CITICS 2017 Financial Performance Presentation

March, 23rd 2018

1 Chinese Securities Industry Overview

2 CITICS Financial Performance

3 CITICS Business Highlights

3

Content

1 Chinese Securities Industry Overview

1,026

1,174

9391,026

200255.3

500.6

844.6

0

200

400

600

800

1,000

1,200

1,400

2014 2015 2016 2017 2014 2015 2016 2017

4

2017 Chinese Major Stock/Bond Indices Average Daily Turnover in Equity Market1 2

Stock Indices

Shanghai Composite Index +6.56%

Shanghai & Shenzhen 300 Index +21.78%

New OTC Market-making Index -10.65%

GEM Composite Index -15.32%

Hang Seng Index +35.99%

Bond index

China Bond Wealth Index -0.59%

2014 Average 309.8 Bn

2015 Average 1,076.5 Bn

2016 Average 533.7 Bn

Interest rate hikes with wider spread 3 Margin Finance and Stock Repo all up4

RMB Billion

2017 Average470 Bn, ↓12%

Overview of Chinese Capital Market in 2017

Margin Finance ↑9.3% Stock Repo ↑69%

2.0000

3.0000

4.0000

5.0000

6.0000

3-month SHIBOR：（+163BP）

10-year Treasury：（+78BP）

5-year AAA Corporate：（+143BP）

Source：Wind，SAC，Internal Data

RMB Billion

5

0.9

1.7 2.1

0

1

2

3

2014 2015 2016 2017

6.7 8.4 9.2 11.6

0

10

20

2014 End 2015 End 2016 End 2017 End

Source：Wind, SAC, AMAC

AUM of Securities Industry AUM of Fund Industry3 4

8.0 11.9

17.4 17.3

05

101520

2014 End 2015 End 2016 End 2017 End

RMB Trillion RMB Trillion

Equity Financing Size1 Debt Financing Size2

6.2

11.5 14.9

0

5

10

15

2014 2015 2016 2017

RMB Trillion RMB Trillion

1.8 11.9

Overview of Chinese Capital Market in 2017

Equity Financing ↓15%

IPO ↑33%

SEO ↓19%

Debt Financing ↓20%

Corporate Bond ↓60%

↓1% ↑26%

6

Total Assets Total Liabilities1 2

RMB TrillionRMB Trillion

1.1 1.6 2.9 4.4 4.3 5.1 0.6 0.5 1.2

2.1 1.4 1.1

0

2

4

6

8

10

2012 2013 2014 2015 2016 2017

Own Assets Client Assets

0.6 1.0 2.0 2.9 2.7 3.20.6 0.5 1.2 2.1 1.4 1.1

0

2

4

6

8

10

2012 2013 2014 2015 2016 2017

Own Liabilities Client Assets

4.34.1

1.2

6.45.0

2.11.7 3.21.5

Net Assets3 Leverage Ratio4

RMB Trillion

0.50 0.52 0.92

1.50 1.64 1.85

0

1

2

2012 2013 2014 2015 2016 2017

1.6 2.1 3.2 3.0 2.7 2.8

2.5 2.8 4.4 4.4

3.5 3.3

0

5

10

2012 2013 2014 2015 2016 2017

Adjusted Leverage Total Leverage

Multiples

5.84.1

Source: Internal, SAC

6.1

Industry Assets: Own Assets up, Leverage stable

7

Operating Income

ROE

Net Income1

3

2

Profit Margin4

130 159 260

575

328 311

0

200

400

600

800

2012 2013 2014 2015 2016 2017

RMB Billion

33 44 97

245

123 113

050

100150200250300

2012 2013 2014 2015 2016 2017

RMB Billion

4.9% 6.1%11.8%

19.9%

8.1% 6.5%

0%

20%

40%

2012 2013 2014 2015 2016 2017

25% 28%37%

43%38% 36%

0%

20%

40%

60%

2012 2013 2014 2015 2016 2017

↓5% ↓8%

Source: SAC, Internal

Industry Profitability：Economics of Scale Continue Fading

8

Content

2 CITICS Financial Performance

9

11.7 16.1 29.2

56.0

38.0 43.3

0

25

50

75

100

2012 2013 2014 2015 2016 2017

4.90%6.02%

12.18%

16.64%

7.36% 7.82%

0%

25%

2012 2013 2014 2015 2016 2017

Operating Income1 Net Income2

ROE3 Profit Margin（1）4

RMB Billion RMB Billion

4.2 5.2 11.3

19.8

10.4 11.4

0

10

20

30

40

50

2012 2013 2014 2015 2016 2017

36% 32% 39% 37%31% 33%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016 2017

↑10%

↑0.46 percentage

points

↑14%

1. Financial Indicators (1/2)

Note 1：Profit margin was calculated without income from Commodities after 2015

10

480

616 597 626

379

474 452 472

-

100

200

300

400

500

600

700

2014 End 2015 End 2016 End 2017 End

Total Assets Total Liabilities

4.7

4.34.1 4.1

3.7

3.3 3.23.4

2.5

3.0

3.5

4.0

4.5

5.0

2014 2015 2016 2017

Total Leverage Adjusted Leverage

Assets and LiabilitiesRMB Billion

Net Assets Leverage Ratio

99.1

139.1 142.7 149.8

0

50

100

150

200

2014 2015 2016 2017

RMB Billion

1

2 3

101.8 150.5 134.4 99.9

1. Financial Indicators (2/2)

Redlines items are Security Deposit

Sources: Annual Report

Multiples

35%

16%19%

5%

11%

15%

28%

13%16%

4%

12%

27%

0%5%

10%15%20%25%30%35%40%

Brokerage InvestmentBank

AssetManagement

Other Financing Investment

Revenue Mix

2016 2017

11.8

5.46.4

1.6

3.65.2

10.0

4.45.7

1.3

4.3

9.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Brokerage InvestmentBanking

AssetManagement

Other Financing Investment

Revenue Movement

2016 2017

8.8

13.7

0

5

10

15

2016 2017

11

25.1 21.5

0

15

30

2016 2017

26%

39%

74%

61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017

Fee-basedBusiness

Capital-basedBusiness

↑56%

↓14%RMB Billion

RMB Billion

2. Revenue Mix—Fee-based income down 14%, Capital-based up 56%

Source: Internal data

Fee-based

RMB Billion

Note: Income from Commodities is removed

Fee-based Capital-based(Net)

Note: financing cost is reduced from income of Financing and Investment

Capital-based(Net)

12

3. Cost Analysis

Sources: Annual Report

Cost-to-Income Ratio1

Compensation-to-Income Ratio2

In A-share report, our cost-

to-income ratio was 39% as

of the end of 2017, down by

6 percentage points y-o-y

In A-share report, our

compensation ratio was 28%

as of the end of 2017, down

by 2 percentage points y-o-y

63% 64%72% 73%

47%36% 45% 39%

0%

50%

100%

2014 2015 2016 2017H-share Report A-share Report

24% 20% 23% 21%32% 26% 30% 28%

0%

50%

100%

2014 2015 2016 2017H-share Report A-share Report

Note: 1. In H-share report, operating expenses include expenses of commission, fees and interest which are not included in A-share report2. In H-share report, operating income is gross income, while in A-share report, operating income is net of expenses of commission, fees and interest.

4. Domestic Competition Landscape: Lead in Revenue and Profit

2016年前9月八大券商营业收入比较（亿元）

2017 Top Five Total Assets 2016年9月末八大券商归属净资产比较（亿元）

2017 Top Five ROE 2017 Top Five Leverage Ratio

2017 Top Five Revenue 2017 Top Five Profit

2017 Top Five Net Assets

10.75 10.55 9.05

7.82

7.57

0.00

5.00

10.00

15.00

Huatai Guangfa Guojun CITICS Haitong

625.6 534.8

431.6 392.1 355.3

0

200

400

600

800

CITICS Haitong Guojun Huatai Guangfa

3.52 3.46

3.43

3.382.60

0

1

2

3

4

Huatai Haitong CITICS Guangfa Guotai

43.3

28.2 23.8 21.5 21.1

0

10

20

30

40

50

CITICS Haitong Guojun Guangfa Huatai

Source：Annual Report, Performance Announcement

1 2

3 4

5 6

13Note: Leverage ratio is estimated data

RMB Billion RMB Billion

149.8123.1 117.5

87.6 84.9

0

50

100

150

200

CITICS Guojun Haitong Huatai Guangfa

RMB Billion RMB Billion

11.49.9 9.4 8.6 8.6

0

5

10

15

CITICS Guojun Huatai Haitong Guangfa

294.0

209.7

5.243.3

0

200

400

2006 2017

Revenue

GS CITICS

317

537

12.3

149.8

0

200

400

600

2006 2017

Net Assets

GS CITICS

6,545 5,992

63.6 625.6

0

4000

8000

2006 2017

Total Assets

GS CITICS

Source: SAC，WIND，Annual Report

Benchmarking in Total Assets and Net Assets Benchmarking in Revenue and Profit1 2

GS’ revenue was 56 times of CITICS’ in 2006, the gap is narrowed to

4.8 in 2017; Profit gap was 31 times in 2006, now is 4.6

Business Layout3 Overseas Business4

RMB Billion

GS’ total assets was 103 times of CITICS’ in 2006, the gap is narrowed

to 9.6 in 2017; Net assets gap was 26 times in 2006, now is 3.6

RMB Billion

• Market-making is still small. Capital-based business will be the focus in the future.

• Exchange, commodities, credit derivatives and structured products are still far behind

Overseas business starts from zero and continues to grow

After acquisition of CLSA, the client base and overseas distribution channel have been expanded to 17 regions and countries and 20 branches globally

Synergy has been recognized in areas such as investment banking, brokerage, research etc.

Overseas income grows rapidly CLSA’s income accounts for 15% of total income in 2017

Product-centric Client-centric

Equity

Business

Equity/Debt

Diversified

Volatile to

Market

Less

Volatile

Homogenous

CompetitionDifferentiation

Establish GS-like business model

Cover most product types

Diversify income sources

Improve risk resilience

• GS overseas income accounts for 41% of its total income, which is still far ahead of CITICS

• Regional distribution of overseas revenue is centralized and shall be spread out

Capital-based business

5. Overseas Benchmarking: Narrow the gap with Goldman Sachs

73.452.9

2.4 11.40

50

100

150

2006 2017

Profit

GS CITICS

14

15

Content

3 CITICS Business Highlights

A-share Asset Restructuring

No.1 in Equity Underwriting No. 1 in Debt Underwriting

Rank Underwriter Amount (RMB Bn) Market Share

1 CITICS 220.98 12.29%

2 CICC 211.50 11.76%

3 China Securities 192.47 10.71%

4 Guotai Junan 143.66 7.99%

5 Huatai 113.74 6.33%

1 2

4

16Source：Bloomberg, Wind, Internal

Rank Underwriter Amount (RMB Bn) Market Share

1 CITICS 511.63 4.29%

2 China Securities 387.66 3.25%

3 China Merchant 356.08 2.98%

4 Tebon Securities 267.24 2.24%

5 Guotai Junan 259.75 2.18%

No.1 in IPO Underwriting3

Rank Advisor Asset Size (RMB Bn） Market Share

1 CITICS 139.8 16.21%

2 ChinaSecurities 110.1 12.78%

3 CICC 92.2 10.69%

4 Huatai 63.7 7.39%

5 Guotai Juan 57.3 6.65%

Rank Underwriter Amount (RMB Bn)

Market Share

1 CITICS 20.6 9.42%

2 Guangfa 17.0 7.75%

3 ChinaSecurities 14.42 6.59%

4 Guosen 14.41 6.58%

5 Haitong 12.5 5.69%

China-related M&A5

Rank Advisor Market Share

1 CICC 17.28%

2 Morgan Stanley 8.97%

3 Goldman Sachs 8.21%

4 CITI 7.56%

5 CITICS 7.28%

1. Investment Banking：Maintain the Leading Position

17

No.2 in Turnover: In 2017, Our Stock/Fund Turnover was

RMB 13.05 Trillion with a market share of 5.69%, ranking No.

2 in industry; Revenue from commission accounts for 5.39%

of all, also ranking No.2 in industry

Asset under Custody continue to grow: In 2017, AUC

reached RMB 5 Trillion, an 18% y-o-y growth

Abundant Client resources：In 2017, number of QFII clients

reached 138 and RQFII reaches 52

Stable Market Share1

Descending Commission Rate2

Wealth Manage

ment44%

Sales & Trading

32%

Investment

Banking15%

Asset Manage

ment7%

Other2%

Account Manage

ment Fee56%

Interest24%

Commission

10%

IB3%

Trading5%

Other2%

Morgan Stanley Revenue Mix in 20173

Revenue Mix Wealth Management Revenue Mix

Wealth Management Objectives4

2. Brokerage：Transforming to Wealth Management

Differentiation and value creation

Higher fee

The quality and the capabilities of team become the main driver of profit making

Client representatives customize wealth management plans based on client’s risk preference

Use AI technology to aid asset allocation

Provide one-stop shopping services to realize asset class allocation

Extended financial services：heritage、tax planning、family trust etc.

Financial Services: investment, lending, saving, account management etc.

Source: Internal Data

7.88 7.966.91

5.124.04 3.58

6.8 6.545.27

4.07 3.75 3.39

0

2

4

6

8

10

2012 2013 2014 2015 2016 2017 Future

Industry CITICS

？

‱

3.2 4.0 3.9

3.2

0

5

2014 2015 2016 2017

18

755 1,071 1,921 1,667

0

1,500

3,000

2014 End 2015 End 2016 End 2017 End

178 412

610 589

0

400

800

2014 End 2015 End 2016 End 2017 End

458

864 1,006 1,020

0

600

1,200

2014 End 2015 End 2016 End 2017 End

3. Asset management: Lead in AUM

Asset Management Fee

AUM by China AMCTotal AUM and Active AUM2 3

1st in Total AUM

1st in Active AUM

RMB Billion RMB Billion

RMB Billion

AM Fee by China AMC4

0.8

1.8 2.1 2.0

0

2

4

2014 2015 2016 2017

RMB Billion

Source: Internal Data

Business Advantage1

► Fully licensed：CITICS Asset Management is fully licensed to manage corporate annuity, Social Security Fund domestic investment, insurance fund etc.

► CITICS：By 2017, Total AUM reached RMB 1.67 Trillion with market share of 10.1%; Active AUM reached RMB 589 billion; Both are ranked No.1 in industry

► China AMC：By 2017, AUM of Institutional Business reached RMB 471 billion, among 1st tier in industry

5

47

15

(10)

(25)(30)(20)(10)

0102030405060

Financing Option Delta Liquidity Fixed-income

138.0

75.4

118.7

75.2

4.37%3.59%

4.66%

2.72%

0%

3%

5%

0

30

60

90

120

150

180

Debt Instrument Interbank Repo2017 2016

19

4.1 Capital-based Business: Optimized StructureOptimized Asset Allocation

Improved ROA

2

4

RMB Billion

2017 Capital-based Income1

RMB Billion 2017 2016 Δ %

Total Income 13.72 8.82 4.90 56%

Interest Income 8.32 6.95 1.37 20%

Investment Income 13.32 8.62 4.70 55%

Financing Cost -7.87 -6.86 -1.01 15%

Exchange gain/loss -0.05 0.12 -0.17 -143%

Optimized Liabilities3

4.27%

6.05%5.69%

9.60%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

ROA ROAC

2016 2017RMB Billion

Source: Internal Data

Less allocation to fixed-income business

More allocation to financing business

Debt financing cost reduced

↓

↑

4.2 Fixed-IncomeBusiness Layout

20

Sales Trading

New Business

China Bond Connect

Market-making

Market-making license

Cover over 100 foreign investors

17 Billions Turnover; No. 1 in

industry

Hold leading positions in

many trading markets, e.g.

Interbank market, debt

market, money market,

derivatives market etc.

Won the Excellent Award by

the Shanghai Stock Exchange

as bond dealer, bond investor

and product innovator.

Risk Management

Established risk management system for market risk, credit risk and operation risk

Liquidity Support

Daily financing amount of 39bn

Credit Research team build-up

Recruit talents

Smooth the dialog among research, trading and risk management

Strengthen enterprise credit field research

Source: Internal Data

ABS

Integrate research and investment；

Full coverage of industrial chain；

Properly manage business and risk.

Cross-Border TRS

First securities company to engage fixed-income cross-border TRS

Complete 6 contracts in total

FX Application

Regulatory communication;

Platform build-up;

Streamline FX business needs

Model design.

4.72% 5.62%4.23%

0%

6%

2015 2016 2017

No. 1 Interest Rate Bond Sales （Market Share）

522.1

441.4 469.6

400

500

600

2015 2016 2017

No.1 in Debenture Bond Sales (Amount)

RMB Billion

-3.40%

1.50%

4.30%

-4%

-2%

0%

2%

4%

6%

China Bond Index Average Bond FundReturn

CITICS Trading

2.2

17.1

0

10

20

2016 2017

5.1 4.0

0

5

10

2016 2017

4.3 Equity Derivatives

21

Stock-pledged Repo Option Delta TRS Market-making

39.4

78.0

0

50

100

2016 2017

RMB Billion+98%

RMB Billion

10.0 6.4

0

6

12

2016 2017

-36%RMB Billion RMB Billion

-21%

Source: Internal Data

4 5 6 7

6.8 times

Customer Needs

Instruments & Products

OTC Derivatives Equity Financing Market-Making1 2 3

• Serve financial institutions, hedge fund, enterprise, HNWI and retail clients.

• Offer client risk management solutions, wealth management, global asset allocation and enterprise capital operation.

• Serve shareholders, senior executives and ESOP(Employee Stock Ownership Program).

• Offer clients existing equity solutions and financing instruments

• Offer market-making services for exchange fund products and options.

• Offer liquidity market-making and arbitrage strategies for cross-market, cross-assets and cross-products activities.

Structured Products

OTC Option Flow Trading

Corporate Risk Management Solution

Equity Collateralized Financing

Equity Incentive Financing

Mezzanine/Cross-border Financing

Exchange option contract market-making

ETF/Money Market Market-Making

Other Market-Making Strategies

OTC derivative trading amount over100bn

The market share of Stock-pledged financing was 9.2%

ranking 1st

Core market-maker of 50ETFranking 1st.

22

4.4 Financing Business2017 Top Five in Margin Finance Balance 2017 Top Five in Stock Repo Balance

Descending Margin Fee Rate

8.46% 8.30% 8.15%7.69%

8.22%

7.56%

6.89%

5.42%

5.00%

6.00%

7.00%

8.00%

9.00%

2015 2016H1 2016 2017

Margin Finance Stock Repo

Interest Income Continue Growing

1 2

3 4

71 64 59 57 56

6.91%6.25%

5.73% 5.56% 5.46%

0

40

80

120

CITICS Guojun Huatai Galaxy Guangfa

Balance Share

78 77 75

44 38

9.2% 9.1% 8.9%

5.3%4.5%

0.0%

6.0%

12.0%

0

20

40

60

80

100

120

CITICS Haitong Guojun Huatai Guosen

Balance Share

4.85

2.04

4.89

3.38

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Margin Finance Stock Pledged Repo

2016 2017

RMB Billion

RMB Billion RMB Billion

Source: Internal Data

5. GoldStone: Profit Continue Growing

23

1.3 3.2 3.8

0

5

2015 2016 2017

Goldstone Financial Performance from 2015-2017RMB Billion

Revenue

0.4 1.7 1.9

0

2

4

2015 2016 2017

RMB Billion

Profit

Source: Internal Data

Two subsidiaries reform Goldstone becomes the

platform of PE fund investment

CITICS Investment becomes the principal investment unit

Continue fund-raising and investing In 2017, goldstone established

multiple industry funds and the AUM in total reached RMB 60 billions

In 2017, CITICS investment completed 28 new investments with total amount of RMB 2.3 billions

Business strategy

In 2018, goldstone will accelerate investing pace and expand overseas investment

CITICS Investment will strive to keep the leading position in AUM, research and investment return in peers

Push for Business Transformation

0.14

0.54

0

0.4

0.8

2016 2017

Profit

4.445.11

0

3

6

2016 2017

Revenue

24

6. International ExpansionCITIC CLSA

Completed full integration Restructured US Business, optimized

overhead, improved financial return

2017 CITIC CLSA Business Highlights

Help CITICS to gain the best

Asia Investment Bank by IFR

Best Broker in Research and

Sales by Asia Money

Completed the conversion from HK GEM board to HK Main BoardKVB

International

Credit Rating

Improved

Moody’s maintained our Baa1 rating and changed the outlook from

negative to stable; S&P raised from BBB to BBB+ with stable outlook;

CITICS is the only Chinese securities company that has two BBB+ ratings

+15%+2.8times

RMB Billion RMB Billion

Source: Internal Data

6.16%

3.54% 3.61% 3.50%

0

1

2

3

4

0%

2%

4%

6%

8%

2014/12/31 2015/12/31 2016/12/30 2017/12/29

Stress Test Value

Stress Test Value/Net Capital

206 203

141

95

0

50

100

150

200

250

31/12/2014 31/12/2015 31/12/2016 31/12/2017

Interest VaR Equity VaR

Exchange VaR Commodities VaR

Overall Portfolio VaR

25

7. Comprehensive Risk Management Framework

Source: Internal Data

VaR4

Market Risk

RMB Million

Stress Test

Risk Exposure of Bond Investment (Onshore)1

Credit Risk

Management Framework

5

2 Control Procedures3

Operation Risk

RMB Billion

RMB Billion

0

20

40

60

80

100

2014 2015 2016 2017

Sovereign AAA AA A A-1 Other

50.6

70.8 76.5

Sovereign and AAA accounted for 62% of holding positions by 2017

35.6

Assets over Liability 2017 2016

Margin Finance 300% 277%Outright Repo 216% 228%Stock Pledged 246% 273%

To Prevent Risk via New Product Approval Procedure, review of workflow & design of control steps;

To Mitigate Risk via Incident Reporting, Mitigation Action Recommendation and Tracking

To Flag Potential Risk via day-to-day KRI Monitoring

To Promote Risk Awareness via trainings and case study

Credit Risk Management system

includes: Due Diligence, Internal Credit

Rating, Limit Setting & Monitoring

Note: VaR is calculated for parent company only and excludes holdings of restricted shares

Thank You！