Industrial and Commercial Bank of China Limited

Good afternoon.

Welcome to the ICBC 2026 Q3 earnings call. I'm Dongjian Jun. Joining us today is Board Secretary Mr. Tianlong Lin and the heads of our head office departments, corporate banking, personal banking, inclusive finance, credit management, finance and sustainability management, tech, financial markets, investment banking, and personal loans. They will be interacting with you online. Our board directors. Dong Yang, Zhong Mantao, Liu Fang, Herbert Walter, Chen Guanqin, Li Weiping, and Li Jinhong also participate online. Let me start with a brief overview of our first three quarters performance. The results were published on our website overall. ICBC delivered a high-quality first three quarters marked by volume growth, better quality, and improved efficiency. Our key indicators showed a queue-on-queue improvement trend. First, profitability, resilience, and drivers. In the first three quarters, group operating income grew by 9.2 YOY. Net profit grew by 6% YOY. Neem was 1.29%, up one deep from last year. driving a 9.6% YOY increase in net interest income. Non-interest income grew 7.7% YOY. Second, the volume and structure of assets and liabilities. Total assets reached over 57 trillion, maintaining our position as the largest bank globally. Onshore R&D loans stood at over 30 trillion, up 1.6%. and many more. the risk bottom line and asset quality. The MPR ratio was 1.29% down two geeks from last year. Her vision remained ample and prudent. Asset quality stayed stable and our risk absorption capacity strengthened further. So the disclosed. show the quarter three data and also the data of first three quarters. That's the brief of our performance. Now, I'll hand over the floor to you. We'll move to the Q&A session. Please identify yourself before raising questions. Thank you. The first question. Thank you for giving me the chance to raise the first question. I'm Mei Yan from UBS Securities. My question concerns net interest margin with a rising share of direct financing and changing credit demand structure against the backdrop of shifting social financing composition. How do you see NIM trending this year and next? What measures will you take to stabilize and protect net interest income? And also congratulate you as the largest bank on the robust results you have achieved. Thank you. I'll invite the assets and liability management department to answer this question. In the first three quarters, total social finance increased by 27.5 trillion. New bonds and stock financing accounted for 49.5%, about 7 percentage points higher than the share of new loans. This shift from indirect to direct financing is also reflected on our balance sheet. Our bonds investment average balance grew 18.8% from the beginning of this year, while average loan balance grew only 6.2% this structural change. is becoming a new variable affecting NIMS. Thanks to lower liability costs, ICBC margin has shown size of stabilization. The first three quarters NIMS was 1.29% up one bit from last year and flat with the interim. For this and next year, Our view is if policy rates remain stable, our margin is expected to stable and find a bottom this year. With slightly narrowing pressure next year, there are three key factors. First, liability cost improvement has reported margin stabilization, which, however, was gradually fading. since this year, ICBC has fully implemented the interest rate self-discipline initiative, applying refined management to maturing deposits. Reliability interest expense ratio fell 20 bps from the beginning of the year, providing strong support for stable margin this year. But we're also aware that as the volume of high-rate time deposits maturing gradually declines, the temporary benefits from cost improvements is already and many more. In the first quarter, our loan repricing was basically completed and new loans rates have stabilized, driving asset yields to decline 19 bps. and YOY using downward pressure on NIM this year. But looking ahead, the shift in social financing structure is a long-term trend. The share of bonds investments with longer repricing cycles will continue to rise, and assets yields will face continued downward pressure next year. Third, Forex and overseas operations present both opportunities and challenges. Now, major developments are in monetary tightening cycle transmitting spillover effects to global markets through interest rates, exchange rates, and cross-border capital flows. The stability of our forex and the overseas operation is under test. ICBC liability side interest rate sensitivity is higher than the ASDA side. This structural feature will increase NIMH management pressure in the future. We will work to reduce the volatility of net interest income growth and fully leverage its role as a foundation for stabilizing revenue and profit. First, we'll continue to strengthen liability cost management with a diversified liability layout, strictly implementing the deposit self-sufficiency initiative, managing high-rate deposit rollover and expanding low-cost funding through custody, settle, and other businesses to drive down interest expense. Second, we will well manage asset quality. We will optimize loan allocation, increase resource deployment in key areas, monitor risks in retail segments such as credit cards and personal business loans, and use intelligent risk control to safeguard asset quality and minimize yield losses. Third, we will firmly guard the interest rate risk bottom line. We will strengthen portfolio management of assets and liability scales rates. and Zhaixing Wang. Thank you. Now, the second question.

First, I want to thank the bank for giving me this opportunity. I'm Mr. Ni from Guangfa Securities. I want to congratulate that you have achieved a very good Q3 results. and my question is, under the overarching guidance of decelerating growth for enhancing quality and lending, will ICBC's bond investment growth continue to outpace credit growth going forward? How much pressure does the EVE change indicator face and how should we expect the trajectory of bond investment yields? I'll ask to invite the S&I Liability Department and Global Market Department to answer the question. First, I want to thank you for paying very close attention to our bond investment. Since 2024, our bank's bond investment has grown in a rapid way, which is a result of multiple factors. First, this is the objective manifestation of evolving structure of aggregated social financing and drive towards a higher quality and greater efficiency in lending. On the credit side, the focus has been shifted from share volume and speed to structure and quality. The resources have been channeled into sectors as SciTech innovation, green development, and advanced manufacturing. Demand has been resided in traditional high credit intensity sectors and loan growth has naturally decelerated. The share of direct financing in the economic continues to rise and balance has become an important channel for credit creation. Second, this is also a close tie to the fiscal policy. In recent years, the scale of government bond issuance has increased, and the associated demand for bond allocation has risen, which is another important reason for the acceleration in bond investment growth. Looking ahead, whether bond investment growth can sustainably outpace credit growth depends on multiple factors, three factors. First, the macro policy tax. Bond allocation inherently carries a strong policy dimension, and we must take a holistic view in incorporating fiscal budget arrangements to scale government bond insurance and other relevant factors. Second, effective credit demand. If low-economic investment and financing demand recovers and the supply of high-quality credit projects increases, The pace of credit deployment will rise accordingly. Third, the trajectory of market interest rates. Our banks will dynamically adjust its bond allocation strategy in response to changes in market rates. This is the right moment to collaborate the pace of allocation. We will adhere to a management approach of coordinating positioning between credit and bonds, continuously optimizing the incremental structure of credit and further leverage in lending as a primary channel for serving the real economy. Through dynamic optimization of the positioning of both asset classes, we will maintain steady growth in total investment and financing, achieving organic alignment between serving the real economy and sound development. Regarding the EVA changes that you asked about, at the end of the third quarter, our bank's maximum EVA change stood at 14.15%. down by 0.26 percentage points from the beginning of the year and up by 0.06 percentage points from mid-year, operating smoothly within the regulatory sharehold. Overall, the measurement pressure is controllable. The first reason is the adjustment of the regulatory parameters has delivered a substantive enhancement of the safety margin. Starting in 2026, the NFRA officially adopted the latest standardized interest rate shock magnitude These adjustments reduce our bank's maximum EVA change ratio by approximately 1.1% points. Second, the effectiveness of our bank's asset liability mismatch management is evident, with net duration gap remaining broadly impossible. while maintaining our deployment of long-duration government bonds and local government bonds, we have taken measures such as moderacy, increasing allocation to duration bonds, and extending liability duration, thereby reasonably continuing the expansion of the net asset liability duration. Third, the subsequent capital injection will provide further room for indicator optimization. The denominator in the calculator of maximum EVA change ratio is tier one net capital. have their injection plans progressively implemented. Our bank's maximum is the age ratio expected to decline by 0.35 percentage points. Thank you for your question and your support to FDC's work. First, regarding the bond investment, we have always adhered to serving national strategy and the need of the real economy, fully leveraging the important role of large state-owned banks in the transmission of macro policies. First, we serve the national strategies. ICBC has approximately stepped up its investment in government bonds, local government bonds, and other instruments. And to address the funding needs of the key sectors, at the same time, centered on priorities areas and five priorities of finance, we have continuously optimized the structure of our bond investment, supporting the new quality productive forces and transformation and upgrading of the economy. Supporting the national strategy roles and real economy to promote the dynamic optimization of the bank's overall asset structure, taking into comprehensive consideration factors such as yield levels, capital consumption, and taxation, bonus assets over relatively superior investment value. and the bank's coordinated arrangements, the facilitation of the rational positioning and coordinated linkage between loans and bonds as two asset classes. At the end of Q3 2026, the RMB bond investment balance stood at 16.7 trillion yuan. The next step will take into account the implementation of macro policy, bonds of supply and banks overall asset liability arrangements. and second, regarding the interest rate risk, we have consistently embedded risk prevention and control throughout the entire bond investment process. Continuously strengthening the portfolio's resilience against the market's vitality, EVE changes in bond investment is a portfolio duration management. The bond market is in a low-rate, high-relativity environment that places greater emphasis on coordinating investment returns and interest rate risk from a cross-cyclical perspective. First, strengthening the assessment of macroeconomic conditions and market trends. Second, continuously optimizing the maturity in instrument type, account, and the currency structure of the bond portfolio, enhancing portfolio diversification and stability. and others. Third, reinforcing market monitoring, stress testing and risk early warning. In addition, this year's issuance of 300 billion yuan in special capital replenishment, stock and bonds to supply core tier one capital will expand room for maneuver in bond investment under the EV change calculation framework. Overall, we uphold the equal emphasize on development and security. While maintaining a reasonable level of returns, we continue to enhance the proactive and forward-looking nature of bond investment risk management. Third, regarding the trajectory of interest rates going forward, we assess that the bond market in Q4 will remain in an environment where bullish and bearish factors are intertwined. With the factors centering on economic performance, the effectiveness of incremental policies, and the pace of the government bond supply. First, the domestic economy is experiencing marginal recovery. The price level expected to go down moderately, coupled with the continued deployment of more proactive fiscal policy. Second, the monetary policy is in a supportive way. The guidance of fiscal monetary coordination and the shift of the policy rate benchmark to overnight repo rate, market liquidity is likely to remain reasonably ample. Third, on the bound supply front, the year's issuance pace has been more balanced. We project a Q4 governance bound issuance of 3.8 trillion yuan and the local government-bound issuance 2 trillion yuan. The issuance of ultra-long special government bonds for this year will be completed in the late October and the overall supply demand structure is expected to see marginal improvement in Q4. And fourth, the external environment is amplifying market volatility take it together Q4 bound market bullish and bearish factors are intertwined with limited room for interest rates to move sharply in either direction. We expect the market to broadly maintain a range bound pattern with particular attention warranted to the marginal impact of the pace of fiscal deployment. Thank you.