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Edited Transcript of 601939.SS earnings conference call or presentation 31-Aug-22 8:00am GMT

Half Year 2022 China Construction Bank Corp Earnings Call (Chinese, English) Beijing Sep 8, 2022 (Thomson StreetEvents) -- Edited Transcript of China Construction Bank Corp earnings conference call or presentation Wednesday, August 31, 2022 at 8:00:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Changmiao Hu China Construction Bank Corporation - Secretary to the Board * Cui Yong * Jinliang Zhang China Construction Bank Corporation - President & Vice Chairman of the Board * Min Zhang China Construction Bank Corporation - EVP * Yuanguo Cheng China Construction Bank Corporation - Chief Risk Officer * Yun Li China Construction Bank Corporation - EVP * Zhihong Ji China Construction Bank Corporation - EVP ================================================================================ Conference Call Participants ================================================================================ * Hu Shen Crédit Suisse AG, Research Division - China Analyst * Ran Xu Morgan Stanley, Research Division - MD * Shuaishuai Zhang China International Capital Corporation Limited, Research Division - Analyst * Yi Wu BofA Securities, Research Division - Chief Strategist, Head of Financial Institutions Research & Deputy Director of China Research ================================================================================ Presentation -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [1] -------------------------------------------------------------------------------- Distinguished investors, analysts, media friends, good afternoon. Welcome, everyone, to attend CCB 2022 interim results announcement. I'd also like to thank you for your all-out support to CCB. In terms of the prevention and control of COVID-19, this meeting takes the form of phone connection as well as webinar. The attendees of today's meeting are President of CCB, Mr. Zhang Jinliang; Vice President, Cui Yong; Mr. Ji Zhihong; Ms. Zhang Min; Mr. Li Yun; CRO, Mr. Cheng Yuanguo. According to the requirements of the regulators, we also invited our Independent Director, Kenneth Chung, to attend online. There also the representatives of the Board as well as the supervisors to attend this meeting. I'm the Board Secretary, Hu Changmiao. The interim results was officially publicly announced last night. And we also showcased the performance results on our official website for your reference. When we come to the official interactions, we would like to invite President, Zhang Jinliang, to brief you about our H1 performance. Over to you, Mr. Zhang Jinliang. -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [2] -------------------------------------------------------------------------------- Distinguished investors, analysts, media friends, good afternoon. Welcome, everyone, to attend 2022 interim results announcement. Thank you for your long-term interest and your support to CCB. I'm very glad to share with you our performance in the first half of this year, and I'd also like to update about our future outlook. In the first half of the year, CCB actively implemented the decisions and the deployment of the central government, the State Council. We have been working on the stability as well as future development. We have been fulfilling the responsibility in the economic and political stance. And we also coordinate the COVID-19 prevention and control as well as economic and social development. We have implemented the new finance activities to consolidate our client base to improve our operational performance as to cope with the risks and challenges. So core indicators have been quite stable. NIM, plus 2.09%; ROA, 1.01%; ROE, 12.59%. Taking the lead among peers, business signs benefits return and asset quality developed in a coordinated way. The total asset exceeds RMB 33 trillion, up by 11.4%. Total liability exceeds CNY 31 trillion, up by 12.2%. And net profit, CNY 161.7 billion, year-on-year increase of 4.95%. NPL ratio, 1.4%, down by 2 percentage points. Provision coverage, 244%. Cap adequacy ratio, 17.95%. We are capable to fight against all kinds of risks. First, we are quite determined to serve the real economy. We want to prevent COVID-19 to stabilize the economy and to pursue secured development. We have promoted a series of quite strong as well as heartfelt and speedy and pragmatic measures so as to consolidate economic recovery and stabilize the macro economy. On one hand, we continue to increase our capital support. RMB loans increased by CNY 1.54 trillion, year-on-year increase of CNY 364.2 billion. RMB debt investment increased by CNY 800 billion. We greatly participated in the government debt subscription. Also, support monetary as well as fiscal policy. On the other hand, we continue to optimize our resources allocation to focus on the key priorities in our national economy. For example, infrastructure, manufacturing industry, strategic emerging industry, the loans increased by 8%, 14.4% and 26.7%, respectively. And tech-related loans exceed CNY 1 trillion. Jing-Jin-Ji, Yangtze River Delta region and GBA area also get more loans in the total loan extension. We also cut our fees and surrender profit to the real economy. Inclusive loans increased by CNY 267.1 billion. The balance totaled CNY 2.14 trillion. And second, we have been very effectively in promoting our strategies. Centering on the pain points of the economic and social development, we have been promoting series of new finance explorations and practices, rely on the fintech trends, we have to build different kinds of operational scenarios. We use the smart governance system to enable the national governance system as well as the modernization of the governance. We also coordinated our leading strength, for example, our fast loans as well as Huidongni platform, reach out to more SMEs platform as well as digitalization-based development, promote high-quality and sustainable development of inclusive finance. Inclusive finance balance takes about 10% of the total. We also deepened rural revitalization practices. Yunongtong continue to converge online and off-line practices. Agriculture-related loans increased by 12.4%. We also constantly improved the Green and Low-Carbon development footprint. So green loans totaled RMB 2.4 billion and green product development products further diversified. We also actively increased our lending to foreign investment and foreign trade, also promoted whole currency payment products. The global matchmaker platform facilitated the interconnectivity of the market. We also continue to construct the housing reform, focusing on equal emphasis on rental as well as house purchase. The house rental platform comes more than 90% of the prefecture-level geography and above. The house rental loans totaled RMB 180.6 billion. Third, our operation and development further improved its quality and efficiency. We have been trying to strike a balance between the size as well as the return of the business. We further continue to the corporate business base and business structure. We also strengthened corporate as well as private businesses with higher efficiency and high-quality services to precisely reach out to the clients and also expand client base and deliver comprehensive financial services. So corporate accounts totaled 12.58 million, taking the lead in the industry and personal accounts totaled 730 million. AUM exceed CNY 16 trillion. Credit card exceeds 150 million. We also promote online and off-line convergence, optimize the outlets deployment and also accelerate the digital transformation as well as [binary star] campaigns. The mobile phone as well as the Internet banking services have a total of 500 million clients. CCB Life has a registered users of about 66 million, and DAU, 4 million. We also consolidated on-balance sheet and off-balance sheet coordination to shift from the bank balance sheet to operation of the clients' balance sheet so as to promote the brand asset and the brand wealth management ecosystem. And CCB Dragon wealth branding become more [inclusive], our agency business, wealth management business continued to develop with the total custodian size more than CNY 19 trillion. And investment banking business also taking the lead in that industry. And fourth, our risk control continue to be strengthened. We further improved our comprehensive risk management framework to mitigate major risks to actually exclude the major risks and strengthen our preventive scenarios and to better control property as well as the local government implicit debt risks. We continue to strengthen credit asset quality to have the tiered-based management for the key accounts and promote unified credit risk monitoring system. Asset quality continue to be stable and the risk categorization has been quite consolidated. The delinquency ratio is 43 basis points lower than the NPL ratio. And the gap between overdue as well as NPL is CNY 87.9 billion. We also intensified the disposal of NPL, strengthened the cash recovery as well as the other aspects. We also strengthened internal control as well as compliance management. AML work is very effective and consolidated. We also share our benefits and return with the shareholders. Last month, we completed 2021 dividend payout with a total number of CNY 91 billion. Since IPO, CCB created significant amount of cash return for our shareholders. We have paid out CNY 1 trillion in total. And we are also listed as the China IPO association, the most rewarded company. We also have to consolidate property innovation as well as rural revitalization. So workers' and labor's harbor platform offer comprehensive services to the society. We also improved our senior and elderly support facilities. And (inaudible) project take a deep root so as to offer to prefect knowledges to the different people at aggressive level. Our strategic initiative also got high recognition in 2022. The bankers also ranked us as #2 in the world top 1,000 banks. And in 2022 in Fortune 500, we ranked 24, up by one position. And we also awarded by the Asian Banker's as the Best Retail Bank in Asia Pacific, China's Best Inclusive Finance Bank and China's Best Custodian Bank and China's Best Comprehensive Risk Control Bank. And MSCI ESG rated CCB as A level and CSI ESG rated CCB as AAA. We are the highest level among the peers. Since this year, we can see that in the assessment of the service to the rural revitalization, you can see that CCB is also ranked at the excellent level. Since this year, facing very complicated external dynamics and risk and challenges, the central government coordinated the corporate control as well as economic development and also made very effective achievements in terms of COVID control as well as economic recovery, creating very favorable conditions for the stable and sound development of the banking sector. So far, we see that unprecedented dynamics. Over the past century, the global economy slowed down with more inflation as well as market dynamics. However, the long-term good trend of the economy hasn't been changed, and the economic resilience continue to be strengthened. There are a lot of favorable conditions for us to better promote high-quality development. Economic transformation and upgrading has generated new momentum for the growth, digital transformation, green development as well as tech innovation expect more financial support. At the same time, we can also expect historical opportunities for the commercial banks. In the future, CCB will continue to insist on Xi Jinping's new outlook for China's development with the Chinese characteristics. We will grasp the opportunities and to pursue a good path for the financial development in China to consolidate our capabilities to serve the national economy to participate in international competition. And we will also utilize the digitalization as well as platform-based operation to promote our new finance initiative and to solve deep-rooted problems, optimize the mechanism and promote a mainstream business to develop in a stable and sound manner, so as to realize the sustained, balanced as well as coordinated development of size, benefits and risks. Firstly, we will continue to play our role as a major bank to serve the economy and the society. This is our borne responsibility to serve the real economy and also the fundamental guarantee to realize sound and sustainable development. We will continue to implement 23 measures to prevent COVID as well as to promote economic and social development and to continue to lay equal emphasis on the key priority area, key industries, key clients as well as key geographies will continue to surrender benefits to the real economy to help those SMEs so as to realize the six stabilities and six guarantees. And second, we will continue to balance size and quality so as to improve equality and efficiency of our operation. We will continue to pursue high-quality development. We will pursue the reasonable growth of quantity as well as stable growth after quality. Asset and liability business will strike a balance as to satisfy the needs of the market major players. We will continue to optimize the liability structure as well as liability structures. And we're going to make breakthroughs and to deliver more coordination and to better allocate the benefits. Cost control will also insist on the principle so as to improve the input/output ratio. And thirdly, we will continue to defend the new finance initiatives. Based on CCB 14th Five-Year Plan blueprint, we are going to integrate the platform-based mindset into our new finance initiative. House rental will continue to deliver support to the social housing development. We're also going to improve the influence of the comprehensive house rental platforms. We continue to improve the structure of inclusive finance and to provide better services to the customers and to improve the Huidongni ecosystem. For fintech, we have to let fintech play a leading and driving role so as to take stock of the needs of the customers, to integrate and share and better use the data. And for green finance, we'll continue to improve the share of asset and to expand the services and products of green finance and to prevent climate risk and transition risks. For rural revitalization, we have to take an integrated approach regarding the product and services and to improve the comprehensive services regarding all types of rural-related products. And also, we will have to promote deposits and existing funds and to focus on the key areas and become a model in these areas. And number four, we'll continue to strengthen our fundamentals and to improve the quality of our businesses. For commercial banks, customer operation is the basis and the business development is the fruits. We'll continue to enhance the roots and to have a customer service system that is multi-tiered and multi-category based. We will leverage the digital tools and to make use of the three mid-office and to also leverage the corporate level and other platforms to promote the integrated development of business data and the platforms. Number five, we'll have to balance business development and security and enhance risk control and compliance to follow the rules of financial development and observe the bottom line; to be prudent, comprehensive and proactive in our risk management and build such a culture. We'll have to have full coverage in our risk management and enhance business operation, the first, second and the third line of defense, and to accelerate risk treatment and control and to ensure that all the key indicators are within a reasonable range. And we also have to strengthen AML and to protect consumer rights and the data security. So this is our ambition. We will continue to implement the arrangements of the central government and to seek progress among steady development, to make consistent efforts to pursue high-quality development and to produce tangible results to repay your trust and support. Thank you. -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [3] -------------------------------------------------------------------------------- Thank you, President Zhang. Now let's turn to the Q&A session. (Operator Instructions) Okay. Now let's start the Q&A session. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) First question comes from Morgan Stanley. -------------------------------------------------------------------------------- Ran Xu, Morgan Stanley, Research Division - MD [2] -------------------------------------------------------------------------------- I'm financial analyst Xu Ran from Morgan Stanley. First of all, I would like to congratulate the CCB for achieving good performance results in this complex situation in the first half of the year. We have seen that in July, some key economic indicators have all recovered, including the industrial added value and export growth. However, social financing growth has slowed down, and we continue to expect complicated situation in overall economic development. So I would like to consult the management on your opinion on the current macroeconomic situation and the environment for bank's operation. For the lending of CCB, you have more lending in the first half of the year on a year-on-year basis. Do you expect it -- this to be the same for the whole year? And what are the key areas for lending? And personal mortgage loans has been impacted to some extent, so would you accelerate the supply of consumer lending? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [3] -------------------------------------------------------------------------------- So Mr. Zhang, President Zhang. -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [4] -------------------------------------------------------------------------------- Thank you. So this year, because of the impact of both internal and external factors, China is facing a lot of pressure in its economic development. So the central government and the CPC Central Committee has introduced a series of measures to stabilize the economy. Actually, from the mid to long-term perspective, China has the world's most potential -- has the largest market in the world with the greatest potential. We have the world's most complete industrial system. And our economy is resilient, dynamic and has a great potential. So our fundamentals remains good. And we are confident that we can overcome the volatilities and difficulties for the time. And China's economy will achieve long-term and high-quality development. So in the first half of this year, CCB has fully implemented the financial policy in advance, in full and with accurate targets. The total lending of the group has exceeded RMB 20 trillion with an addition of CNY 1.58 trillion, and the balance of bond investment exceeded RMB 8 trillion with an increase of CNY 800 million. Both are historic highs. And we have also increased supports to the key areas and weak links. And for inclusive loans, the balance of inclusive loans have reached RMB 2.14 trillion. We continue to be #1 among the peers. Second, we have continued to provide funding for manufacturing sector and the green sector, and the balance of green loans exceeded RMB 2 trillion, and the balance of mid- to long-term loans for the manufacturing sector exceeded CNY 800 billion. So both has -- the growth rate of both has exceeded 20%. And third, we have actively supported the rural sector. In the first half of the year, rural-related loan growth and the growth rate has exceeded the previous historic average. And also, we have leveraged our traditional advantage in infrastructure support. A balance of loans in the infrastructure sector has exceeded RMB 5.5 trillion and has maintained steady growth. And number five, we have continued to consolidate our advantage as the largest retail bank. And the growth of personal business loans exceeded 35%. So in the second half of the year, CCB will actively seize the critical period for economic recovery and implement the monetary policy of PBOC and continue to provide steady loans. You have mentioned consumer loans. Actually, in the first half of this year, the market conditions was quite harsh but we managed to provide the personal mortgage loans in a steady and orderly manner. And also, we continue to expand the consumption scenes and to innovate the service model. We actively promoted the consumer finance and have registered positive growth. Actually, personal consumption loans has increased by CNY 22.8 billion and credit loans has increased by CNY 14.1 billion. So as the government's policies to boost consumption and stabilize economy continues to take effect, I believe that the consumer confidence will continue to recover. And the consumption demand and the market room will continue to be released. So from the long term, I think there will be a good opportunity. And we believe that in the second half of this year, the growth of consumption loans will be better than the first half of this year. That's my brief answer to your question. Thank you. -------------------------------------------------------------------------------- Operator [5] -------------------------------------------------------------------------------- Next question comes from [Xuan Lulu] from the Security Times (sic) [Securities Daily]. -------------------------------------------------------------------------------- Unidentified Participant, [6] -------------------------------------------------------------------------------- We have seen that given the COVID and economic slowdown, despite this, CCB has maintained its asset quality on the whole. We know that the asset quality of banks is closely related to the macro environment, especially economic growth rate. So given the pressure in overall economic growth, how do you see the asset quality for the second half of this year? And as the central government has raised the policy requirement to lower the provision rate, what will -- what's the impact on lending cost for CCB? -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [7] -------------------------------------------------------------------------------- So in the first half of this year, because of COVID and the triple pressure of the macro economy, CCB has fully leveraged its professional capabilities in lending management and has striked a balance between stabilizing growth and preventing risks. So by the end of June, NPL ratio of the group was 1.4%, which is 0.02 percentage points compared with the beginning of the year, and the overdue rate is 0.97%, which is relatively low. And we have very solid asset quality and very prudent categories. By the end of June, the scissors gap of the overdue nonperforming loans was minus CNY 78.858 billion, which is better than those peers and the proportion of nonperforming loans overdue for 19 days and more was 44.89%, which is relatively low. So CCB always pursued prudent management and has taken a prudent and forward-looking approach in foreseeing the risks in key areas and has taken proactive measures for adjustment and management. Take the real estate sector as an example. While meeting the reasonable financing need for the real estate sector, we have strictly controlled risks. The corporate real estate loan nonperforming ratio was 2.98%, and the NPL ratio for personal mortgage loans was 0.25%. Both were relatively good among the peers, and the risks were generally under control. And in some other sectors, for example, in infrastructure and manufacturing sectors, the NPL ratio has -- the NPL ratio and the NPL assets amount have both been reduced. It's fair to say that we have enough room for managing the asset quality, credit assets quality, and we have the capabilities and the confidence to respond to all types of risks. And in terms of provisions, by the end of June, the provision coverage rate was 244.12%, which was 4.16 percentage points compared with the beginning of the year. However, it was 2.24 percentage points compared with the Q1. So we have ample financial capabilities to fend off the future risks. So in the future, we will closely follow the developments of the macro economy and the changes in the asset quality to strictly follow the requirements of the MOF and the CBIRC to objectively and reasonably evaluate the ECL and to set aside provisions in full and in time. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Next question comes from [Tawi] from Temasek. -------------------------------------------------------------------------------- Unidentified Analyst, [9] -------------------------------------------------------------------------------- I'm [Tawi] from Temasek. I have a question regarding the real estate sector. There are two aspects of my question. Since last year, we have seen many risks in China by real estate sector. So my question is, what's the asset quality of CCB in the real estate sector? And how do you see the future trend of the real estate sector? And what are your response measures? The second question is that recently, we have seen that the Ministry of Urban and Rural Development and Housing at MOF and the PBOC have introduced a series of measures to enable special lines of loans from policy banks and the bank loans to support the delivery of overdue houses. What's your interpretation? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [10] -------------------------------------------------------------------------------- Okay. CRO Cheng will answer this question. -------------------------------------------------------------------------------- Yuanguo Cheng, China Construction Bank Corporation - Chief Risk Officer [11] -------------------------------------------------------------------------------- CCB has always actively implemented the decisions and arrangements of the central government. And we believe that housing is for living, not for speculation. And around the goal of stabilizing the land price, the housing price and expectation, we have provided ample and reasonable financing support for the real estate sector on a city-by-city basis. So in the first half of the year, the real estate sector have faced a lot of pressure and the NPL ratio has risen. We have seen reduction of the housing sales. And the lending assets for the real estate sector have been impacted at CCB. And our NPL ratio was 2.98%, which is higher than the last year. And personal loans was RMB 6.48 trillion, which was also higher than last year. However, it was generally under control, and we continue to be the best among the peers. In recent years, you can see that our asset quality in the property sector remains quite stable. This is because we always bear in mind that fighting against the financial risks, in particular, prevent systematic risk from happening is our fundamental role and our time-honored team. Because CCB insist on serving the real economy and insist on our three major strategy, keep optimizing our credit structure to use our credit resources to support the priority area in the economy. As a result, property extension has been reduced. And second, we have been very forward-looking to make deployment in the house rental, and we deliver more credit resources to house rental sector. At the end of June, we can see that our total house rental loans was CNY 180.6 billion, an increase of 35%. House rental loans has nothing to do with exposure and CCB continue to optimize our client structure, geography structure as well as client base. We are quite capable in terms of fighting against the risks. In terms of the property developers loans, we can see that most of the projects are concentrated in Tier 1 and Tier 2 cities. The balance in Tier 1 and Tier 2 cities occupies more than 85%, and more than 87% of the loans are delivered to the residential house projects. We think that property sector will continue to -- our key priority in the future. And we think that the central government has been releasing favorable policies. In June, the property sector has witnessed the marginal improvement. The construction area and land purchase area all witnessed month-by-month increase. And recently, PBOC continue to reduce 5-year LPR by 15 percentage points. Multiple government authorities issued policies through policy bank loan. We are supporting the delivery of the difficulty property projects. And the local government also issued a series of bailout measures. I believe that all of these measures will help us to stabilize the market conditions and to recover market confidence. In short term, there will still be volatility in the market. But in the longer term, I believe that major theme is to stability. CCB will continue to follow the market-oriented, legal-based and professional principles, actively show their social responsibilities and to give more financial support in order to guarantee the delivery of the house projects. First of all, stabilize the loan extension. We will continue to implement the property financial policies so as to stabilize the delivery of the projects and to satisfy the financial needs of the property sector to support the region as well as the improvement housing demand and deliver more support to the social housing as well as house rental services, so as to maintain the sound as well as long-term development of the property sector. And the second, to promote M&A. According to compliance risk control as well as commercially viable principles, we will actually conduct property M&A financial services and such, controlled risk. CCB will continue to incorporate property business into our key priorities in the future to take full advantage of intelligent risk control instruments, to continue to have a good monitoring of the risk in the property sector. We will also standardize the presale founding management so as to better control the risk. We will also facilitate the property developers to have a very sound development in the future. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Next question come from Xinhua News Agency, [Wu Yi]. -------------------------------------------------------------------------------- Unidentified Participant, [13] -------------------------------------------------------------------------------- I'm [Wu Yi] from Xinhua News Agency. There's a follow-up question. We can see that -- what is the change for the mortgage demand? In particular, we see that there is some delay of the delivery of the house projects and there's also suspension of the mortgage. Is CCB under such impact? And what is the asset quality of CCB's mortgage? How can we forecast the future mortgage asset development? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [14] -------------------------------------------------------------------------------- We would like to give the floor to our Vice President, Li Yun. -------------------------------------------------------------------------------- Yun Li, China Construction Bank Corporation - EVP [15] -------------------------------------------------------------------------------- Thank you for raising this question. I think that there are three major aspects in your question. I'd like to take your question one by one. First of all, I would like to briefly talk about the overall development as well as asset quality of mortgage loans in CCB. CCB insist on implementing the rules of the central government and State Council. We insist on that houses are for living rather than for speculation. We also stabilized the land price. So as to stabilize the expectation by the end of June, our individual mortgage balance was CNY 6.48 trillion, increased by CNY 92.69 billion. NPL ratio of 0.25%, keeping the lead among peers. As always, CCB strictly implement national policies. We keep optimizing the mortgage quality and structure. In terms of the mortgage structure, there are three characteristics. First of all, optimized regional structure. We will choose the better performing geographies. 50% of the mortgage loans are extended to Bohai region, Yangtze River Delta region and Pearl River Delta region. More than 65% of the loans are extended to Tier 1, Tier 2 cities with good economic operation, continuous population growth. And second, optimize the client base. We will select the high-quality developers to support individual clients rate as well as improvement-based housing demand. 80% of the loans are extended to the clients who purchase a house with area below 144 square meters. And thirdly, we keep optimizing the product mix. We insist on the balanced development of the new house as well as secondhand houses. By the end of June, secondhand house loans was CNY 1.76 trillion, [6 27%] of the total. In many years of development, we'll also continue to improve the professionalism and refined risk control for mortgage lending. There are three things we did. First of all, for the pre-loans access risk control, we have collected different kinds of data. And altogether, we cooperated with the risk department as well as the corporate lending department to score the developers as well as their projects so as to optimize the access of the projects. And second, during the lending, we will precisely identify the risks. We will give priority to the default conditions as well as the abnormal conditions for the advanced payment of the key clients. The system will block the risky loans before the loan is extended. And said, there's also intelligent risk monitoring system. After lending, we actually have 128 risk alert and risk monitoring models to actually give pre-alert for the post-lending risks. Through all of these three professional capabilities, you can see that since 2020, for the newly issued mortgage, the NPL ratio was just 0.07%. So this is about the risk control for the individual mortgage. And the second part, you can see in terms of the demand of the mortgage loans. In the first half of this year, you can see that in different months, there's volatility for the demand of the individual mortgage in April and May due to the volatility pressure of the house developers as well as the outbreak and resurgence of COVID-19. From the demand side, there's a big pressure in June. Thanks to the policy optimization as well as the recovery of the pandemic, the acceptance as well as extension of the mortgage loans recovered, reached CNY 88.9 billion as well as CNY 89.9 billion, respectively, month-by-month increase of 54.5% and 49.4% and daily acceptance is about CNY 3 billion. And recently, central and local government also issued a series of policies. You can see there's also the policy from the policy banks to ensure the delivery of the projects. And the local government also issued a series of policies to stabilize the property segment. And you can see that on August 24, the 5-year LPR downgraded by 15 percentage points. This was also in favor of the development of the demand side of the mortgage loans. And thirdly, you're also interested in a so-called mortgage suspension. A while ago, you can see that in the public channels, you see the media also released the mandatory suspension of the mortgage, which actually got high attention from different walks of life. After that, CCB attempted through great importance and in the firsthand respond to mortgage suspension. You can see that according to the data collected by July, we see that the personal mortgage related to suspension is about CNY 1.14 billion, which accounts for 0.018% of the total and NPL was CNY 500 million, which is 0.0077% of the total in the balance. Generally speaking, the personal mortgage risk is well under control. In the future, CCB will cooperate with the local government to stabilize the delivery, to stabilize people's livelihood as well as stability so as to mitigate risks, promote the sound and smooth development of the property segment. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Next question from Zhang Shuaishuai from CICC. -------------------------------------------------------------------------------- Shuaishuai Zhang, China International Capital Corporation Limited, Research Division - Analyst [17] -------------------------------------------------------------------------------- I'm Zhang Shuaishuai from CICC. I'd like to ask a question about infrastructure. Well, you said this year, infrastructure investment will be very important period to stabilize the growth. There's also the acceleration of the issuance of the specialized debt as well as the policy finance. And for CCB, we do enjoy great strength in infrastructure. So my question is that whether we are going to benefit more from this trend. What kind of deployment and arrangement do you have in this aspect? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [18] -------------------------------------------------------------------------------- Thank you for raising this question. We would like to give the floor to Vice President, Cui Yong. -------------------------------------------------------------------------------- Cui Yong, [19] -------------------------------------------------------------------------------- Thank you for raising this question. I can tell you that in this round of infrastructure investment, we benefited a lot. During this process, as we know, I think all of you here today, both off-line and online, you see that China's infrastructure development is pretty fast. People's daily traveling, transportation and logistic experience are greatly enhanced. This is attributable to the fast increase in the infrastructure investment. You can see that infrastructure development is already very famous name card for our capability. You see that in CCB, in terms of infrastructure, we do have traditional strength. To grow the infrastructure-related finance is also actually taken by CCB to implement the President Xi Jinping's general instructions where, at the same time, we should also play the role of infrastructure as a cornerstone. Since this year, central government and State Council issued a series of policies and measures to promote the further development of infrastructure to expand effective investment. In CCB, we also actively implement the decision of central government and State Council and further intensified credit support. The loan to infrastructure increased steadily, and CCB continue to benefit from that. The role played by infrastructure as a cornerstone continue to showcase. There's some data I would like to share with you. By the end of June, our infrastructure loan balance, like Mr. Zhang Jinliang said was CNY 5.5 trillion and it takes almost 52% in our total corporate loans. And NPL ratio is much lower than a corporate loan and the asset quality is pretty high. And in terms of the extension, there's an increase of CNY 406.6 billion, an increase of 8%. And new infrastructure loan balance, CNY 115.1 billion, an increase of CNY 14.3 billion. And according to our arrangement, we would like to make the following ideas. First of all, we would like to strengthen the credit extension to key areas. We will continue to support transportation, water conservation, et cetera. In particular, recently, there are also special arrangement from the State Council to water conservation project. We're going to further extend loans to 5G base stations, AI, big data center as well as the other new infrastructure development. Also, we will focus on urban renewal, the shortages and weaknesses in towns and some other areas in new types of urbanization. So both old and the new infrastructure needs will be satisfied. Second, we will take a proactive approach to follow up the supporting funds for the infrastructure. So CCB has coordinated with NDRC and policy banks to share regular -- to share information on a regular basis and have established a liaison system for the projects. We have also participated in the syndicated loans led by the policy banks and have provided full-fledged support for the infrastructure projects that are eligible for the loans and have provided differentiated policy support. And we are requested to provide these loans as soon as possible. So we have made some special arrangements. Number three, we focus on project-based and list-based management. First, we look at the list of key projects from the key provinces and ministries so as to better align our work with the government's requirements. So everybody is working extra hours to fully cover the projects in the list. And second, we have carried out a white-list dynamic differentiated management for the key infrastructure clients and to the clients of new infrastructure. So we were requested to have quick decision-making process by the government. And the third, to provide whole process financial service for the special bonds, special debt system and to follow up progress of the projects on a regular basis and to provide more of supporting funds for the special bond projects. And number four, we have strengthened the support of policy support. For example, we have made it clear that we will accelerate the extension for policy-supported projects and have made differentiated policy arrangements in these areas. Thank you. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Next question is from [Lisa Yi] from the Hong Kong Business News. -------------------------------------------------------------------------------- Unidentified Participant, [21] -------------------------------------------------------------------------------- So before raising the question, I would like to say that we have been holding this phone conference for several years because of the COVID, so we really look forward to a face-to-face communication. So my question is about aging and old-age financing. So we know that China is entering an aging society, so we pay a lot of attention to financing for the retirees. And China has promoted a personal pension system, and CCB has a dedicated pension company and have participated in the wealth management product pilot. So what is the overall plan arrangement in this respect? -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [22] -------------------------------------------------------------------------------- Thank you for your interest in our old age and the pension finance development. In the first half of this year, we have received a lot of policy support in terms of personal pension and inclusive pension loans. As we can see, China is entering an aging society, so it is urgent to develop pension and old-age financing. And the personal and commercial banks has a unique advantage in providing such services. Actually, a large proportion of our customer base are natural customers of our old-age financing services. And the policy have made it clear that the personal pension business will shift from a product system to an account system. So the core of this system is to ensure the old-age assets will maintain and grow its value. So commercial banks asset management business starts from wealth management. And after more than 10 years of development, our multi-license comprehensive and systematic operation capabilities have continued to improve. And we have the capability to provide old-age wealth planning and asset allocation capabilities for the general public. And the people's trust in us is our natural advantage to enter this business. So CCB has put forward the one-three one-four development strategy, that is to provide a full life cycle service for our customers. So there are two ones here. First, we have this goal of becoming a professional old-age financing bank. And also, we want to improve our one-stop service capabilities. And for three, it means we'll have to focus on the three pillars for old-age care. And by four, we mean that we will have a 4-in-1 service system, which consists of old-age wealth reservation, industry cultivation, service provision and ecosystem construction. In the first half of this year, we have participated in the innovative pilots and improved our existing business. In terms of our services, we have improved the amount and the quality of our Pillar 1 and Pillar 2 business. We have the CCB Pension, a dedicated company. The Pillar 2 business has a total assets of CNY 416.2 billion, up by 9.1% compared with the beginning of the first year -- beginning of the year. And you're all very focused on the Pillar 3 business, and we have made the preparation for that. We have two subsidiaries, CCB Wealth Management and the CCB BlackRock. Both have received the license for wealth management. And the wealth management products issued by CCB Wealth Management exceeded CNY 17 billion, which ranked #1 among the subsidiaries of the big 4. And the CCB Pension has got the license for old-age pension pilot in 2019. And they have the license for target date and target risk funds. And also, they have covered a full range of product. And CCB Life have gained the qualification for a tax-deferred pension insurance pilot, and their product line covers all types of needs for the old people, including health, old-age care and health care. So in terms of the old-age care service, CCB will offer a dedicated channel on the CCB Life app, which is the health and old-age care to meet the customers' needs for old-age care. And in terms of the old-age care industry, CCB has developed the marketing guidelines for the old-age care industry. So it's fair to say that CCB not only focuses on the product and the services and their innovation, but also tries to integrate internal and external resources so as to promote this business in a systematic manner. As the next steps, we will focus on three things. First, to offer long-term and prudent product. And second, we will ensure that customer service is appropriate and relevant, which means that the products we offered will meet the risk preference of customers and also meet the needs of the customers, so that the customers will rest assured with our offerings. And third, we need to provide professional and accurate support for the old-age care industry. So the old-age care industry has a lot of problems such as undersupply of effective services and mismatch of structure. So there is urgent need for old-age care facilities and the day care services for the people and the clinical services for the elderly and high tech and smart old-age services, et cetera. So CCB has a responsibility, the capability and the willingness to contribute to old-age care in China and to build a dedicated and professional pension financing bank with our own features and live up to people's expectations so as to contribute our wisdom and capabilities to China's old-age care. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Next question is from Guangdong Development Securities. -------------------------------------------------------------------------------- Unidentified Analyst, [24] -------------------------------------------------------------------------------- I have a question regarding digital operation. Just now, President Zhang has mentioned the specific application of the digital tools in the business. So my question is that, could you share with us the progress and achievements of digital operation in CCB? And what's the impact on our business development? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [25] -------------------------------------------------------------------------------- Vice President Zhang Min will take this question. -------------------------------------------------------------------------------- Min Zhang, China Construction Bank Corporation - EVP [26] -------------------------------------------------------------------------------- Thank you for your question and interest in digital operation. Indeed, CCB was one of the early movers in exploring digital operation. We have put forward three strategies, implemented the new finance and now it has become a day-to-day operation. So we have translated this idea into real practice. In the first half of this year, we have actively implemented the regulator's requirement for digital operation and have strengthened the foundation for our fintech capabilities. As for the progress and achievements, I would like to approach it in five aspects. First, we have a master plan for building a digital CCB. So this year, we have developed this master plan for building a digital CCB 2022 to 2025. We firmly hold that data should be a key production factor and the technology should be a core production tool, and the ecosystem will become a new development pattern for us. And we have made a master plan for the long-term objectives, implementation strategy, management model, talent training and cultural development for the digital transformation of the CCB. Second, we have built and improved our organization system. So we are one of the first major banks to adjust our structures for this digital transformation. In 2020, we have built a fintech and the digital operation committee had -- headed by the President so as to take a coordinated approach in the digital transformation. And this year, we have established a special committee to coordinate the management and we focus on the synergy between different departments, business lines and the regions. And by now, we have built an organization system that is open, sharing, responsive and agile. And number three, we have consistently enhanced our data system for technology development. We have a Top Plus 2.0 strategy, that is technology, openness, platform and joint operation. So in the data, technology and business mid-offices, we have enabled the responsive -- response -- the agile response that supports digital operation. And we adopted the domestic office system so as to support the single-track operation of the whole system, which is the first of its kind in the whole industry. And for the distributed technology platform capability development, we have already established a core system that is independently developed, secure, stable and has high performance that is up to international standards. And we are one of the model businesses identified the State Council in this respect. And number four, we have an ecosystem for business operation, focusing on the pain points and key challenges. We have built an ecosystem, build the scenes and expanded the users to connect the G, B and the C end so as to promote the digital operation capabilities. From the G end, we actually serve the digital government development with intelligent governance. We already cooperated with 29 provincial government and also offered house rental as well as social housing platform. And from the B end, we actually take the corporate Internet banking as well as mobile banking and the core and also constructed a vertically deep-rooted corporate service system. And the [credit] only platform, beautiful, inclusive finance clients, already served 7.7 million SMEs. And from the C end, take mobile banking as well as CCB Life asset binary stars, we promoted the deep integration of financial services as well as nonfinancial services. And with the regional different scenarios, we also constructed integration of online convergence with the offline services. You can see that 72% of the newly added clients are acquired online. Mobile banking and Internet banking individual clients almost approached 500 million, which is -- kept leading among our peers, and online account received transactions already accounted for 97.57% of the total. It also shows that we have been very wide connection in terms of the coverage. We have been having this fintech wins so as to provide more convenience to our clients. And thus, we keep increasing our risk control capabilities. In our transformation after digitalization, there are all kinds of traditional as well as new types of the risks. In particular, in terms of the complications as well as dynamics, we have to leverage big data, cloud computing as well as AI to continue to mitigate risks, to have the risk alert system, RMD and RED system, so as to promote faster iteration of the risk alert system. We, at the same time, also keep optimizing our risk compliance system, the [blue core] mechanism already embedded risk control into our pre-middle as well as post business structures, so as to form synergy and channel's product as well as client, and we have been very comprehensive to prevent and control the risks. The President said that actually economic as well as finance transformation is our future trend. On a national level, we take building the digitalization strengths as one of our priorities during the 14th 5-year plan. And assumes we will also continue to insist on with digital transformation where at the same time to make our digital services more professional and more people-oriented so as to satisfy the customers' whole life cycle financial needs, continue to improve the quality service level as well as professionalism of our services so as to offer the optimal services for our individual clients as well as our corporate clients. Thank you. That's all for me. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Next question comes from [Faha Shou]. -------------------------------------------------------------------------------- Unidentified Analyst, [28] -------------------------------------------------------------------------------- My question is more about a NIM. We see that in the first half of this year, you can see that NIM of different banks all faced a lot of pressure because there's adequate liquidity. And the central government also downgraded our PR. So how can we understand the future policy interest rate as well as deposit and lending rate? And how do you forecast your NIM trend? Can you help us to understand the drivers between the NIM and what kind of measures can be adopted by CCB to stabilize your NIM? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [29] -------------------------------------------------------------------------------- We'd like to give the floor to President Zhang Jinliang. -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [30] -------------------------------------------------------------------------------- Thank you for raising this question. The trend of the rate as well as NIM is of common interest of the analysts. As we said before, since this year, central government has been implementing the measures to stabilize the monetary policy, and there's also the down adjustment of LPR. As a result, the market interest level is lower than the same period last year. The two biggest assets, loans as well as debt investment, the interest income is lower than that of the same period of last year. And from the liability side, you can see that the interest-bearing cost is also increasing. So you can see that our NIM in the first half of this year is 2.09%, and down by 4 percentage points comparing with December of last year. In these circumstances, CCB actively take measures to manage our asset liability structure, in particular with strengthened differentiated pricing mechanism, to deeply adopt the digitalized operation mechanism and use some interest management tools to offset these dynamics. And the result has been proven to be very effective. 2.09% of the NIM is do quite good among peers. In the second half of the year, you can see that the interest income, there is still some further room for reduction. You can see since last 2 years, there's many reduction of the LPR. So interest account impact hasn't been further released. And we're also very determined to implement the decisions of the central government and State Council. There's still further potential for the cut of the interest. So I think that CCB will take active measures to mitigate all of this negative impact so that our NIM can be stabilized at a reasonable level. I'd like to analyze this issue from the asset as well as liability side. First of all, from the asset side, we will keep optimizing the structure. The total asset of CCB already exceeds CNY 33 trillion. So there's a big potential for us to adjust the structure, in particular, the structure of the products as well as the tenure. So I think that in the future, we will continue to optimize our research capabilities of the market, to review our asset allocation strategies. For example, in the first half of this year, our loan and financial investment as well as some high-yield assets take a high proportion in the total asset, which played a very positive role in driving up the NIM. And in the future, we will continue to play the role like this. And second, from the liability side, there are many things we can do from the liability side. In particular, while we reduce fee income to surrender profit to the real economy, I believe that CCB should pay more attention to cost control from the liability side. Only by stabilizing the cost from the liability side can we better cope with the situation and reduce the financing cost of the real economy. I think that there are following things we can do. First of all, I think that we will continue to operate the liquidity from the liability business. We should further study the capital utilization rules in different industries and for different clients, and take key accounts as an example so as to further expand to the SME clients. In particular, we should also improve the [inner taking] rate of the capital funding payment for the key accounts so as to form a closed loop of the capital utilization. And second, we will also use our digitalized means so as to further expand to medium and smaller clients as well as long-tail clients so as to improve the payment settlement, the salary payment as well as the fees collection and the other basic financial product coverage, so as to have more current deposit. And certainly, like I said before, CCB has been further promoting our grand wealth management strategy. And take individual founding. For example, we're going to further improve our cooperation with all different kinds of the financial institutions. I believe that with the implementation of the grand wealth management strategy, we're going to have more low-cost current deposit. And fifth, CCB will continue to further cooperate with different types of the financial institutions so as to have more low-cost settlement fundings from the different kinds of the financial institutions. Besides, we also see that since last year, you can see that the interest rate market-oriented reform began to play its role. LPR reform will gradually transmit from the loan side to the deposit side, and this will help us to stabilize the cost from the liability side. And certainly, we're going to strengthen interest rate risk management, use different kinds of interest rate derivative instruments. I believe that with the above-mentioned measures, CCB is confident to maintain a very good NIM level among peers. Thank you. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Next question, [Jan Chung Xu] from Shanghai Securities News. -------------------------------------------------------------------------------- Unidentified Analyst, [32] -------------------------------------------------------------------------------- Inclusive finance, 1 of your 3 strategies, management, please give us a brief update about inclusive finance development, including the size, pricing, asset quality of inclusive finance. And with economic downturn, whether the demand of the inclusive finance is also affected, whether you can also satisfy the needs of the regulators. What kind of countermeasures have you adopted? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [33] -------------------------------------------------------------------------------- Vice President Cui Yong, please take this question. -------------------------------------------------------------------------------- Cui Yong, [34] -------------------------------------------------------------------------------- Thank you for your attention to inclusive finance. I should say that among the peers, CCB is the first to identify inclusive finance as 1 of our 3 major strategies. And over the past few years, we keep improving our organizational structure, in particular in terms of platform development, product development. As well as the service penetration as well as team building, we have been lay a very solid foundation for inclusive finance development. I think there is something I would like to share with you. By the end of June 2022, inclusive finance balance was CNY 2.14 trillion. And this is also the largest commercial bank with inclusive finance. And there is an increase of CNY 267.1 billion. And you can see that extension of inclusive loans continue to grow. Now we have 2.25 million clients, an increase of 310,000 comparing with the beginning of the year. I believe that you pay attention to commercial banks, you know that 310,000 is actually the total number of the corporate clients for the commercial banks in early days. It's really not an easy job. You can see that given the complicated dynamics, it's really not easy job. You can see that the half year incremental is also the biggest one over the past 2 years. And you can see that the loan rate -- well, we continue to be compliant with the regulators' requirements and they continue to drop, so as to surrender profit to the real economy. And the quality of the loans continue to be stable. Basically, no volatility. All of these achievements, like I said, are attributable to platform development, product development as well as service penetration. While at the same time, I should say that we played a role of the tech. You know that many colleagues as well as the media pays a high attention to our platform, Huidongni. CCB Huidongni offers one-stop services which is very convenient to reach out to a wider client base. And based on this platform, there are also something I would like to share with you because we're going to release Huidongni 3.0 version. This new version is really a good thing you can expect about. And recently, the visit of Huidongni is about 170 million and the download is about 21 million. For Huidongni platform, you can see that the beneficiary client is about 8 million. And there are 1.65 million customers and with a loan extension of CNY 1.3 trillion. So for inclusive finance, it's impossible to reach such a large number of customers without the support of technology. Over 90% of our businesses are actually deliver to see the Huidongni platform. So indeed, this platform has provided very convenient services to the businesses. And in the first half of this year, we have also organized a dedicated campaign to provide services for self-employed businesses and SMEs. We have also offered some digital and online micro loans. This has made the products more relevant and made our services more accurate. Also, we have implemented the policy requirement to extend the loans for SMEs so as to ease the difficulties for the market entities. And you also mentioned the lending needs or borrowing needs of the SMEs. We have seen some volatilities there. But overall, the SMEs still needs fund and then we still have a large room for inclusive finance. As for the regulatory requirements, actually, this year is a little bit different from the previous years. So in the beginning of the year, the report on the work of the government said that we need to promote market increase in support -- inclusive financing support for the SMEs. This is different wording than the previous years. And in the May meeting, it has been made clear that the large state-owned banks has increased the SME loans by CNY 1.6 trillion. Actually, based on our progress, there is no question that we can meet this target. So as the next steps, we will continue to closely follow the market trends and the customers' needs to provide more financial services for the SMEs so as to enable the market players to recover their vitalities and to promote a high-quality and sustainable development of inclusive finance. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- Next question is from Winnie Wu of Merrill Lynch, Bank of America. -------------------------------------------------------------------------------- Yi Wu, BofA Securities, Research Division - Chief Strategist, Head of Financial Institutions Research & Deputy Director of China Research [36] -------------------------------------------------------------------------------- My question is regarding wealth management strategy. Over the past 2 to 3 years, this has been a priority for a lot of banks. But the first half of this year, the market conditions are quite challenging and complex. So for CCB Wealth Management, what are the investment strategies for the first half of the year? And what's the plan for the half of next year -- for the second half of the year? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [37] -------------------------------------------------------------------------------- Mr. Ji will take your questions. -------------------------------------------------------------------------------- Zhihong Ji, China Construction Bank Corporation - EVP [38] -------------------------------------------------------------------------------- So this is the -- this year is the first year for the end of the transition period of the new rules for asset management. In the first half of the year, in particular in Q1, the wealth management industry has undergone a very severe stress test. We have accumulated a lot of valuable experience and has demonstrated the resilience. There are several features of the development of CCB Wealth Management. First, our business has become more prudent. The subsidiary has inherited the prudent business style of the commercial bank. And also, we have built our advantage. Compared with other asset management institutions, we have shown our advantage in terms of synergy between the subsidiary and the parent company. And the third, the customer has a good experience. We have a larger customer base who has sophisticated investment philosophy. And thanks to the advantage synergy between the parent company and the subsidiary, we can better cater to the risk appetite of the customers and respond to the customers' needs in a timely manner. So CCB Wealth Management is the first wealth management subsidiary in China. And by the end of the first year of this -- first half of this year, the total AUM reached CNY 2.05 trillion and our operation has been very prudent. And to go further and go farther, we have to focus on three aspects. First, compliance. Compliance constitute our core competitiveness. So from the very beginning, the wealth management subsidiary has been separated from the bank in terms of personnel system and products. And we have put a lot of emphasis on compliance so as to protect the interests of investors. And we have provided a lot of value to the customers while serving the country's needs. And second, we need to adopt a market-based mechanism to go even further. I think this is a consensus. We need to adopt the market-based incentives and employ a really good professionals to build competitive products so as to win market trust. By the end of the first half, the comparative performance has reached 90% as compared to the benchmark, which was leading among the peers. And number three, we need to be more professional. So CCB Wealth Management needs to adopt a market-based approach, and at the same time, to leverage our advantage in having the synergy between the subsidiary and the group. We have to benchmark ourselves to first-class institutions in the market and to build our professional asset management capabilities that can be put into the test of the market and the economic cycles. Also, we need to consolidate our advantages in allocation of debentures, nonstandard and other equity assets, and also improve our investment capabilities in stocks and non-listed equities and also increase investment in public REITs and passive investment as appropriate. In the future, CCB Wealth Management will continue to prioritize development quality and to strike balanced development in quality, scale and efficiency so as to become a very prudent institution and become a very reasonable and trustworthy institution. Our product will continue to offer low volatility and stable yield. We'll continue to focus on fixed income products and to follow a diversified allocation strategy. We'll focus on the Greater Bay Area and the Yangtze River Delta region and to support the regional development of key areas and to make our investment mainly in green finance, ESG, advanced manufacturing, strategic emerging industries, rural revitalization, et cetera. Faced with the complex economic and financial situation, CCB Wealth Management will continue to prioritize risk control. We will make sure that our asset quality, our delivery rate and our benchmark meeting rate and other key indicators will continue to lead the market. Here, I would like to say that apart from CCB Wealth Management, we have more than a dozen wealth management subsidiaries, including CCB Pension, CCB Trust, CCB Fund and CCB Insurance as asset management. And the CCB capabilities in equity investment has been acknowledged by the market. And CCB Wealth Management has won the Golden Bull Award of wealth management companies of banks for 2 consecutive years. And on Monday, we have also won the excellence -- excellent return awards and the three equity products, Golden Bull Award. We continue to target some customers with long-term and sophisticated investment philosophies. And CCB will continue to consolidate our group resources to make sure that asset management will continue to meet people's needs for wealth management and to provide a long-term funding for the real economy and the capital market and to grow with the customers. And we'll continue to improve our competitiveness and advantages in wealth management. -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [39] -------------------------------------------------------------------------------- Well, it's almost time, but there are still a lot of questions unanswered. So we will extend the meeting a little bit. Next question, please. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Next question is from Shen Hu, Credit Suisse. -------------------------------------------------------------------------------- Hu Shen, Crédit Suisse AG, Research Division - China Analyst [41] -------------------------------------------------------------------------------- I'm Shen Hu from Credit Suisse. So my question is about the mega wealth management. This is a priority for all the major banks. And the ample savings has provided good opportunities for the development of this business. So I would like to consult the management on the progress and achievement of the system development of this mega wealth management system. And what's the plan and expectation for this business in the future? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [42] -------------------------------------------------------------------------------- So President Li Yun will answer this question. -------------------------------------------------------------------------------- Yun Li, China Construction Bank Corporation - EVP [43] -------------------------------------------------------------------------------- Thank you for the question. So CCB attaches importance to wealth management. And it has been incorporated into the 14th 5-year plan as a key priority. So in the past 3 years, we have promoted the strategic transition of the mega wealth management from the top-level design and actually our actual practice. So despite the market volatilities, our wealth management business has achieved good results. First, the AUM for retail customers exceeded CNY 16 trillion, an increase of CNY 945.2 million. And second, the fee and commission revenue has exceeded CNY 21 million, up -- CNY 21 billion, up by 7.8 year-on-year, and it contributed to over 30% of the fees -- fee-based services within the bank. And third, the structure of individual customers continue to optimize. In the first half of the year, there are 2.68 million new customers with an AUM of over CNY 50,000, which is a historic high. And we have four features. First, inclusiveness. CCB has a total personal client of 700 million. So we have such a large customer base. So we -- on the one hand, we need to offer good wealth management services for over 190,000 personal banking clients. At the same time, we have to provide services for 700,000 general public clients. So we have constructed a multi-tiered and multi-category customer system. We have accurately identified the risk appetite of the customers so as to offer relevant wealth management products for them, so as to ensure that we provide high-quality financial services to meet people's needs. Second, smart wealth management. CCB enjoy a lot of advantage in fintech and the digital operation. So we have applied digital technology into wealth management and have achieved some good results. On the employee end, we have developed three work benches, namely this consultant -- investment consultant, customer relation managers and client direct sale platform, so as to provide very good toolbox for our employees. And on the client end, we have built an online platform to incentivize the customers. We have leveraged some practices in the Internet industry so that the customers can upgrade to high-value customers. And also recently, we have improved the wealth management capabilities of the mobile banking service. We have an online wealth planning service for the customers and have provided a comprehensive customer journey from KYC to product portfolio. Actually, 85% of the customers are reached through the online channels. And third, professional wealth management. Professional capabilities come from practice and exploration. From 2020 to 2022, we have conducted wealth management season and wealth season and other themed campaigns for 3 consecutive years. In reality, we keep improve the professionalism of wealth management. In 2021 wealth season campaign, 37 Tier 1 branches has realized the all-around growth of existing capital, deposit as well as investment and wealth management. So far, we have been promoting 2022 wealth season campaigns. And it also comes from the team building. CCB has been building three teams featuring the buy-side research, investment advisory as well as client manager. So in terms of the buy-side research team, we want to make it into a brain of the investment decision-making. There's also 400 people teamed -- investment advisers team in the headquarter and Tier 1 branches. We also have more than 30,000 accounts manager who are also being ranking among the top in the nationwide financial wealth management competition. And fourth, we are also trying to build a so-called focused and targeted wealth management. We have been forming the [CAP2] centered as well as coordinated AUM-related operational system. We have been anchoring with the AUM growth. And the whole bank will be focusing on the grand wealth management transformation. In the first half of the year, we have been selling CNY 178 billion funds. Among the peers, we have been taking the lead. While at the same time, we also see that the year-on-year increase of 29%. With the implementation of the grand wealth management, our retail business market competition keep improving and influence also keep expanding. And last week was the Asian Banker 2022 international excellent retail service provider awards. CCB has been awarded as Asia Pacific Best Retail Bank, China Best Retail Bank and China Best Large Retail Bank. These are the three major comprehensive retail awards. And also, actually, this is the very first time for a bank to be awarded all of three awards. And we are also among first to being awarded as the Asia Pacific Best Retail Bank as a state-owned bank. All of this recognition from the professional industry as well as all walks of life, we are quite determined to make a very grand wealth management business even better. First of all, we are going to focus on inclusive, intelligent, focused as well as targeted wealth management. While at the same time, we'll also try to prevent risks and create long-lasting wealth for our clients. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- Next question, [Yi Asacio] from UBS. -------------------------------------------------------------------------------- Unidentified Analyst, [45] -------------------------------------------------------------------------------- I come from UBS. This question is about fee-based income. We see that in the first half of the year, fee-based income slowed down in the entire banking industry. So with fee cut and surrender profit to the real economy, how do you strike the balance between the SOE bank responsibility and value creation? What kind of measures will be adopted by CCB to increase your fee-based income? And what will be the major driver? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [46] -------------------------------------------------------------------------------- President Zhang Jinliang, please take this question. -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [47] -------------------------------------------------------------------------------- Thank you for raising this question. In the first half of the year, our fee-based income and commission income is CNY 68.8 billion, year-on-year decrease of 0.89%. The major reasons are as follows. First of all, we insist on implementing the policies of the central government and the State Council. We will cut fees to surrender profit to the real economy. And second, with the resurgence of COVID-19, consumption remained to be quite sluggish. And you can see that the income related to consumption increased very slowly. And thirdly, the volatility on the capital market, we see the issuance of the public fund decreasing. As a result, our fund sales business income also declined. Some of the products as well as the services are affected by the above-mentioned factors. However, you can see that the fee-based income in CCB still ranks the second among the peers. For some of the priority areas, the performance is pretty stable. First of all, our grand wealth management systematic training has been gradually showing effect. Like President Li Yun mentioned, in the first half of the year, our grand wealth management fee-based income exceeds CNY 21 billion, year-on-year increase of more than 8%, showing our service capabilities in agency sales, custodian as well as asset management. In particular, in terms of the agency insurance as well as asset custodian income, we realized a double-digit growth. And secondly, we have been nurturing our advantages area as well as intelligent business, which shows great vitality. We see that the property capital-related finance business keeps increasing. In the first half of the year, the growth was 11%. Matchmaking acquisition as well as the other capital organization business as well as they had our intelligent related new kind of investment banking business grew pretty good. The total revenue was CNY 7 billion with an increase of 10%. And thirdly, our basic financial business also show a very solid growth. In particular, settlement and clearing related commission income was CNY 20 billion, year-on-year increase of 0.5%. In the first half of the year, we see that this is really a hard win result because of the dynamic in H1. RMB settlement and international settlement as well as the other corporate transaction business, based on our strengths, we have been winning a faster growth of the client number as well as the business transaction. In first half of the year, this increase of 2.5%. In the second half, we'll continue to grasp all the opportunities while creating value for our clients. We would also like to guarantee the compliance based and stable growth of our fee-based income. There are several things I would like to talk about. First of all, we would like to consolidate our strength in traditional businesses. And now we have been adopting the project to strengthen our fundamentals. We would like to better leverage our strengths on a corporate service network, continue to deliver better services to large and medium-sized clients. At the same time, we also see that for the coverage transaction business, fee-based income as well as the house reform, financial-related fee-based income will continue to grow steadily. And secondly, we will continue to improve the contribution of the priority area. And by leveraging on the wealth management season campaign, we're going to further nurture wealth management system capabilities and also continuing to focus on the differentiated needs of the clients. One of the specific strengths of CCB is about the advisory business pricing. So we're going to continue to increase our income, while at the same time, the debt underwriting capabilities of CCB is also very strong. And thirdly, we expect that some of the business will turn better with the recovery of COVID-19 and the recovery of the consumption. You can see that consumption-related middle income, like e-banking and bank card-related business, will gradually recover. We're going to gradually improve the consumption scenarios, optimize the customers' experience so that we will have the compliant-based as well as a steady growth of our fee-based income. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Next question from [Louis Han], Financial Times. -------------------------------------------------------------------------------- Unidentified Analyst, [49] -------------------------------------------------------------------------------- My question is about green finance. When I was at with carbon peak and carbon neutrality, there's an urgent need for green transformation of the society. All kinds of different financial institutions formulated your green finance strategies. And recently, we also see that CCB released their first environmental disclosure report. Could you give us more details about the practices on green finance and your future plans? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [50] -------------------------------------------------------------------------------- Vice President Cui Yong, please take the question. -------------------------------------------------------------------------------- Cui Yong, [51] -------------------------------------------------------------------------------- First of all, thank you for raising this question. In the interest of time, I would like to briefly talk about our good practices as well as the achievements on green finance. First of all, in terms of the operation mechanism, we will continue to optimize our top-level design. Within our group, with the support of the Green Finance Committee, we'll also have the leaders group led by our Chairman, and we also have the zero carbon ['20] action plans. And there's also the 3-year strategy as well as a 3-year action plan. We also initiated medium and long-term road map. We identified that we were going to lead CCB into a global leading sustainable development bank. So this is from the top-level design. And secondly, the green finance product development and innovation will continue to be promoted. We see that CCB has been playing our strength with whole license. We're going to cover green credit, green debt, green fund, green trust, green rental so as to have the whole coverage of the green finance product. And so far, from the commercial bank's perspective, I believe that we have been consecutively launched different kinds of innovative products. And thirdly, in terms of the policymaking, we have been navigating towards the green and low-carbon transition. We clearly initiate ideas that the green credit proportion in total lending. We also actually clarify the policies on the priority area. The indicators of decarbonization has been incorporated into the selection of some clients as well as some projects. And fourth, keep improving our risk control capabilities. On one hand, we're going to curb the blind development of 2 high and 1 low projects while, at the same time, we will also actively serve the purpose of energy security as well as the stability of the supply chain. Through the above-mentioned 4 aspects of endeavor, CCB, I should say that in terms of green finance development, we really see faster growth. There are some data I would like to share with you. By the end of June, our green loans totaled CNY 2.41 trillion, increased by 22%. And green loan and clean energy loans growth is faster than the other types of loans. And in terms of the noncredit green finance, in terms of the green debt issuance, in May, we have issued a total USD 1.15 billion denominated BRI green bonds, and we also issued CNY 10 billion SLB green bonds, which is very popular on the market. And in terms of the green bond underwriting by the end of June, we underwrite 23 green bonds for 17 clients with a total issuance of CNY 25.7 billion. So you can see with all of this data disclosure and with all of the mentioned service system, I should say that we have been keeping exploring on green finance, and there are more best practices. -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [52] -------------------------------------------------------------------------------- We would like to give the floor for the final question on site. -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- We would like to give the floor to [Jiu Dao Yen] from Bank and Insurance News. -------------------------------------------------------------------------------- Unidentified Analyst, [54] -------------------------------------------------------------------------------- My question is about rural revitalization. Management, could you give us an introduction about your strategies as well as your management model? -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [55] -------------------------------------------------------------------------------- Vice President Li Yun, over to you. -------------------------------------------------------------------------------- Yun Li, China Construction Bank Corporation - EVP [56] -------------------------------------------------------------------------------- Okay. Thank you for raising this question. CCB take revitalization as one of our major strategies. We think that this is very important to dig in to the blue ocean in the financial industry. We are actually among the first to establish rural revitalization department among peers. After many years of development, we play our strengths. In fintech, we also highlight digital operation as well as ecosystem building. We also initially built a [1-2-1-1] rural revitalization service system. The first one is one platform that is the Yunongtong rural revitalization comprehensive service platform. So on the offline channel, we provide Yunongtong-inclusive finance outlets. We have established some 490,000 outlets so that the villagers can have access to some cash withdrawal, social security and health care and other financial and nonfinancial services. So now we have already 189 million transactions delivered through these outlets. And on the online channel, we have developed the Yunongtong app. We provide online e-commerce and convenient services through this platform. By the end of June this year, there are over 3 million registered users on the Yunongtong app, which -- and it has extended nearly CNY 12 billion of loans. So both the online and offline channel have constituted this comprehensive Yunongtong service platform. The second two refers to two rural-related credit product packages. So on the online channel, we have provided the quick loan product package, so as to meet the borrowing needs of the farmers. We have leveraged the big data and have catered to the lending or borrowing needs of the farmers. By the end of June, the balance of this quick loan product reached CNY 41 billion, up by 93%. And the off-line loan package mainly cater to the corporate client needs and mainly cover the rural infrastructure projects, public service institutions and some key businesses. And the balance of rural-related loans of the bank reached CNY 2.77 trillion, significantly higher than the average growth of loans across the bank. And the third one refers to a series of professional ecosystems and scenes. We have built a series of professional and vertical scenes around 3 aspects. First, the featured agricultural eco-industrial chain. For example, we have a typical industrial chain service system for the dairy industry, the shrimp industry and the vegetable industry. And we also have the government service in rural areas. We have provided the special high-quality agricultural produce dedicated zone on the online channel, and over 600,000 visits have been reached on this channel. And also, we have established a set of agriculture-related financial digital risk management system. We have a management cockpit and other digital tools to identify and real-time monitoring -- to have real-time monitoring of the suspicious points. We have also deployed 85 monitoring model so as to enhance the auto identification and the early warning of the fraud and credit risk and other risks. In this process, CCB has this comprehensive service platform, we have the quick loans, and we have the (inaudible), the premier products platform. And we have the [Huilong] score room for training, and we have the Huilong friends circle for social services, and we have a Huilong market for circulation. So we have complicated -- we have a very complicated and comprehensive service system which covers the product platform scene customer. And this ecosystem has enabled us to achieve comprehensive development of country business. By the end of June, the balance of deposits at loan -- at town level reached CNY 5.08 trillion, which is CNY 465 billion more than the beginning of the year. And not long ago, the regulators has conducted evaluation for the services provided to the rural areas by the national banks, and the CCB has been rated as excellent. So as the next step, CCB will continue to implement the concept of new finance and better serve rural industry, rural development, rural governance and rural reform so as to contribute CCB capabilities to comprehensive rural revitalization. -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [57] -------------------------------------------------------------------------------- We have a webcast for the investors, and we have issued a notice for the announcement. So through the hotline and the e-mail, we have collected a lot of questions from the investors. We have seen that a lot of investors have left a message for us. I think most of the questions you are interested in have been answered, or have been already been asked by the media. And another question you're all very interested in is about profits and dividends. Many investors have said that given the complex situation this year, the profit growth of banks is closely related to the macroeconomic trends, and the net profit of CCB has been declined compared with the previous year, especially the noninterest revenue, and you would like the management to give some expectations for the trend. And is there any plans to adjust the dividend ratio? So I would like to invite President Jinliang to give you an answer. -------------------------------------------------------------------------------- Jinliang Zhang, China Construction Bank Corporation - President & Vice Chairman of the Board [58] -------------------------------------------------------------------------------- Thank you for the question. In the first half of this year, CCB has maintained a steady growth in its profits. Our net profits have grown by 4.95%, which is consistent with the CAGR over the past 5 years, that is from 2016 to 2021. So the average CAGR over the past 5 years was 5.51%. And our ROA was 1.01% and the ROE was 12.59%, which is relatively good upon the peers. So I think there are several features of our profits. First, in the first half of the year, our net profits or net revenue from the interest income have grown steadily. This constitutes the bulk of our profits. So interest -- net interest revenue reached CNY 317.3 billion, up by 7.18% year-on-year. This is mainly because we have increased investment in -- we have increased credit supply and the debt investment. At the same time, we have adjusted our asset and liability structure for high-yielding assets, including loans and financial investments. They have accounted for a larger share of our total assets. And we face less pressure in terms of paying the personal deposits. Through granular management, the NIM for the first half of this year was 2.09%, which is down by 4 basis points, which is relatively stable. Second, we have cultivated our comprehensive service capabilities. Fee-based income and commission income was relatively stable. I will not elaborate because it has already been covered in previous answers. Third, you're all very interested in the other noninterest income. This has dropped significantly in the first half. There are three reasons to it. First, because of volatilities in the capital market, the equity investment and the bond investment held by the head office and our subsidiaries have dropped in terms of their valuation and their losses. And the second reason is that the business of asset securitization have decreased significantly. And third, because of exchange rate volatilities, our foreign exchange business income have decreased. So these are the three reasons for the reduction in our other noninterest income. And number four, on the profit/loss statement, our operation expenses have increased steadily, and our efficiency of operation has been quite good. Our operation expense was CNY 95 billion, up by 7.78% year-on-year. And our income and cost ratio was 23.4%, which is relatively good compared with the peers. In the first half of the year, we have strictly cut down on unnecessary expenses. For example, market -- some travel expenses, some publicity and reception expenses have been cut down. Number five, we have adopted a prudent principle and have enhanced our risk control and competence. So in the first half of the year, we have set aside CNY 103.3 billion for asset write-offs, which is down by CNY 5.1 billion, up -- down by 4.73%. This is because of our good risk control capabilities. And our provision coverage was 244%, and this is one of the best among the industry. So the banking sector is closely related to the real economy. And the real economy is the ultimate driving force for the sustainable growth of banks. So to support the real economies, to support the future of the bank, despite a lot of uncertainties in the COVID situation and the macro economy, we have every confidence to keep our performance stable. To elaborate on this, I would like to approach it from both the income and the expense -- expenditure. And so from the revenue end, we have a relatively high level of capital adequacy ratio. Tier 1 -- core Tier 1 and Tier 2 CAR have all been quite very good. So we have the capabilities to support asset growth, in particular, the interest-bearing assets. And the growth of the balance of assets can hedge or offset the downward NIM trend to some extent. And second, as I said, total assets of CCB has exceeded CNY 33 trillion. And there is still a large room for further optimizing the asset liability structure, and this can produce even better results. And third, as the COVID situation eases and the consumption will continue to improve. And CCB is actively promoting its wealth management strategy. So fee-based service will continue to generate more revenue for us. This is from the revenue end. And from the cost end, the two biggest costs are, first, the operating expenses. The cost-to-income ratio was relatively good among the industry. And we will continue to increase our marketing and the strategy expenses to improve the effectiveness of our investment. And second, the credit cost is the biggest cost of the banks. We will continue to focus on substantive risk judgment, and we are very strict in asset categorization. And our NPL overdue scissors gap continued to be minus. And our provision coverage is very high. So we have every confidence to keep our profits grow on a steady basis. And about dividends, over the years, cash dividends from CCB has been maintaining at 3% -- 30% or more. And we have provide long-term and sustained return to the investors and shareholders. So this is the basic logic for our business, and we will strike a balance between current yield and future capital accumulation. So now we don't have any plans to adjust the dividend proportions. So in the future, CCB will continue to improve its granular management capabilities to achieve high quality and effective growth so as to deliver more values for the shareholders. -------------------------------------------------------------------------------- Changmiao Hu, China Construction Bank Corporation - Secretary to the Board [59] -------------------------------------------------------------------------------- Thank you, President Zhang Jinliang. Just now, our management had very candid, professional and in-depth discussions with the investors. I hope that this can help you to better understand the strategic initiative, the business operation as well as the future development trend of CCB. If you have other questions, you're interested, you can contact the Board office or contact our PR department at any time. And from different channels, we will respond to your interests. Thank you for your participation. I wish all of you stay safe and stay well. Thank you. That's the end of this interim results announcement. [Statements in English on this transcript were spoken by an interpreter present on the live call.]