Planning for a Sound and Promising Development

Performance of the Banking Industry in 2016 and Outlook for 2017

Ip Sio Kai, Chairman of The Macau Association of Banks

First of all, we would like to express our gratitude to all sectors of Macao for their support over the years. Now, I would like to report on the business situation of the Macao´s banking industry in 2016, as well as outlook for 2017.

I – Performance and Development in 2016

Last year was a year that Macao´s banking industry encountered serious challenges. Due to the volatility of the neighbouring economies, coupled with the continuous adjustment of the local economy, Macao´s banking sector experienced a weak market demand and falling asset business price. However, thanks to the support of the Macao SAR Government and the guidance of Monetary Authority of Macao, we responded calmly, maintained a careful management and thus succeeded in overcoming all kinds of challenges. Total bank assets, deposits and loans continued to grow moderately, while non-performing loans continued to remain at a fairly low level, to achieve a healthy and stable development industry-wide. The most gratifying change was that the share of the value-added in banking and insurance industry increased gradually to account for 6.3% of Macao´s GDP (end-2015 figure), up 1.7% year-on-year. Furthermore, the financial sector is playing an increasingly important role in the moderate diversification of Macao´s economy.

In 2016, total assets of the banking industry reached MOP1,391 Billion, up 3.73% year-on-year. Total deposits amounted to MOP942 Billion, up 9.54%. Total amount of loans granted was MOP784.3 Billion, up 3.08%. Non-performing assets stood at 0.21%, corresponding to a slight increase, but continued to remain relatively low. Earnings before tax totalled MOP14.24 Billion (+11.3%). The capital adequacy ratio of local banks stood at 16.1%, up one percentage point, which demonstrates the sufficiency of capital adequacy and the maintenance of satisfactory liquidity. The one and three-month liquidity ratio remained above 55%.

During the period of economic adjustment, each bank makes full use of its international operations and competitiveness, as well as its professional capacitycultivated over several years, and strives to open new cross-border marketsand business, through syndicated loans, structured finance, international settlement, capital markets investment and finance, and wealth management, aiming to obtain more profits generated abroad.

1.  Up to year-end 2016, the international assets of Macao´s banking sector increased by 2.7% year-on-year, and during the same period, 1.4% increase in international liabilities. These figures show that Macao´s banking sector is actively developing the international marketcreatingprofitsand continuously widening the international influence of Macao´s banking industry.

2.  In view of the adjustment of the local economy, the banking sector continues to actively support the local industries, with local loans increasing in adverse circumstance. As of year-end 2016, total loans granted by the banking sector increased 3% year-on-year, of which loans to residents increased 8.64% year-on-year, while loans to non-residents decreased by 2.37%, year-on-year.

Macao´s banking industry strongly supports local SMEs, through the launching of various types of financial preferential service schemes and has also made positive adjustments in the loan structure to support the SMEs to overcome difficulties. As of year-end 2016, the balance of loans to Macao´s SMEs totalled MOP69.8 Billion, up 4.5% year-on-year, which was higher than the overall growth rate of loans granted. Despite the somewhat increase in the balanceof SMEs arrears, total new loans granted by the banking sector to SMEs in the second-half of 2016 increased substantially by 36% to MOP13.6 Billion.

Macao´s banking sector vigorously promotes the construction of the Financial Services Platform between China and Portuguese-speaking Countries. In 2016, Macao´s banks handled the clearing of 105,000 transactions in Renminbi (CNY) (+11.2%), of which the number of clearing transaction in RMB between China and banks or banks of Portuguese capitals in Portuguese-speaking Countries increased by 31.9%.

2016 was also a year that Macao´s banking industry outlined long-term development plans. In the past year, in a bid to actively support the implementation of Macao SAR Government´s address, the banking sector has played the role of “booster” in promoting the moderate diversification of the economy, by providing support to the local SMEs and maintaining the security of Macao´s finances. The related works can be concretely summarized in three “New´s” (new starting point, new progress and new breakthrough):

Firstly, supportingthe development of characteristic financebecame a new starting point,for the advancement of the banking industry. Aiming to meet requirementsof the Macao SAR Government in relations to characteristic finance, in April last year, The Macau Association of Banks(ABM)and the Monetary Authority of Macao(AMCM)jointly organized a seminar in Beijing with participation ofChina Banking Regulatory Commission and finance companies; in June of the same year, ABMpaid a courtesy visit to China Banking Regulatory Commission and The People´s Bank of China to solicittheir opinionsand travelled to Tianjin on study visit on financial leasing business; inAugust, the banking industry coordinated the Secretary for Economy and Finance to holdthe High-end Finance Leasing Seminarwiththe participation of top leaders of China Development and Reform Commission and the Ministry of Finance as well as top management of major financial institutions;in September, through the Liaison Office of the Central People´s Government in the Macao S.A.R., the banking sector submitted to the central government “SuggestionsforFinancial Work in Promoting the Commercial and Trade Cooperation between China and Portuguese-speaking Countries”. The said suggestions were reflected in the agenda of the Prime Minister´s visit to Macao. Later on, by taking advantage of the Prime Minister´s visit, ABMactively strengthenedcommunication with the local community, in order to reach a consensus on characteristic finances, such as the publication in Macao Daily News of a series of articles oninterpretation of  the Prime Minister´s preferential policies granted to Macao; presentation on the characteristic financewas held in Macao´s major institutions of higher education; setting up forums to promote anddiscuss issues regarding characteristic finance for the Federation of Macau Kaifong Associations and Macao New Chinese Youth Association.. All these initiatives have received relatively good response from the community, as we strive to promote the implementation of the Prime Minister´s working plan announced during his visit to Macao.

Secondly, new progress has been made in strengthening the management of anti-money laundering, such as the “Macau Banking Anti-Money Laundering and Combating the Financing of Terrorism Knowledge Contest” and “Seminar on Anti-Money Laundering and Combating the Financing of Terrorism”, whichwere led and organizedby The Macau Association of Banks,and also the participation of  the first edition of “Macao Financial Education Day”, in addition to other activities, to constantly raise the public awareness on anti-money laundering issues, as well as production of videos regarding security in the financial education, to strengthen the widespread dissemination of financial knowledge. At the same time, the banking sector actively promotedthe cultivation of anti-money professionals. During the year, approximately 200 professionals hadsuccessfully obtained International Certificates in Anti-money Laundering.

Thirdly, new breakthroughs were achieved in promoting cooperation and exchange. Last year, The Macau Association of Banks signed a cooperation agreement with Macao Federation of Trade Unions, aiming to promote harmonious relations between employers and employees of the banking sector, strengthen the training of human resources for the banking industry, promote youth employment and widen the space for upward mobility. With regards to international exchange and co-operation, The Macau Association of Banks successfully received the visit of the International Monetary Fund (MIF) and other organizations, having obtained a high evaluation and thus safeguarded Macao´s international reputation.

The development of the banking sector creates job opportunities and career advancement for the youth and also cultivates talentfor the territory. Currently, Macao´s banking sector has a workforce of 6072 people (2016 third quarter´s figure), corresponding to 144 new jobs year-on-year, including 49 new management and qualified professional positions. The future development of characteristic financewill provide a large number of high-quality jobs and wider upward mobility space for Macao´s youth. According to an initial assessment, the posts that should be created or replenished in the future to support the development of characteristic finance, mainly include:

First category – positions in the characteristic financial area, which include high-quality professionals familiar with financial leasing, property rights transactions, assets management, securities trading and funds, covering several areas, including customer relationship marketing, new product development, and systemoperation.  Second category – positions in the banking sector, which require “financial compound talents” with cross industry experience, in such areas as traditional commercial banking, investment banking, insurance, funds and investment companies. Third category – ancillary services professionals, such as lawyers, accountants, appraisers, actuaries and translators, etc.

Over the past year, The Macau Association of Banks, as an organization linking the banking industry, has played an active role in maintaining financial stability and effectivesupervision ofcoordination, strengthening exchange and cooperation with other countries and regions, enhancing the professional quality and, in particular, the effective support to the Macao SAR Government Address in developing characteristic finance.

II – MACAO BANKING SECTOR OUTLOOK FOR 2017

Looking ahead, 2017 will remain full of changes and uncertainties. There has been a slight growth in the world economy, but the impact brought about by the reversal of globalization, rise of trade protectionism and global liquidity reversal should not be ignored, given that the monetary policy normalization in the United States as well as the pace of USD dollar interest rate hike will have an impact on global fundsflows and on currency exchange and interest rates. However, as our country´s economy maintains a stable development, and the local economy gradually shifting away from the stage of economic adjustment, coupled with the further development of Macao´s unique advantages, it is believed that, compared to 2016, the banking sector will enjoy a better business environment, with ample opportunities.

This year, the colleaguesof banking industry will seize the historical opportunity of the significant   development of Macao´s financial industry and vigorously develop emerging markets and emerging business. In a new year, we will continue to implement the 5-Year Development Plan outlined by the Macao SAR Government, to actively grasp the opportunities brought about by the “One Belt, One Road” national strategy. While striving for self-development, we shall also create conditions for the development of characteristic financeand contribute towards the moderate diversification of the economy!