SUMMARY OF RESULTS

The Board of Directors of CITIC Ka Wah Bank Limited (the "Bank") announces the unaudited consolidated results of the Bank and its subsidiaries (the "Group") for the six months ended 30 June 1998 together with the comparative figures for the corresponding period in previous year as follows:-

Notes:

(1) The provision for Hong Kong profits tax is based on an estimate of the assessable profits for the six months ended 30 June 1998 at 16% (1997: 16.5%). Taxation for overseas branches and subsidiaries is charged at the appropriate current rates of taxation ruling in the countries in which they operate.

No provision for deferred tax is made as there are no material timing differences which would result in a liability payable or an asset receivable in the foreseeable future.

(2) The calculation of earnings per share for the six months ended 30 June 1998 is based on earnings of HK$191,403,000 (1997: HK$268,254,000) and on the weighted average of 2,356,339,273 (1997: 1,887,946,861) ordinary shares in issue during the period after adjustment of the bonus issue on 28 April 1998. The earnings per share for the six months ended 30 June 1997 have been adjusted accordingly.

UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(1) Advances and other accounts

(2) Advances to customers --- By industry segment

(3) Loans on which interest is placed in suspense

(4) Overdue advances

(5) Rescheduled loans

(6) Summary of financial position

BUSINESS REVIEW

The difficulties experienced by the Hong Kong banking sector during the first half of 1998 were unprecedented. Under such circumstances, the Bank adopted a prudent but progressive strategy to ensure that development in various business divisions can be made on a stable platform.

* Progress

At a time when banks were competing fiercely for deposits, the Bank, through structural realignments, actively expanded its retail banking business. Total deposits increased by HK$3.58 billion in the first half of the year, or approximately 13%, mainly attributable to individual customers.

In corporate banking, the Bank adopted an aggressive yet selective promotion campaign. As a result, total amount of loans increased 11% over the same period last year. Meanwhile, the Bank intensified its business dealings with prestigious and prominent local enterprises and multinational organisations, thereby improving customer quality and structure, as well as substantially upgrading asset quality.

Notwithstanding spiraling capital cost and narrowing interest spreads, net interest income rose by 14% over the same period last year. Despite the local capital markets was at its low tide with trading volume shrinking, non-interest income of the Bank still increased marginally. Operating income and operating profit before provision recorded an increase of approximately 11% and 4%, respectively.

* Stability

The Bank is financially sound. As at 30 June, its liquidity ratio was 48%, loan to deposit ratio stood at 67%, capital adequacy ratio was 22%.

* Problems and their solving

The Bank is deeply aware that to reduce the ratio of problem loans and upgrade asset quality is an important task. In the first half of the year, thanks to the enormous support from China International Trust and Investment Corporation ("CITIC") and related institutions, the Bank's new management has taken positive and effective measures to keep problem loans under control and significant inroads had been made in solving the problem. At the same time, the Bank set aside considerable amount of special provision against such problem loans. The Board firmly believes that as the issue of problem loans are being resolved gradually and its loan business continues to expand at normal pace, the bad debt ratio of the Bank will be reduced further in the second half of the year, despite deteriorating economic conditions triggered by the financial turmoil.

Business expansion needs and improvements in basic facilities in the first half of the year have combined to generate a 27% increase in the Bank's operating expenses over the same period of previous year. The Bank believes that in realising its long-term development goal, it is necessary to invest in human resources, information system and other relevant areas. However, management is also aware that despite the ratio of operating expenses to operating income still stands at a reasonable level of 37%, it remains a major task in the second half of the year to control operating expenses.

* Prospects

The Bank will continue to adopt the basic principles of cautious development and stringent management as its business motto in the second half of the year. It will proactively expand its businesses to enlarge market share, and to stay alert for any expansion opportunities that may help grow the Bank rapidly. In corporate banking, the Bank will focus on upgrading customer quality and improving client base, and to offer more comprehensive, value-added services to the business enterprises in both Hong Kong and China. The Bank will accelerate the expansion of its retail banking business through rationalising its branch location, coupled with promotion campaigns, product development and exploration of sales channels. Moreover, the Bank will continue recruiting top professionals to boost its human resources and rationalise its staff structure. The Bank will also continue to strengthen its risk management and tuning of its organisational structure, making them more adaptable to the business strategy. Furthermore, the Bank has planned to launch a new design for its corporate image during the year in order to participate in market competition with a new identity.

INTERIM DIVIDEND

The board does not recommend any interim dividend (1997 : Nil) for the period.

CHANGE OF NAME

The Bank has changed its name to "CITIC Ka Wah Bank Limited" ( ), representing a new stage of relationship forged into between the Bank and CITIC.

APPOINTMENT OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The Board warmly welcomes Mr. Cai Zhongzhi who was appointed as President and Chief Executive Officer on 18 March 1998; and Mr. Hong Yung Cheng who assumed Chairmanship on 23 June 1998.

The Board is confident that the new leadership will be able to lead the Bank through the next millennium and usher in a new stage of development for the Bank.

The Board would like to extend its gratitude to the ex-chairman, Mr. Peter V. Kwok, for his valuable contributions and guidance to the Bank during his tenure, particularly during a period when Hong Kong experienced extreme financial severity.

PURCHASE, SALE AND REDEMPTION OF SECURITIES

There were no purchases, sales or redemption by the Bank, or any of its subsidiaries, of the Bank's listed securities during this interim.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

The bank has complied with the Code of Best Practice set out by the Stock Exchange of Hong Kong Limited throughout the period under review.

YEAR 2000 COMPLIANCE

To ensure that the overall operation of the Bank straddles smoothly across Year 2000 and that the guidelines laid down by the Hong Kong Monetary Authority be followed, management set up in June 1997 a high level committee, an inter-departmental working group and "millennium bug" team under the Information Technology Department to tackle all problems relating to the millennium issue. A working schedule to modify the Bank's computer and system and ancillary equipment has been successfully formulated.

The mainframe system of the Bank has now undergone all modification processes and has been going through different tests since May 1998. It is estimated that all such system installation and modification relating to transition over Year 2000 will be completed in December 1998.

By Order of the Board
Cai Zhongzhi
President and Chief Executive Officer

Hong Kong, the 30th day of July 1998

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