China Construction Bank Corporation

Ladies and gentlemen, good afternoon. Welcome to the 2023 Interim Results Announcement Press Conference by CCB. And I thank you for your trust, care and support to our bank. This press conference is held in both Hong Kong and Beijing through a video link. and it is also live-streamed online to shareholders and the public. In Hong Kong, present in this venue are Mr. Tian Guoli, Chairman of CCB, Vice President Mr. Ji Zhihong, Mr. Shengliurong, CFO, Present in Beijing are Mr. Zhang Jingliang, President of the Bank, Vice President Cui Yong, Mr. Li Yun, Vice President, Mr. Wang Bin, Vice President, Mr. Li Ming, member of the CPC Committee of CCB. We also have Mr. Xia Yang and Madam Liu Fang present as Shareholder directors, we also have Mr. Kenneth Chong, Grim Wheeler, Michelle Madeline, Mr. William Cohn, and Mr. Liu Heng, who is a supervisor representative in Hong Kong. Madam Shao Ming and Mr. Tian Bo and Madam Li Lu, representatives of equity shareholders, are joining us from Beijing. We also have colleagues from the head office and other business departments in both Beijing and Hong Kong present. My name is Hu Changmiao. I'm the board secretary. Our interim results were disclosed yesterday. I'm sure you have all read it. The presentations have all been published on our official website. Before we go into questions and answers, Mr. Zhang Qingliang, the president, will give a presentation on the business performance of the first half of 2023. Mr. Zhang, please. Investors, analysts, friends from the media, good afternoon. Welcome to the 2023 interim results announcement by CCB. Thank you for your care, support and trust to our bank. Up next, I will make a presentation on the business performance of the first half and the way forward. In the first half, we deeply implemented the spirit of the 20th CPC Congress and Central Economic Work Conference. We fulfilled our political, economic, and social responsibilities. We see high quality development as a priority with consolidated customer base and key risks being under control. We have seen stable growth in all business lines with our development quality going for the better. Up to the end of June, total assets amounted to 38.3 trillion RMB, liability 35.3 trillion RMB. Net profit 167.3 billion RMB, or 3.12% year-on-year. We have seen higher quality amid stability development. NIEM 1.79%, ROA 0.92%, ROE 11.95%. All the key metrics have been balanced and very robust. putting us at a very good level compared with the industry average. NPL ratio 1.37%, coverage ratio, provision coverage ratio 244.48%, capital adequacy ratio 17.4%. Both asset quality and risk mitigation have been very well since the beginning of this year. We keep the key priorities in state policy in our mind and helping real economy recover so we can play the stabilizer role as a major bank. We have seen very robust and effective bond and loan insurance. In the first half and second half, we have made a good kickstart and stabilized the total volume. In the first half, The newly added loans amounted to 1.94 trillion RMB or 354.1 billion RMB a year. Newly added bonds amounted to 717.5 billion RMB. We have targeted key sectors. 480.5 billion are invested in manufacturing industry with an year-on-year increase of 21.4%. Infrastructure saw new loans of 806.3 billion RMB or up. 14.13%. Technology-related loans have added 265 billion, or 21.57% increase. We have strengthened our support to real estate sector and make sure that the real estate property developers can deliver their houses. The balances of loans for private companies are 5.22 trillion RMB. we have facilitated the coordinated development of different regions. Beijing, Tianjin, Hebei, and Yangtze River Delta and the Greater Bay Area took up over 50% of corporate loans. Central China, Western China, and Northeastern China have seen more loans compared with last year. Since the beginning of this year, we implemented the new development concept and explore the effective ways for Chinese modernization with financial services. We have seen higher scale and more coverage with inclusive finance. The loan balances from inclusive finance is 2.86 trillion, up 21.79%. Both credit customers and loan customers have achieved new highs. We have enhanced our leasing financial services system with a closed loop of investment to exit financial services. We have issued loans for leasing of 300 billion RMB. Our self-developed distributed new system has been improved with the launch of financial big models supporting our business. We have 259 million customers on our e-governance platforms handling 4.4 billion applications. CCB Cloud was launched, enabling small and medium-sized FIs. 370,000 Yuenongtong service points covered most of the villages in China, serving over 550 million customers. Yuenongtong sold over 10 million registered customers. Yuenong Quick Loan and Yuenong Loan have seen fast growth in loan balances. Loan balances for agriculture-related products have been 3.62 trillion RMB. Binary Star has been gaining traction with over 110 customers with a CCB life or an increase of 127% in transactions. It has been... proven that ccb life has been interacting with our mobile banking app green loans have seen a balance of 3.48 trillion rmb an increase of 26.39 percent green bonds amounted to 15 billion RMB with AAA ratings for consecutive three years. Since this year, we have been deepening the three business sectors of corporate, personal, and wealth management. All the business sectors have been operating in a good way with better synergy. Most companies of the key metrics have been proven very brilliant. In the first half, corporate loans have added 960 billion RMB with more contribution from investment banking business. There is also an increased amount of corporate deposits. We have 10.16 million corporate customers. Major customers, major projects, and our service level have been improved. We have seen better performance in personal financial business and our contribution to the industry. Personal deposits and daily added volume have achieved new historical highs with personal AUM exceeding 18 trillion RMB. Personal consumer loans, operating loans have seen greater growth. Long-tail customers have released capacity. Asset management business has seen higher volume and better quality. Bond investment has seen stable growth. Financial market has reached 10 trillion in its asset under management size with 20 trillion RMB under trust services. Precious metals and commodity businesses have gained a good start as independent institutions. This year, we have been always keeping the worst scenario in our mind and strengthening our risk mitigation and management systems. and we are trying our best to make sure that all kinds of risks are put under control across the group so we can enhance this three-dimensional risk governance structure. Bluechip engineering investment transaction business smart platform has been awarded the first prize from PBOC. We have strengthened our forward-looking management of major financial risks With a stable asset quality in key industries like property development, we have been going steadfast in digitalization and internal control with better and more robust grassroots governance systems.

For the second half of this year, CCB will continue to adhere to Xi Jinping's thought on Chinese characteristics for a new era concentrate which will bring our heart and soul together and we will focus on high quality, high standard education for various themes and to continue to push forward for high quality development. We will continue to improve our finance supply capability and to facilitate the efficient improvement of the economy's improvement as well as the reasonable growth of quality. The first is that the total volume needs to be stable. We need to make sure that we can provide solid, stable and sustainable financial support. Second, the projects need to be solid. surrounding the key areas and the strategic business, we will devise very accurate servicing plans and to continue to solidify our project pipelines. And thirdly, we need to make sure that the rhythms are accurate to ensure that our supply and credit extension is very balanced and ensure that all the capital will go into the real economy. And number four, to ensure that the structure remains optimized to continue to enhance our retail lending support and to ensure the stability continuity of the policy support for the corporate lending business and to serve the important areas and key themes. We'll continue to enhance our strategic implementation capability using the new finance to serve people's livelihood, to continue to increase the housing leasing capital supply, and to look at new models for the real estate financing service industry to continue to deepen our digital inclusive finance. further expand inclusive finance credit extension to various different customers to further enhance the supply for the rural areas and ensure more and more financial resources will be provided to the rural areas and continue to speed up our studies and research in the new technology and fundamental technologies continue to enhance our digital operation to push forward for the mobile banking as well as the concentrated development of CCB life cycle as well as the circular operation will continue to push forward for corporate retail and asset management business In terms of the corporate business, we'll continue to focus on key areas and new industries to make sure that the volume as well as pricing and risks are all balancing out. Ensure that we have the capability of managing good cash flow and continue to extend our settlement capital to improve the quality of corporate loans. to improve our overall comprehensive financial service supply capability. In terms of retail business, we'll continue to build our retail banks' advantages and continue to expand the individual clients' scale. to improve our private banking capability in terms of mortgages as well as credit cards and consumption loans and all these areas we will continue to improve the retail credit loans efficiency and contribution to our business in terms of asset management will continue to adhere to the high-quality service as well as regulation and to make sure that we can create new values and help the bank to transfer to a light asset model. We will continue to improve our digital response capability and solidify our accurate management foundation, further deepen technology empowerment. overall improve technology driving forward the business development and to make sure that we can improve all the branch competitiveness as well as operation efficiency, further deepen the binary stars platform to make sure that our business can be comprehensive and inclusive. We continue to enhance our asset management and balance sheet management to make sure that there is a differentiation of our deposit in the loan business as well as accurate pricing management continue to improve our capability and the sustainability of serving long-term real economy continue to make sure that we can grasp the cost management we continue to utilize our advantage in fintech and to push forward the overall planning for the branch work and intensive management and continue to push forward the intensive management of capital, improve the capital usage efficiency, continue to optimize our internal valuation model and to ensure the accuracy of such models and the role it plays. We will continue to make sure that we are going to be continuously working on our risk management and continue to perfect our three defenses mechanism to ensure that all the group's risk preference and the judgment of customers are unified and continue to speed up the corporate risk management platform building and continue to push forward the common sharing system for the information of our corporate clients and individual clients. We continue to speed up the comprehensive financing management mechanism and ensure that onshore, offshore, local and foreign currency, on and off balance sheet, as well as prop trading, all these business, we can cover all the risk management. We will build a very clean and healthy balance sheet and ensuring that the bottom line of a safe operation is safeguarded. We will continue to adhere to the policies implemented by the central government and state council. We will focus on stability of our business, sustainability as well as continuity, continue to realize a high quality development of our business and to use a solid performance to repay you for your support and trust in us. Thank you very much.

Thank you, Mr Zhang. Now we will start taking questions. This press conference is being held both in Beijing and Hong Kong, so we will alternate between two venues for questions to allow more participants to ask questions. We urge you to limit your questions to one each time, and before asking a question, please identify yourself. So we start from the participants in Hong Kong, the lady in the middle. Congratulations to CCB for the very good business performance. I think it's closely related to the so-called new financial campaigns. Can Chairman Tian please share with us the effects of new financial campaigns and its future key priorities? We've been hearing On the other hand, strategy for house leasing. So how does it contribute to your business as a strategy? What are the future plans? The question comes from Phoenix TV. Mr. Chairman, thank you. Thank you for your interest in new financial We've been talking about that in mainland China very often, so it's well known already. But 96% of our investors are in Hong Kong. That's why we'd like to take this opportunity to communicate the idea to overseas investors as well. so you will gain a better understanding of what new financial campaign is and how it contributes to our business in the presentation you've just heard you might note that every strategy was related to technology it wasn't about credit customers it was more of a technology-related engine which was driving the growth of business lines in different aspects. Simply put, that is to use the power of technology to take care of the long-tail customers. In the past, big banks served their big customers in a relatively good way. That was one of our advantages as well. However, back then, we wanted to serve small and medium-sized customers, but that would require much higher technological capabilities and solutions. So we couldn't do that back then. However, we have improved our technology very efficiently in recent years. And with higher computing power, big data, and all other technologies, we have seen a new window of opportunity to improve on our capabilities. And this is an opportunity that we must not miss. Let me give you an example. Rural areas used to be a market that we would cringe at. We were pretty disadvantaged when it comes to agriculture-related loans, but now we have a mobile application. It covers thousands, tens of thousands of service outlets. We can keep in touch with the CPC committees of every NH village. We can set up a terminal there, providing services to local villages. We can also work with local telecommunication companies, so our application can enable the rural users offering financial support and services. The Yu Nong Tong app is a very powerful app. You can save money, apply for loans, and do a lot of things. as a one-stop service, and it will also be able to publish village life related information. We have nearly 400,000 service outlets, which is a rather powerful service network. Let me give you some numbers. Over recent years, we have served over 58 million village customers. This was unimaginable in the past because all our customers used to live in cities, and now we're able to serve 58 million rural customers. Besides that, we set up a digital platform supporting the industry chain development in rural areas, for example, vegetables, potatoes in these sectors. This would enable us to develop credit services to villages so we could help different sectors build their own digital platforms and this digital platforms can offer some very good visibility of what kind of credit support our villages needed. In the very first half of this year, many overseas investors talked with me about agriculture related business. So there is this very high level of interest in the first half. Loan balances for rural areas amounted to 313.8 billion RMB, a 54% increase compared with the beginning of the year. When it comes to internet-based services, sometimes the growth is just exponential. This is just much higher than expected. Agriculture-related loans have grown by 18% year-on-year. Our balance increased from 1.8 trillion in 2019 to 3.6 trillion in 2022. The number almost doubled. Loan balances of agricultural loans have seen its historical highs in both growth rate and scale. And these loans have been helping our villagers in a very efficient way. Actually, villagers are very kind-hearted people, so we have a higher level of assurance when it comes to credit and trust loans. because these villages have been living together in a place for a long time. So they treasure credit and trust through big data. We can tap into agricultural markets. So that's why we've made very fast progress. Besides that, CCB is also trying to make more contribution to society. We help governments build so-called digital governments. we're talking about smart governance. Most of the provinces have seen their e-governance systems being built by CCB. We have a team of 15,000 personnels Large financial institutions like us are very good at digital services because we are dealing with data every day. Let me give you a few other numbers. 14 provinces and 13 municipalities have seen their governance systems being built with the help of CCB. You can see we have a huge potential going forward. Registered customers are 260 million. Total number of applications amounted to 4.4 billion. These are the substantial numbers supporting our business performance. Over 9,000 applications were handled in our outlets in different parts of China. You can go to another province to handle all these paper works, even if you are coming from a different province. Well, imagine that we have a lot of outlets, much more than government offices. This is why we can serve people with a large service network. In the past, when you thought about CCB, you thought about ATM machines withdrawing and saving money. But now, if you go to an outlet, you can apply for different documents of proof and do a lot of things in a place. You can pay your social security, you can pay fees, a lot of things. You can make appointments and handle this government paperwork in 14,000 CCB outlets. We have allowed 17,000 items to be handled through this outlet. and the amount increased to $250 billion. This is not financial services, so that's a huge number. E-governance helped us build a bridge between bank services and customers. This is beneficial to the bank in tapping into long-tail customers In the past, commercial banks used to focus on major corporate customers, but small and medium enterprises taking up 90% of the market were ignored. I believe you've heard many complaints about that, but now we are still in the process of addressing this problem. Let me talk about our solution and how it worked. In traditional model, It was risky and costly to serve SME customers. A bank like us wanted to serve small customers, but it wasn't about our intention. It was because of our limited capability. However, new finance and technology allowed us to make a breakthrough. Inclusive finance and how it serves small and medium enterprises is a global issue. Before this year, we only offered 20 to 30 billion loans to SMEs. The MPL ratio was 7 to 8%. The key to breakthrough is FinTech, We use internet, AI, big data, and blockchain to reduce our reliance on collaterals. We don't need collaterals anymore because they don't have any assets to pledge. Otherwise, there wouldn't be SMEs. So we need to tap into data to less rely on manual work and establish standardized processes both online and offline, building a new model for inclusive finance, becoming the largest FI in inclusive finance. Let me give you another number, which is really shocking. It's shocking to peer banks and even some analysts. Over the recent five years, over 10 million customers have gained access to inclusive finance, small loans, low-interest loans. The banks have controlled their risks under control with a proven efficiency. We have full confidence for that. Inclusive finance has a very, very short duration. We're talking about three to five months or one year at most. We've been working on inclusive finance for over five years, so we have an established model. The loan balance increased from 400 billion in 2021 to 2.86 trillion in 2023, six times. And the loan percentage increased from 3.4 to 13.4%. Newly added loans increased from 7.6 to 24.3%. You can see how much room for growth we're looking at. You can see how much potential we're looking at. NPL ratio decreased by 1.7%. We have maintained good asset quality. With technology, we are bold enough. In the past, big banks often asked for collaterals, but this made it impossible for us to tap into SMEs. This time, we can enhance our support to SMEs and high-tech companies, some tech startups. don't have any asset for a pledge. They can pledge their equity, but they wouldn't want to do that because they thought their invention had a very good potential. That's why. We proposed a new methodology in assessing their assets. That's about patents and equities. And we've been exploring different ways, sometimes risky tech startups can also gain access to fund from our bank. So we can look at their future development potential. Through innovation, we can serve their tangible needs. A lot of the SMEs are tech companies. A lot of them are. They are private companies. Nearly 100% of them are private companies. We use internet thoughts to recreate our distribution channels, building the binary star of our mobile app, so our mobile app will offer a fresh look from inside out. Through internet, we hope that we can reshape the time-honored brand of CCB so it can present a new look. Mobile app is the entrance to all online financial products. In the first half, we recorded 131 million customers, year-on-year increase being 12%. And CCB Life is another app serving people's daily life. We have an agriculture-related financial services network that covers a lot of villages. But here, CCB Life is there to cover people in cities. Since three years since it's launched, its customers exceeded 110 million. And that number puts us comparable to some very... brilliant peer banks, but it took them 10 years to achieve that number of users. It took them 10 years, but for us, only three years. We have been building our presence in over 350,000 online stores. Now we have over 3 million DAUs in the past. National banks, their mobile applications were not good. We prefer talking about total number of users, but we were too shy to talk about daily active users. But now the case is different. We are confident talking about DAUs. Currently, we have around 3 million DAUs. offering internet traffic to online merchandisers increasing their sales. Our applications are popular among merchandisers. People who open an account and use our mobile applications and use our credit services will find it very useful. For example, BYD from Shenzhen and Guangzhou Auto from Guangzhou even started selling their cars on our CCB Life application. If I don't talk about it, maybe these features are unknown. We offer free services to merchandisers to bring them internet traffic. we issued over 4 billion consumption vouchers on behalf of the government in 250 cities. CCB live covers a very large area. So 4 billion RMB worth of consumption vouchers were issued through CCB app. We have more and more new products These examples above will enable us to know how important fintech is in our bank's business. In 2022, we had over 15,000 technology personnels. Our investment in technology was 33.2 billion. Our technology capabilities were used in over 2,500 scenarios. 700 of them are supported by AIs. Big data on average handles over 100 billion entries every day. In the past, in order to serve long-tail customers, We used to ignore the 80% of the market long-tail customers, but now we are able to serve the 20% large companies and we can also serve the 80% long-tail customers. FinTech, the fast development of FinTech has translated our intention to serve the public into reality. Let me give you another example with our development philosophy. We're not happy with increasing our competitiveness by investing in tech companies. We're quite open with that. Our risk control models and other softwares are open to the public. A lot of financial institutions use our systems to build their own ones. So we turned our bank into a tech company. This tech company, 50% of its revenue comes from financial markets. This is to implement the national policy that's to share financial resources because some smaller banks would not be able to develop their own systems, especially in risk control. You also asked about house leasing. When there were turbulences in the property sector, people thought that CCB would be a victim, but contrary to that, we proposed leasing as a major strategy six years ago, and that enabled us to reduce our reliance on developer loans and mortgage loans, and we hope that we can shift into a new real estate development model we used to have a very high percentage in our business for property development but now we've switched to leasing which has played well and looking at what is going on today i'm very happy about how forward-looking we were back then we chose the most difficult task at the first place. That was to enhance leasing market. That was to fulfill our responsibility to society. It was also to enhance our own development, which worked very well. CCB has been working with real estate industry for a long time. And previously people would think of CCB when they wanted to buy a house and now they go to CCB for renting a flat or even pledging their property. That's because we have these platforms above and this is thanks to the coverage of our outlets across the nation. Let me give you some numbers. we established multiple ecosystem scenario-based system and CCB's leasing platform is called CCB Jianrong Jiayuan The online customers have exceeded 47 million customers. Over 16,000 enterprises were on the platform. The applications have been promoted in 158 cities. The application is available in 234 cities. We rely on 270 long term leasing communities. House leasing has brought to CCB over 13 million new customers with a total business volume of 237.5 billion RMB. Corporate leasing loans have exceeded 300 billion RMB, taking up one quarter of corporate loans. This is beneficial to the bank in keeping its credit growth and profitability resiliency Now the national government made it clear to support leasing markets. We were one of the early starters so we could benefit from the trend in a better manner. We believe this is in compliance with the future policy directions. So we will offer supporting services to mega cities and reconstruction project in cities. In the future, there is great potential to tap into. There are always opportunities coming out of risks. CCB was one of the early ones to tap into these opportunities so we can seize them in our hands more steadfastly. we have set up a closed loop from investment to exit. You can see that a new business model is emerging. Leasing funds, as you know, were approved by the State Council. CCB is the owning bank who got the approval. We work with market entities in setting up sub-funds with a total volume of 30 billion, subscribed amount 19.7 billion. We have developed our own public REITs for lazy markets. Now it's the best time to go into M&A's in realistic development projects. Now we can enjoy some discounts when acquiring new projects so we can make sure that the rent will enable us to pay for interests. I'm confident that in the future the market will become vibrant again. We're confident that as long as the rent is higher than interest rate because everyone knows that interest rates is coming down and leasing market will become more vibrant that's why we are very confident about this market by taking this back we can issue rates to benefit the market. So we are both an investor and an asset manager. We are managing these collected funds for the public and society. CCB will adopt a new business model in managing these assets, building our leading position in the market. That's all. Thank you for your interest in CCB.