.67%, respectively. Among the demand deposits, corporate deposits accounted for 62.17% while retail deposits accounted for 37.83%; and among the time deposits, corporate deposits accounted for 71.33% while retail deposits accounted for 28.67%. From January to September 2020, among the daily average balance of deposits from customers of the Company, the percentage of demand deposits accounted for 59.74%, representing an increase of 0.92 percentage point as compared with the first half of 2020.

Our net operating income grew steadily while net profit decreased slightly. For the period from January to September 2020, the Company realised a net profit of RMB69.617 billion, representing a year-on-year decrease of 3.33%. The Company realised a net operating income of RMB204.147 billion, representing a year-on-year increase of 5.09%, among which, the net operating income from the retail finance business amounted to RMB118.619 billion, representing a year-on-year increase of 10.95%, accounting for 58.10% of the net operating income of the Company.

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Net interest income of the Company amounted to RMB134.281 billion from January to September 2020, representing a year-on-year increase of 5.86% and accounting for 65.78% of the net operating income. Net interest spread and net interest margin of the Company were 2.49% and 2.58%, respectively from January to September 2020, representing a year-on-year decrease of 11 basis points and 14 basis points, respectively; for the third quarter of 2020, net interest spread and net interest margin of the Company were 2.52% and 2.61%, respectively, representing a quarter-on-quarter increase of 7 basis points and 9 basis points, respectively, which was mainly attributable to the followings: the first was the recovery growth of retail loans, as a result, the proportion of high-yield assets has increased; the second was to strengthen the control of deposit costs and promote the steady growth of low-cost deposits, as a result, the deposit structure has been constantly optimised, and costs continued to decrease.

From January to September 2020, the Company realised a net non-interest income of RMB69.866 billion, representing a year-on-year increase of 3.65%, which accounted for 34.22% of the net operating income of the Company. The overall growth rate of net non-interest income has slowed down as compared with the first half of the year. Net fee and commission income amounted to RMB56.338 billion, representing a year-on-year increase of 7.03%, among which, fee and commission income from wealth management amounted to RMB27.260 billion, representing a year-on-year increase of 44.98% (including: income from agency distribution of funds of RMB8.299 billion, income from entrusted wealth management services of RMB7.826 billion, income from agency distribution of trust schemes of RMB5.826 billion, income from agency distribution of insurance policies of RMB5.098 billion and income from agency distribution of precious metals of RMB211 million), while transactions such as residents' consumption and payment settlement were affected to a certain extent by the pandemic, with income from bank card fees amounting to RMB14.081 billion or a year-on-year decrease of 2.70%, and income from settlement and clearing fees amounting to RMB9.574 billion or a year-on-year increase of 3.05%. Other net non-interest income amounted to RMB13.528 billion, representing a year-on-year decrease of 8.38%, which was mainly attributable to the significant decrease in net exchange gains resulting from the appreciation of RMB.

From January to September 2020, the Company's operating expenses were RMB63.806 billion, representing a year-on-year increase of 8.35%, and the cost-to-income ratio was 30.34%, representing a year-on-year increase of 0.89 percentage point.

Capital adequacy ratios and efficiency of capital utilisation remained at a relatively satisfactory level. As at the end of September 2020, the capital adequacy ratio and Tier 1 capital adequacy ratio of the Company measured under the Advanced Measurement Approach were 15.86% and 12.91%, respectively, up by 2.77 percentage points and 1.48 percentage points, respectively as compared with those under the Weighted Approach. The risk-adjusted return on capital (RAROC, before tax) under the Advanced Measurement Approach was 25.70%, maintaining at a high level.

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Third Quarterly Report of 2020 (H Share)

The Company adhered to the management strategy of strict asset classification and full exposure of risks. As at the end of the reporting period, the Company's balance of non-performing loans increased while the non-performing loan ratio decreased. There was a decrease in both the balance and percentage of special-mention loans and overdue loans. Due to the rapid increase in risks associated with credit card business, the formation amount of non-performing loans increased year-on-year. As at the end of the reporting period, balance of non-performing loans amounted to RMB54.684 billion, representing an increase of RMB4.234 billion as compared with the end of the previous year. Non-performing loan ratio was 1.17%, representing a decrease of 0.04 percentage point as compared with the end of the previous year. Balance of special-mention loans amounted to RMB39.499 billion, representing a decrease of RMB9.800 billion as compared with the end of the previous year. The percentage of special-mention loans was 0.85%, representing a decrease of 0.33 percentage point as compared with the end of the previous year. Balance of overdue loans amounted to RMB60.475 billion, representing a decrease of RMB451 million as compared with the end of the previous year. The percentage of overdue loans was 1.30%, representing a decrease of 0.16 percentage point as compared with the end of the previous year. From January to September 2020, the formation amount of non-performing loans of the Company was RMB43.456 billion, representing a year-on-year increase of RMB9.691 billion.

The following tables set forth the quality of loans and advances to customers of the Company by product type as at the indicated dates.

					30 September 2020
			Balance of			Percentage of
		Balance of	non-	Non-	Balance of	special-		Percentage
(in millions of RMB,	loans and	performing	performing	special-	mention	Balance of	of overdue
except for percentages)	advances	loans	loan ratio (%)	mention loans	loans (%)	overdue loans	loans (%)
Corporate loans	1,790,647	33,207	1.85	12,615	0.70	27,646	1.54
Discounted bills	291,143	-	0.00	6	0.00	-	0.00
Retail loans	2,577,274	21,477	0.83	26,878	1.04	32,829	1.27
Micro-finance loans	475,717	3,025	0.64	1,522	0.32	3,373	0.71
Residential mortgage loans	1,238,043	3,334	0.27	1,853	0.15	3,965	0.32
Credit card loans	701,546	12,495	1.78	22,750	3.24	22,450	3.20
Consumption loans	137,488	2,087	1.52	686	0.50	2,492	1.81
Others(note)	24,480	536	2.19	67	0.27	549	2.24
Total loans and advances to
customers	4,659,064	54,684	1.17	39,499	0.85	60,475	1.30

China Merchants Bank								15
Third Quarterly Report of 2020 (H Share)
							31 December 2019
					Balance			Percentage
			Balance of	of non-	Non-	Balance of	of special-	Balance	Percentage
(in millions of RMB,	loans and	performing	performing	special-	mention loans	of overdue	of overdue
except for percentages)	advances	loans	loan ratio (%)	mention loans	(%)	loans	loans (%)
	Corporate loans	1,624,314	33,377	2.05	21,298	1.31	33,036	2.03
	Discounted bills	224,884	19	0.01	544	0.24	-	-
	Retail loans	2,327,955	17,054	0.73	27,457	1.18	27,890	1.20
	Micro-finance loans	405,149	3,284	0.81	1,326	0.33	3,436	0.85
	Residential mortgage loans	1,098,547	2,747	0.25	1,305	0.12	3,667	0.33
	Credit card loans	670,921	9,032	1.35	24,147	3.60	18,342	2.73
	Consumption loans	123,691	1,461	1.18	552	0.45	1,855	1.50
	Others(note)	29,647	530	1.79	127	0.43	590	1.99
	Total loans and advances to
	customers	4,177,153	50,450	1.21	49,299	1.18	60,926	1.46

Note: It consists primarily of commercial housing loans, automobile loans, house decoration loans, education loans and other personal loans secured by monetary assets.

Benefiting from the continuous reinforcement of customer structure adjustment, the quality of corporate loan assets has remained relatively stable. As at the end of the reporting period, the balances and ratios of non-performing,special-mention and overdue corporate loans all decreased as compared with the end of the previous year. From January to September 2020, the formation amount of non-performing corporate loans of the Company was RMB13.025 billion, representing a year-on-year decrease of RMB2.598 billion. However, the current international and domestic economic situations are still complicated and severe, and the risk of a second outbreak of the pandemic still exists. Enterprises in some industries are still facing certain pressures on production and operation. Moreover, the risks associated with corporate customers may be laggard, therefore it is expected that the risk exposure of corporate business may rise temporarily.

With the continuous advancement of the resumption of work and production, the domestic economy continued to resume its growth trend. The quality of the Company's retail loan assets remained relatively stable as a whole, and the risk indicators of some retail loans increased slightly as compared with the second quarter. As the impact of the pandemic on retail banking business persists, from January to September 2020, the formation amount of non-performing credit card loans of the Company was RMB24.075 billion, representing a year-on-year increase of RMB10.798 billion. The formation amount of non-performing retail loans (excluding credit cards) was RMB6.356 billion, representing a year-on-year increase of RMB1.490 billion. In view of the impact of the pandemic on household employment, income, consumption and other aspects is still progressing, overlapping with the risk of "joint debts" and other factors, it is expected that the management and control of the risk exposed to retail business will still face significant pressure.

China Merchants Bank	16
Third Quarterly Report of 2020 (H Share)

To implement the decisions and arrangements of Central Committee of CPC and the State Council on the overall promotion of the prevention and control of the pandemic and economic and social development, and to help the customers that were actually affected by the pandemic to mitigate pressure on repayment of the principal and interest, the Company further carried out the policy for periodic deferment of repayment of the principal and interest. In 2020, the total loans granted to the customers who applied for deferment of repayment of the principal and interest in the Company aggregated to RMB138.905 billion. With the effective prevention and control of the pandemic domestically, the resumption of production and work of enterprises progressed in an orderly manner, and most customers have initiated normal repayment. As at the end of the reporting period, the balance of loans granted to the customers who were still at deferment of repayment of the principal and interest was RMB67.822 billion. The exposure of risks associated with individual customers may not be ruled out upon expiry of the policy for deferment of repayment of the principal and interest. The Company will continue to dynamically monitor the customers who applied for the deferment of repayment of the principal and interest, and strive to maintain sound risk management and control.

The Company will dynamically study and determine the risk trends, continue to adjust customer structure and business structure, further promote risk management and reinforce the foundation, firmly implement assets classification, effectively dispose of non-performing assets, and strive to maintain overall stability of asset quality.

The provisions for loans were made in a prudent manner. The Company continued to adopt a stable and prudent policy in respect of making provisions. As at the end of September 2020, the balance of allowance for impairment losses on loans of the Company amounted to RMB233.427 billion, representing an increase of RMB16.484 billion as compared with the end of the previous year. The non-performing loan allowance coverage ratio was 426.87%, representing a decrease of 3.15 percentage points as compared with the end of the previous year. The allowance-to-loan ratio was 5.01%, representing a decrease of 0.18 percentage point as compared with the end of the previous year.

China Merchants Bank	17
Third Quarterly Report of 2020 (H Share)

Steady increase in the number of retail customers and AUM. As at the end of the reporting period, the Company had 155 million retail customers (including debit and credit card customers), representing an increase of 7.64% as compared with the end of the previous year, among which, the number of Sunflower-level and above customers (retail customers of the Company with minimum total daily average assets of RMB500,000 per month) reached 3,013,200, representing an increase of 13.80% as compared with the end of the previous year. The balance of total assets under management (AUM) from our retail customers amounted to RMB8,630.728 billion, representing an increase of 15.17% 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 RMB7,083.048 billion, representing an increase of 16.40% as compared with the end of the previous year, and accounting for 82.07% of the balance of total assets under management from retail customers of the Bank. The Company had 95,943 private banking customers (retail customers of the Company with minimum total daily average assets of RMB10 million per month), representing an increase of 17.47% as compared with the end of the previous year; total assets under management from private banking customers amounted to RMB2,658.367 billion, representing an increase of 19.15% as compared with the end of the previous year; total assets per account amounted to RMB27.7078 million, representing an increase of RMB391,200 as compared with the end of the previous year. Since the beginning of this year, facing the dramatic impact brought about by the COVID-19 pandemic on the global economy and people's livelihoods, the Company conducted various retail businesses in a prudent manner by tapping into the tremendous support of continuous digital transformation for online services to promptly respond to customer requests, which has reduced the impact of the pandemic on operations to a certain extent. With the pandemic under effective control in China, resumption of work and production was accelerating and retail customer acquisition and AUM maintained a steady growth in the third quarter. Looking ahead to the whole year, the Company will maintain its strategic focus, forge ahead with an open and integrated methodology, revolve around the two major lines of businesses being "customers + technology", accelerate the exploration of a digital retail financial business model and fully enhance its ability to create value for customers.

China Merchants Bank	18
Third Quarterly Report of 2020 (H Share)

3 Significant Events

3.1 Significant changes in major consolidated financial statements items and financial indicators and the reasons thereof

	30	Changes over
	September	the end of
Major items	2020	last year	Major reasons
(in millions of RMB,
except for percentages)		(%)
Precious metals	8,308	102.93	The increase in overseas precious metal leasing business
			driven by the increasing demand for gold from banks
Placements with banks and other	197,386	-35.80	The fluctuation in timing of liquidity, the decrease in
financial institutions			placements with banks and other financial institutions
			and the replacement of certain placements with
			banks and other financial institutions by reverse repo
			transactions upon expiration
Amounts held under resale agreements	235,894	116.49	Increase in the balance of bonds reverse repurchase
			transactions
Derivative financial assets	36,636	51.27	The considerable fluctuation in valuation of currency
			derivatives as a result of the impact of the higher
			appreciation of RMB and the widening of spread
			between domestic and foreign funds
Interests in associates	1,708	271.30	Increase in subsidiary's share of owners' interest in
			associates
Other assets	51,633	35.91	Increase in temporary amounts pending for settlement
Financial liabilities at fair value	62,324	43.49	The rising of gold price and the substantial increase in
through profit or loss			sales of gold account products
Derivative financial liabilities	38,083	64.15	The significant fluctuation in valuation of currency
			derivatives as a result of the impact of continuing
			appreciation of the RMB and the widening of the
			spread between domestic and overseas funds
Amounts sold under repurchase	151,679	139.87	The fluctuation in timing of liquidity and the increase in
agreements			debt repurchase transactions
Salaries and welfare payable	23,878	105.17	Increase in wages payable
Provisions	15,303	150.50	The increase in provisions for estimated liabilities during
			the reporting period in order to steadily proceed with
			the subsequent rectification of the asset management
			business upon the extension of the transition period
			of the new asset management regulations
Debt securities issued	386,748	-33.11	Decrease in interbank certificates of deposits
Other equity instruments	84,054	146.75	The undated additional Tier 1 capital bonds of RMB50
			billion issued by the Company in July 2020
Investment revaluation reserve	5,743	-35.61	Rising market interest rates and the decrease in
			valuation of bond investments at fair value through
			other comprehensive income
Hedging reserve	(80)	-105.13	Decrease in fair value of hedging instruments
Exchange reserve	757	-51.51	The higher appreciation of RMB in the third quarter

China Merchants Bank				19
Third Quarterly Report of 2020 (H Share)
				Changes
				over the
			January	same
		to September	period of
	Major items	2020	last year	Major reasons
(in millions of RMB,
except for percentages)			(%)
	Impairment losses on other assets	(30)	N/A	Provision for impairment losses on fixed assets for
					operating leasing of CMB Leasing, our subsidiary
	Share of profits of joint ventures	1,516	30.46	Increase in profits of joint ventures
	Share of profits of associates	337	N/A	Increase in profits of associates
	Exchange reserve	(879)	N/A	The higher appreciation of RMB in the third quarter
	Cash flow hedge: net movement in	(40)	63.96	Decrease in fluctuation of valuation of hedging
	hedging reserve				instruments
	Equity-accounted investees share of		-	-100.00	Decrease in changes of subsidiary's share of other
	other comprehensive income that				interests in associates
	will be reclassified subsequently to
	profit or loss
	Fair value gain/(loss) on debt	(4,259)	N/A	Decrease in valuation of bond investments at fair value
	instruments measured at fair value				through other comprehensive income as a result of
	through other comprehensive				the rising market interest rates
	income
	Net changes in expected credit losses	845	77.89	Increase in credit losses of debt instruments measured at
	of debt instruments measured at fair				fair value through other comprehensive income
	value through other comprehensive
	income
	Fair value gain on equity instruments	310	-30.34	Decrease in fluctuation of valuation of equity
	measured at fair value through				instruments measured at fair value through other
	other comprehensive income				comprehensive income
	Remeasurement of defined benefit	(46)	N/A	Increase in fluctuation of valuation of remeasurement
	scheme redesigned through reserve				of defined benefit scheme of CMB Wing Lung, our
					subsidiary

China Merchants Bank	20
Third Quarterly Report of 2020 (H Share)

1. Warning in respect of forecast of a probable loss or a significant change in the accumulated net profit from the beginning of the year to the end of the next reporting period or as compared with that of the corresponding period of last year and the reasons thereof
2. • Applicable √ Not applicable
3. Update on changes in accounting policy
4. • Applicable √ Not applicable
5. Uncompleted performance of overdue undertakings for the reporting period
6. • Applicable √ Not applicable
7. Other significant events requiring explanations and progress thereof

With the approvals of the China Banking and Insurance Regulatory Commission and the People's Bank of China, the Company issued undated additional Tier 1 capital bonds of RMB50 billion in China's national inter-bank bond market in July 2020. For further information, please refer to the relevant announcement dated 9 July 2020 published by the Company on the websites of Shanghai Stock Exchange, The Stock Exchange of Hong Kong Limited and the Company, respectively.

By Order of the Board

China Merchants Bank Co., Ltd.

Miao Jianmin

Chairman

30 October 2020

As at the date of this announcement, the executive directors of the Company are Tian Huiyu, Liu Jianjun and Wang Liang; the non-executive directors of the Company are Miao Jianmin, Fu Gangfeng, Zhou Song, Hong Xiaoyuan, Zhang Jian, Su Min, Wang Daxiong and Luo Sheng; and the independent non-executive directors of the Company are Leung Kam Chung, Antony, Zhao Jun, Wong See Hong, Li Menggang, Liu Qiao and Tian Hongqi.

China Merchants Bank	Appendix I Financial Statements	21
Third Quarterly Report of 2020 (H Share)

Appendix I Financial Statements

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

(Expressed in millions of Renminbi unless otherwise stated)

	For the period from January to	For the period from July to
	September ended 30 September	September ended 30 September
	2020	2019	2020	2019
Interest income	230,751	219,424	77,066	74,907
Interest expense	(92,216)	(88,200)	(29,404)	(31,090)
Net interest income	138,535	131,224	47,662	43,817
Fee and commission income	68,501	62,596	22,890	20,084
Fee and commission expense	(5,224)	(5,437)	(1,882)	(1,896)
Net fee and commission income	63,277	57,159	21,008	18,188
Other net income	17,623	18,214	3,784	6,962
Operating income	219,435	206,597	72,454	68,967
Operating expenses	(70,862)	(64,134)	(25,980)	(23,733)
Operating profit before expected credit losses	148,573	142,463	46,474	45,234
Expected credit losses	(52,491)	(44,936)	(12,048)	(11,872)
Impairment losses on other assets	(30)	-	(30)	-
Share of profits of joint ventures	1,516	1,162	586	441
Share of profits (losses) of associates	337	(14)	85	(1)
Profit before tax	97,905	98,675	35,067	33,802
Income tax	(20,835)	(20,914)	(8,075)	(6,899)
Net Profit	77,070	77,761	26,992	26,903
Attributable to:
Shareholders of the Bank	76,603	77,239	26,815	26,627
Non-controlling interests	467	522	177	276
Earnings per share
Basic and diluted earnings per share (RMB)	3.02	3.05	1.05	1.04

China Merchants Bank	Appendix I Financial Statements	22
Third Quarterly Report of 2020 (H Share)

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)

(Expressed in millions of Renminbi unless otherwise stated)

	For the period from January to	For the period from July to
	September ended 30 September	September ended 30 September
	2020	2019	2020	2019
Net profit	77,070	77,761	26,992	26,903
Other comprehensive income for the period, net of tax
Items that may be reclassified subsequently to profit or loss:
Fair value gain on debt instruments measured at fair
value through other comprehensive income	(4,259)	730	(4,117)	1,069
Net changes in expected credit losses of debt instruments
measured at fair value through other comprehensive
income	845	475	-	(125)
Cash flow hedge: net movement in hedging reserve	(40)	(111)	10	(14)
Equity-accounted investees share of other comprehensive
income that will be reclassified subsequently to
profit or loss	-	257	(250)	86
Exchange difference on translation of financial statements
of foreign operations	(879)	1,487	(1,705)	1,464
Items that will not be reclassified subsequently to
profit or loss:
Fair value gain on equity instruments measured at fair
value through other comprehensive income	310	445	202	(62)
Remeasurement of defined benefit scheme redesigned
through reserve	(46)	7	-	-
Other comprehensive income for the period, net of tax	(4,069)	3,290	(5,860)	2,418
Attributable to:
Shareholders of the Bank	(3,994)	3,122	(5,699)	2,259
Non-controlling interests	(75)	168	(161)	159
Total comprehensive income for the period	73,001	81,051	21,132	29,321
Attributable to:
Shareholders of the Bank	72,609	80,361	21,116	28,886
Non-controlling interests	392	690	16	435

China Merchants Bank	Appendix I Financial Statements	23
Third Quarterly Report of 2020 (H Share)

UNAUDITED STATEMENT OF PROFIT OR LOSS

(Expressed in millions of Renminbi unless otherwise stated)

	For the period from January to	For the period from July to
	September ended 30 September	September ended 30 September
	2020	2019	2020	2019
Interest income	220,698	208,886	74,050	71,248
Interest expense	(86,417)	(82,035)	(27,706)	(28,964)
Net interest income	134,281	126,851	46,344	42,284
Fee and commission income	64,109	57,723	21,232	18,515
Fee and commission expense	(7,771)	(5,085)	(2,660)	(1,772)
Net fee and commission income	56,338	52,638	18,572	16,743
Other net income	12,672	13,947	2,022	5,610
Operating income	203,291	193,436	66,938	64,637
Operating expenses	(63,806)	(58,888)	(23,281)	(21,809)
Operating profit before expected credit losses	139,485	134,548	43,657	42,828
Expected credit losses	(51,843)	(43,752)	(11,710)	(11,625)
Share of profits of joint ventures	856	818	374	290
Profit before tax	88,498	91,614	32,321	31,493
Less: Income tax	(18,881)	(19,597)	(7,506)	(6,420)
Net Profit	69,617	72,017	24,815	25,073

China Merchants Bank	Appendix I Financial Statements	24
Third Quarterly Report of 2020 (H Share)

UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)

(Expressed in millions of Renminbi unless otherwise stated)

	For the period from January to	For the period from July to
	September ended 30 September	September ended 30 September
	2020	2019	2020	2019
Net profit	69,617	72,017	24,815	25,073
Other comprehensive income for the period, net of tax
Items that may be reclassified subsequently to
profit or loss:
Fair value gain on debt instruments measured at fair value
through other comprehensive income	(4,111)	503	(4,159)	931
Net changes in expected credit losses of debt instruments
measured at fair value through other comprehensive
income	812	309	(9)	(153)
Cash flow hedge: net movement in hedging reserve	-	1	-	(1)
Equity-accounted investees share of other comprehensive
income that will be reclassified subsequently to
profit or loss	77	228	(188)	67
Exchange difference on translation of financial statements
of foreign operations	(9)	(51)	(102)	52
Items that will not be reclassified subsequently to
profit or loss:
Fair value gain on equity instruments measured at fair
value through other comprehensive income	350	635	210	105
Other comprehensive income for the period, net of tax	(2,881)	1,625	(4,248)	1,001
Total comprehensive income for the period	66,736	73,642	20,567	26,074

China Merchants Bank	Appendix I Financial Statements	25
Third Quarterly Report of 2020 (H Share)

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Expressed in millions of Renminbi unless otherwise stated)

	30 September	31 December
Item	2020	2019
Assets
Cash	12,042	15,306
Precious metals	8,308	4,094
Balances with central bank	487,383	552,590
Balances with banks and other financial institutions	93,076	106,113
Placements with banks and other financial institutions	197,386	307,433
Amounts held under resale agreements	235,894	108,961
Loans and advances to customers	4,777,195	4,277,300
Derivative financial assets	36,636	24,219
Financial investments at fair value through profit or loss	462,254	398,276
Financial investments at amortised cost	1,076,969	921,228
Debt investments at fair value through other comprehensive income	520,855	478,856
Equity investments designated at fair value through
other comprehensive income	7,130	6,077
Interest in joint ventures	11,515	10,324
Interest in associates	1,708	460
Investment properties	1,709	1,925
Property and equipment	68,276	66,408
Right-of-use assets	19,457	20,000
Intangible assets	4,912	4,575
Goodwill	9,954	9,954
Deferred tax assets	72,408	65,151
Other assets	51,633	37,990
Total assets	8,156,700	7,417,240

China Merchants Bank	Appendix I Financial Statements	26
Third Quarterly Report of 2020 (H Share)

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

(Expressed in millions of Renminbi unless otherwise stated)

	30 September	31 December
Item	2020	2019
Liabilities
Borrowing from central bank	306,282	359,175
Deposits from banks and other financial institutions	615,937	555,581
Placements from banks and other financial institutions	180,319	165,921
Financial liabilities at fair value through profit or loss	62,324	43,434
Derivative financial liabilities	38,083	23,200
Amounts sold under repurchase agreements	151,679	63,233
Deposits from customers	5,529,132	4,874,981
Salaries and welfare payable	23,878	11,638
Tax payable	20,868	19,069
Contract liabilities	6,843	6,488
Lease liabilities	14,367	14,379
Provisions	15,303	6,109
Debt securities issued	386,748	578,191
Deferred tax liabilities	999	956
Other liabilities	94,211	77,178
Total liabilities	7,446,973	6,799,533
Equity
Share capital	25,220	25,220
Other equity instruments	84,054	34,065
Including: Preference shares	34,065	34,065
Perpetual bonds	49,989	-
Capital reserve	67,523	67,523
Investment revaluation reserve	5,743	8,919
Hedging reserve	(80)	(39)
Surplus reserve	62,291	62,291
Regulatory general reserve	89,608	90,151
Retained profits	368,190	291,346
Proposed profit appropriations	-	30,264
Exchange reserve	757	1,561
Total equity attributable to shareholders of the Bank	703,306	611,301
Non-controlling interests	6,421	6,406
Including: Non-controlling interests	2,512	2,427
Perpetual debt capital	3,909	3,979
Total equity	709,727	617,707
Total equity and liabilities	8,156,700	7,417,240

China Merchants Bank	Appendix I Financial Statements	27
Third Quarterly Report of 2020 (H Share)

UNAUDITED STATEMENT OF FINANCIAL POSITION

(Expressed in millions of Renminbi unless otherwise stated)

	30 September	31 December
Item	2020	2019
Assets
Cash	11,329	14,356
Precious metals	8,238	4,006
Balances with central bank	482,268	549,969
Balances with banks and other financial institutions	69,737	73,472
Placements with banks and other financial institutions	216,470	304,396
Amounts held under resale agreements	231,097	103,740
Loans and advances to customers	4,435,140	3,968,513
Derivative financial assets	36,071	23,769
Financial investments at fair value through profit or loss	418,940	378,242
Financial investments at amortised cost	1,075,714	920,575
Debt investments at fair value through other comprehensive income	443,980	416,181
Equity investments designated at fair value through
other comprehensive income	6,494	5,430
Interests in subsidiaries	49,495	49,495
Interests in joint ventures	6,899	6,091
Investment properties	1,089	1,203
Property and equipment	24,708	25,565
Right-of-use assets	18,205	19,078
Intangible assets	4,133	3,752
Deferred tax assets	70,825	63,663
Other assets	39,743	28,736
Total assets	7,650,575	6,960,232

China Merchants Bank	Appendix I Financial Statements	28
Third Quarterly Report of 2020 (H Share)

UNAUDITED STATEMENT OF FINANCIAL POSITION (CONTINUED)

(Expressed in millions of Renminbi unless otherwise stated)

	30 September	31 December
Item	2020	2019
Liabilities
Borrowing from central bank	306,282	358,728
Deposits from banks and other financial institutions	593,519	541,745
Placements from banks and other financial institutions	88,161	73,880
Financial liabilities at fair value through profit or loss	36,941	32,922
Derivative financial liabilities	37,755	22,911
Amounts sold under repurchase agreements	135,261	55,455
Deposits from customers	5,300,208	4,660,232
Salaries and welfare payable	21,406	9,581
Tax payable	19,426	17,655
Contract liabilities	6,843	6,488
Lease liabilities	13,259	13,632
Provisions	15,260	6,061
Debt securities issued	334,093	527,986
Other liabilities	77,677	54,604
Total liabilities	6,986,091	6,381,880
Equity
Share capital	25,220	25,220
Other equity instruments	84,054	34,065
Including: Preference shares	34,065	34,065
Perpetual bonds	49,989	-
Capital reserve	76,681	76,681
Investment revaluation reserve	5,749	8,676
Hedging reserve	(26)	(26)
Surplus reserve	62,291	62,291
Regulatory general reserve	85,820	85,820
Retained profits	324,498	255,155
Proposed profit appropriations	-	30,264
Exchange reserve	197	206
Total equity	664,484	578,352
Total equity and liabilities	7,650,575	6,960,232

China Merchants Bank	Appendix I Financial Statements	29
Third Quarterly Report of 2020 (H Share)

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

(Expressed in millions of Renminbi unless otherwise stated)

	For the period	For the period
	from January to	from January to
	September 2020	September 2019
Cash flows from operating activities
Profit before tax	97,905	98,675
Adjustments for
- Impairment losses on loans and advances	41,088	43,645
- Provisions for impairment losses on investments	1,331	504
- Provisions for impairment losses on others	10,102	793
- Unwind of discount on impaired loans	(158)	(245)
- Depreciation of properties and equipments and investment properties	2,922	2,804
- Depreciation of right-of-use assets	3,109	3,175
- Amortisation of other assets	1,022	853
- Share of profits of joint ventures	(1,516)	(1,162)
- Share of profits of associates	(337)	14
- Net gains on debt securities and equity investments	(3,304)	(2,529)
- Interest income on investments	(38,403)	(36,612)
- Interest expense on issued debt securities	11,700	12,782
- Net gains on disposal of properties and equipment	(16)	(273)
Changes in:
Balances with central bank	8,746	(20,313)
Balances and placements with banks and other financial
institutions with original maturity over 3 months	8,615	104,309
Loans and advances to customers	(609,782)	(528,558)
Other assets	(121,642)	(46,742)
Deposits from customers	650,707	363,114
Deposits and placements from banks and other financial institutions	163,028	77,406
Borrowings from central bank	(53,751)	(115,920)
Other liabilities	72,581	22,240
Net cash generated from (used in) operating activities
before income tax payment	243,947	(22,040)
Income tax paid	(24,119)	(31,692)
Net cash generated from (used in) operating activities	219,828	(53,732)

China Merchants Bank	Appendix I Financial Statements	30
Third Quarterly Report of 2020 (H Share)

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

(Expressed in millions of Renminbi unless otherwise stated)

	For the period	For the period
	from January to	from January to
	September 2020	September 2019
Cash flows from investing activities
Payment for the purchase of investments	(832,228)	(539,109)
Proceeds from the disposal of investments	636,172	493,496
Gains received from investments	55,374	48,902
Payment for the purchase of properties and equipments and other assets	(10,771)	(15,084)
Proceeds from the disposal of properties and equipments and other assets	1,732	1,132
Net proceeds from the disposals of subsidiaries, joint venture or associates	328	-
Net payment for investments in the subsidiaries, joint venture or associates	(157)	-
Net cash flows used in investing activities	(149,550)	(10,663)
Cash flows from financing activities
Proceeds from the issue of certificates of deposits	19,637	23,897
Proceeds from the issue of debt securities	23,508	72,067
Proceeds from the issue of negotiable interbank certificates of deposits	158,832	365,206
Proceeds from the issue of other equity instruments - perpetual bonds	49,989	-
Proceeds from the issue of perpetual capital instruments	-	2,761
Proceeds from other financing activities	2,374	-
Repayment of certificates of deposits	(25,416)	(21,005)
Repayment of issued debt securities	(46,873)	(20,049)
Repayment of negotiable interbank certificates of deposits	(312,485)	(288,765)
Payment of lease liabilities	(3,196)	(3,180)
Interest paid on issued debt securities	(15,915)	(6,328)
Payment for distribution of dividends	(30,472)	(23,832)
Net cash (used in) generated from financing activities	(180,017)	100,772
Increase in cash and cash equivalents	(109,739)	36,377
Effects of foreign exchange rate changes on cash and cash equivalents	(1,228)	(986)
Net increase in cash and cash equivalents	(110,967)	35,391
Add: balance of cash and cash equivalents at the beginning of the period	589,675	543,683
Balance of cash and cash equivalents at the end of the period	478,708	579,074
Cash flows from operating activities include:
Interest received	191,114	182,525
Interest paid	75,980	75,059

China Merchants Bank	Appendix II Information on Liquidity Coverage Ratio	31
Third Quarterly Report of 2020 (H Share)

Appendix II Information on Liquidity Coverage Ratio

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 average of liquidity coverage ratio of the Group was 131.73% in the third quarter of 2020, representing a decrease of 14.36 percentage points as compared with the previous quarter, which was mainly affected by the decrease in cash inflows from financial institutions. The Group's liquidity coverage ratio at the end of the third quarter of 2020 was 133.87%, which was in line with the 2020 regulatory requirements of the China Banking and Insurance Regulatory Commission. The breakdown of the Group's average value of each item of liquidity coverage ratio in the third quarter of 2020 is set out below:

	(Unit: in millions of RMB, except for percentages)
		Unweighted	Weighted
No.		amount	amount
Stock of high quality liquid assets
1	Total stock of high quality liquid assets	/	1,192,909
Cash outflows
2	Retail and small business customers deposits, of which:	2,106,994	186,966
3	Stable deposits	474,660	23,733
4	Less stable deposits	1,632,334	163,233
5	Unsecured wholesale funding, of which:	3,436,424	1,258,562
6	Operational deposits (excluding correspondent banks)	1,903,347	473,194
7	Non-operational deposits (including all counterparties)	1,497,859	750,150
8	Unsecured debt issuance	35,218	35,218
9	Secured funding	/	18,289
10	Additional requirements, of which:	1,493,656	369,745
11	Cash outflows arising from derivative contracts and
	other transactions arising from related collateral requirements	303,758	303,758
12	Cash outflows arising from secured debt instruments funding	-	-
13	Undrawn committed credit and liquidity facilities	1,189,898	65,987
14	Other contractual obligations to extend funds	64,853	64,853
15	Other contingent funding obligations	6,731,530	98,788
16	Total cash outflows	/	1,997,203

China Merchants Bank	Appendix II Information on Liquidity Coverage Ratio		32
Third Quarterly Report of 2020 (H Share)
			Unweighted	Weighted
No.			amount	amount
Cash inflows
17	Secured lending (including reverse repo and securities borrowing)	187,330	186,894
18	Contractual inflows from fully performing loans	895,734	582,207
19	Other cash inflows		327,743	322,541
20	Total cash inflows		1,410,807	1,091,642
				Adjusted value
21	Total stock of high quality liquid assets		1,192,909
22	Net cash outflows			905,561
23	Liquidity coverage ratio (%)			131.73%

Notes:

1. The data of Mainland China in the above table is a simple arithmetic average of the 92-day value for the latest quarter and the monthly average for the date of subsidiaries.
2. The high quality liquid assets in the above table are prepared by the central bank reserve available under cash and pressure conditions, as well as the bond in line with the 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".