CITIC Limited has established a risk management and internal control system covering all business segments to identify, assess and manage various risks in the Group’s business activities. The business, operating results, financial position and profitability of CITIC Limited may be subject to a number of risk factors and uncertainties, directly or indirectly, relating to the Group. The risk factors set out below are not exhaustive and CITIC Limited, in addition to these risk factors, may also be exposed to other unknown risks or risks that may not be material at present but may become material in future.
As a sub-committee of the Executive Committee, the Asset and Liability Management Committee (“ALCO”) has been established to monitor financial risks of the Group in accordance with the relevant treasury and financial risk management policies.
Asset and liability management
CITIC Limited’s sources of funds for different businesses include long-term and short-term debt and equity, of which ordinary shares, preferred shares and perpetual securities are the alternative forms of equity financing instruments. CITIC Limited manages its capital structure to finance its overall operations and growth by using different sources of funds. The type of funding is targeted to match the characteristics of our underlying business.
ALCO centrally manages and regularly monitors the existing and projected debt levels of CITIC Limited and its major non-financial subsidiaries to ensure that the Group’s debt size, structure and cost are at reasonable levels.
As at 31 December 2017, consolidated debt of CITIC Limited(1) was HK$795,813 million, including loans of HK$142,442 million and debt instruments issued(2) of HK$653,371 million. Debt of the head office of CITIC Limited(3) accounted for HK$86,274 million and debt of CITIC Bank(4) HK$527,860 million. In addition, the head office of CITIC Limited had cash and deposits of HK$5,874 million and available committed facilities from banks of HK$21,829 million.
The details of debt are as follows:
As at 31 December 2017 HK$ million Consolidated debt of CITIC Limited 795,813 Among which: Debt of the head office of CITIC Limited 86,274 Debt of CITIC Bank 527,860
(1) Consolidated debt of CITIC Limited is the sum of “bank and other loans” and “debt instruments issued” in the Consolidated Balance Sheet of CITIC Limited;
(2) Debt instruments issued include corporate bonds, notes, subordinated bonds, certificates of deposit and certificates of interbank deposit issued;
(3) Debt of the head office of CITIC Limited is the sum of “bank and other loans”, “long-term borrowings” and “debt instruments issued” in the Balance Sheet of CITIC Limited;
(4) Debt of CITIC Bank refers to CITIC Bank’s consolidated debt securities issued, including long-term debt securities, subordinated bonds, certificates of deposit and certificates of interbank deposit issued.
The debt to equity ratio of CITIC Limited as at 31 December 2017 is as follows:
HK$ million Consolidated Head office Debt 795,813 86,274 Total equity(1) 793,641 399,146 Debt to equity ratio 100% 22%
(1) Total consolidated equity is based on the “total equity” in the Consolidated Balance Sheet; Total equity of head office is based on the “total ordinary shareholders’ funds and perpetual capital securities” in the Balance Sheet
- Liquidity risk management
The objective of liquidity risk management is to ensure that CITIC Limited always has sufficient cash to repay its maturing debt, perform other payment obligations and meet other funding requirements for normal business development.
CITIC Limited’s liquidity management involves the regular cash flow forecast for the next three years and the consideration of its liquid assets level and new financings necessary to meet future cash flow requirements.
CITIC Limited centrally manages its own liquidity and that of its major non-financial subsidiaries and improves the efficiency of fund utilisation. With flexible access to domestic and overseas markets, CITIC Limited seeks to diversify sources of funding through different financing instruments, in order to raise lowcost funding of medium and long terms, maintain a mix of staggered maturities and minimise refinancing risk.
Details of liquidity risk management are set out in Note 47(b) to the consolidated financial statements.
- Contingent liabilities and commitments
Details of contingent liabilities and commitments of CITIC Limited as at 31 December 2017 are set out in Note 46 to the consolidated financial statements.
- Pledged loan
Details of cash and deposits, inventories, trade and other receivables, fixed assets and intangible assets pledged as security for CITIC Limited’s loan as at 31 December 2017 are set out in Note 41(d) to the consolidated financial statements.
- Credit ratings
Standard & Poor’s Moody’s 31 Dec. 2017 BBB+/Stable A3/Negative