Agricultural Bank of China Limited

Ladies and gentlemen, good afternoon. Welcome to Agriculture Bank of China 2024 Interim Results Announcement. I'm very honored to meet with both offline and online analysts as well as media friends from both and home and abroad. So here I would like to thank you for your active participation in our announcement and thank you too for your long-term interest in Agriculture Bank's development. So we do have the other participants, the Executive Director, Vice President of our bank, Mr. Zhang Xuguang, Executive Director, Vice President Lin Li, Vice President Xu Han, Vice President Liu Hong, and Board Secretary Liu Qing, as well as the other directors online. Next, I would like to firstly introduce the performance results of Agriculture Bank of China in the first half of the year. We actually strongly implement the deployment of the central government. We also actually do a very good performance in our business performance, and we also strike very solid steps in terms of high quality development. There are four major manifestations. First, the major quality indicators keep positive growth. We should see that the Chinese economy has been continuously recovering and also created a very good business environment for Agriculture Bank of China. So we have been very entrepreneurial. In the first half of the year, we have the net profit 136.5 billion, 2% increase year-on-year and operating income 3,075 billion, increased by 4% and interest income 290 billion, increased by 1%, so you can see these are all positive growth. And NIM, 1.45% and one bips up versus the first quarter. So you can see NIM has been stabilized and the second deposit as well as loans increased positively. So you can see that loan totaled 24.4 trillion, an incremental of 1.77 trillion. and increased by 7.8% and will also be very strong in terms of the client management. So you can see that the total deposit from the client and 34.1 trillion incremental of 1.5 trillion and domestic corporate balance is about 11.9 trillion and personal deposit as well as the individual deposit are all ranking the first among the peers. And the deposit interest bearing is 1.63 percent, dropped by 0.08 percentage points. And sadly, the asset quality remains stable. NPR ratio 1.32 percent, dropped by 0.01 percent versus the end of last year. And you can see that the overdue loans also dropped by 0.01 percent. And the loan provisioning rate is 303.94%. So you can see that the total provision is more than trillion. So you can see the asset quality is pretty much sound with adequate provisioning and a very safe cushion. And fourth, we have been further consolidating our client base. Our individual clients is about 870 million ranking top among the peers. The newly added credit card users is about 3.96 million, and agriculture wealth management, 11.9 million, and corporate clients, 11.5 million, an incremental of 674,000. Clients are the cornerstone for our survival and development. We have to further consolidate the base of our clients for the future growth. In H1, The reason for such a sound performance should be attributable to the wise guidance as well as determination of the central government. So good microeconomic conditions as well as the support from the shareholders as well as the clients, it should also be attributable to the positive efforts from all the employees of our bank. And next, I would like to talk about the three major tasks. First, we serve the three agriculture as well as the integration of urban and rural development. First, we coordinate the new type of rural revitalization and urbanization. We continuously to increase the loans provided to the county level institutions. So you can see that the county level loans accounts for 40.1% incremental of 87 million, increased by 9.4%. 1.6% higher than the average. And second, we focus on a major area and depend on financial services. We focus on grain as well as the major agriculture product supply. And the relevant lows is about 99.7 billion, incremental of 9.4 million. So you can see that we have been more capable in terms of safeguarding supply. So you can see that the rural related and the construction related loan balance is 2.2 trillion increased by 13.6%. And 830 poverty alleviation counties also get more than 11.9 million loans. And 180 focused or the mainly targeted poverty alleviation counties also has incremental. of 1.3 million loans. This has been further consolidating the results of the poverty innovation and the surge. With new models, we have been very much dedicated to benefiting the agriculture. Our agriculture related loans has been witnessing the increase of 94.5%. We also have the agriculture land loans, cold chain loans, as well as the other innovative loan types to satisfy diversified needs of our agriculture clients. In the poverty-stricken areas, we also have the poverty alleviation loans and incremental of $33.2 billion to empower the agriculture farmhills. And second, the five major chapters, as well as the other financial services, do witness fruitful results. First, we focus on the development of the new quality protective forces, and we also Constructed a new mechanism for the high technology manufacturing, an incremental of 52.7%. And the strategically important emerging area was the incremental of 53 billion. And the second, we also focus on the low carbon and green transition of our society. We deploy the green as well as the green credit extension. Green credit balance is more than 4.8 trillion. Well, at the same time, through green M&A loans, green bonds, as well as the other products, we also offered more than $200 billion, an increase of 30%. The ESG-related wealth management products totaled $19, with a total amount of $54.1 billion. And third, we continuously optimized inclusive finance services. Inclusive finance has been witnessing higher quality So PBOC calculated the inclusive loan is actually 450 million. And in terms of the amount as well as the growth, we're also ranking number one. And fourth, we actively developed a pension support financial development. We developed multi-level, multi-peeler pension scheme development to support the electronic as well as the physical social security card and medical card as a total clients is actually the 242 and 343 million. And the individual pension accounts as well as the contribution are also ranking among the top in this industry. We also optimized the elderly support financial services. We have the elderly adaptive renovation for our financial outlets so as to deliver a more comfortable and convenient environment. We also get more support to our clients, including the credit as well as loans deposit and elderly support products. And fifth, digital financial services has witnessed more innovations. Reform is the first driver. So we deeply integrated into the digital China development to empower our businesses. So the personal mobile MAU is actually 223 million. So the increase of 8.59% also taking the lead in this industry. For the online credit, Nongying Yidai balance is more than 500 million, increase of 20.3%. We also serve the high quality development. And the third, we're also coordinated the safe development first we have been intensifying to mitigate the credit risk risk mitigation is our top priority we have been actively promote the risks in different areas to support the real estate sector financing support so as to safeguard the delivery of the houses we precisely satisfy the reasonable needs of the real estate projects we implemented a package of the debt mitigation and resolution solutions so as to properly handle the resolution of the NPL and actually the asset quality has been very stable and the second we've been forward looking in market risk control we timely adjust the duration as well as the structure of the bond so as to have a better management of the exposure we also greatly strengthen the management of all kinds of platforms to have the see-through management of all kinds of businesses to have a very good understanding and assessment about our derivative strategies and instead continuously consolidate the technology safety mechanism to have the emergency release as well as the other mitigation drill to have tested more than 50 systems to actually ensure the continuous business deployment. So these are the business performance as well as our focuses in the first half of the year. And next, I would like to brief you about our arrangement in the second half. We think that the Chinese economic development is quite resilient from middle to long term. Economic transition and industrial upgrading has been properly handled. New momentum has been cultivated, in particular with the third plenum, all kinds of measures to Japan reform as well as the macro regulation measures. So market vitality as well as potential will be continuously stimulated. But at the same time, our bank will continue to implement the sub-plenum of the 20th Party Congress theory to continue to precisely serve the three agricultures as well as their real economies so as to promote high quality development of the Agriculture Bank of China. And in second half of the year, jobs first we will continue to actually maintain the stability so with the positive growth we will continue to take the potential to further expand the sources of income to consolidate our business and the second we will continue to serve the agriculture rural as well as the farmers related business as well as the county clients According to the set plenum of the 20th Party Progress, we have seen more opportunities for the rural development. We will grasp these opportunities to focus on the priorities of the agriculture as well as rural development, innovate our business so that we will better serve the street agriculture as well as rural revitalization. we will continue to strengthen the services delivered to the real economy. And in recent years, we will continue to promote the optimization of the agriculture-related economy. So we will continue to deepen the financial services delivered to the five major chapters, stabilize the growth, and to make up for the weaknesses, continuously to improve the precision of serving the real economy. And we will also be forward looking to mitigate all kinds of risks. We will actually have the overall safety approach. So we will have the early warning as well as the disposal so that we can ensure the overall stability of the quality. And next, we come to the QA session. We'd like to invite Liu Ting, the World Secretary, to moderate this session. Thank you, President Wang. Now we come to the QA session. Each of the speakers, please raise one question only. Please also identify yourself before you raise the question. First, on-site speaker, the lady in the front row. Dear management, thank you for giving me this chance for raising a question. I come from Shanghai Securities. So we've seen that the revenue and the margin are quite good in the first half of the year. So what are the drivers for such a good performance? In the second half of the year, do you think that you will continue to maintain such a good performance? So what will be the drivers for the future growth? Okay, let me take this question. I would like to thank the journalist from Shanghai Securities Daily and then just a brief view about our performance in the first half of the year.

In the first half of the year, we keep our role as the mainstay for serving the real economy. While promoting economic growth, we have, in a down-to-earth manner, propelled our own high-quality development, striking a balance between speed and quality, efficiency and quality. Overall performance is turning for the better. According to the data shared with you, operation net profit, operation income, and net interest income have realized year-on-year positive growth and NIM has also been stabilized, MPL ratio stabilized. That means in the context of the current economy, this is no easy job. This has laid a solid foundation for the whole year performance. It also validated the effectiveness of the initiatives and strategies for the first half of the year. That means the key priorities we have set and the methodology we adopted are effective. So we are confident in the second half and also the whole year performance result. In the opening remarks we have mentioned for the second half, the target is to keep the whole year operational quality and efficiency. keep steady growth and stability and break and build we will use for keeping to realize whole year stability and improvement for the whole year first stable growth of the credit size and optimization of the structure in the first half of with strength and support for the real economy no one's have realized the stable growth in terms of the structure we have been optimizing it In key areas and weaknesses, we have strengthened our efforts. For example, county loans, rural revitalization, key county loans, manufacturing industry, green credit, inclusive finance, and the sci-tech finance. We have kept a very good, very high growth rate. So the structure has been keeping optimizing. and overall scale is having stable growth going forward we'll continue to focus on our key business areas and adapt to the policy directions of macroeconomic control and make sure the five major initiatives will be used to serve new quality productive forces with a stable supply of financing second we'll go all out to ensure the overall stability of meme in the first half meme has stabilized and even turned for the better in the latter half of the year, we will strike a balance between quality and pricing so that the pricing is more refined. and will also, in a down-to-earth manner, improve our service capability and also the cementing of the customer base and control the liabilities to ensure the stability of NIM. Third, we'll keep net interest income diversified growth. In the first half, fee income decline margin is 7.9% compared with quarter one that is narrowed. In the second half, We will keep expansion of domestic bonds, promote consumption, and the credit market high quality. These opportunities will be used for high quality development of credit. We'll also follow closely the market developments and adapt flexibly to financial markets fluctuations to optimize our investment portfolios and transaction strategies to tap potentials and encourage the growth of other net interest income. Lastly, we hope to keep stability of asset quality. That is a very essential point. In the first half, MPL ratio over due rate compared with the end of last year declined by 0.01 percentage points and the provision coverage rate was kept at very high level. So we have adequate capability to compensate for the risks. In the second half, we'll comprehensively increase risk control, especially key areas and county level risk mitigation. And we also strengthen the demand management of overdue loans. And we'll also strengthen the efforts to collect back the interest and principal for non-performing assets. Through such measures, For the stability of the overall performance of the second half, we are quite confident. That's all for my answer to this question. Thank you, President Wang, for your answer. Now we would like to invite a question from the online meeting room. We will use the application time as a sequence. First question, please. Thank you for the opportunities to raise the question, Xi-Zhang from Morgan Stanley about NIM. We can see in the first half, it has been rallying and has been recovering. So from the asset side and from the liability side, why NIM is getting for the better. Going forward for July, the deposit interest rate pricing is lowered, but LPR is also lowered, of course. So can you give us your trending, projecting about the meme trend? Thank you, dear analyst, for the question. Let me respond to this question. In this first half of this year, Under the guidance of macroeconomic policies, policy interest LPR has been lowered and overall trend of interest rate is declining and the banking sector is conceding profits to the real economy continuously as the analyst mentioned. NIM is overall narrowed but compared with quarter one, it is stabilizing and turning for the better. And for the new margin rallying from the asset and liability sides, mainly affected by the falling factors from the asset side, mainly it is due to the lowering of LPR and also the mortgaging loan interest rate adjustment of the real estate sector. And we also have exceeded profits to the real economy. Therefore, the real estate Mortgage loans interest rate is lowered. This is consistent with other banks and the decline margin has also turned for the better. In order to adapt to the current situation, we have been following closely the economic transformation, for example, centering around Sanlong and the five major financial initiatives to tap the potentials and needs of real economy. For the overall credit expansion and the structure optimization has also contributed positively to NIM. It has also offset the overall impact of lowered LPR from the liability side we have been conveying the messages of the market requirement of interest rate adjustment. Last year, comparable to our peers, for three times, we lowered the interest rate. This year, many loans entered the state of repricing, especially for medium and long-term loans. Therefore, for newly generated loan interest rate, it has been remarkably low. reduced. Therefore, for deposit cost, pressure on us is lowered, and the deposit interest rate has been declined a little bit compared with the end of last year. For 2023, RMB newly generated time deposits, the interest rate is 2.16%, and for the first half of this year, it has dropped to 1.85%, a 31 BP decline. And about the deposit interest rate, it has been lowered to 1.7%. Compared with last year, it was lowered by 8 BPs. So overall impact from both loans and deposits, you can see. And from the liability side, the cost is declined and the pressure on us is lowered. Therefore, NIM is turning for the better. The analyst asked the question about the July LPR or policy interest rate lowering and ABC interest rate lowering. The overall impact of these two factors can be offset and that is beneficial for us to stabilize the NIM. going forward especially in the second half of this year in terms of the NIMS trend according to our current analysis overall NIMS will be kept at a stable level on the one hand we are enhancing financial support for the real economy so that the financing cost can be reduced while stabilizing so NIM will have the pressure of further narrowing coupled with the bond market interest rate at a low level so NIM will still be under pressure we will work hard to realize a reasonable growth of credit size and also the constant improvement of quality and structure to offset the pressure from the liability side from the policy perspective june july july deposit interest rate lowering is a reflection of the results of the market-based deposit interest rate adjustment especially for r b market the pressure will be lowered and for the us fed interest card is in the final stage. It is estimated that there will be interest cards by the US Fed in September. So from that perspective for foreign currency interest, the liabilities interest rate increase will be ended. So for the current pressure from foreign currency will also be alleviated and we are constantly improving and strengthening our management to strengthen the control of liabilities cost to ensure high quality of liabilities. From that perspective, the deposit interest rate has space for further improvement taken as a whole. In light of all those factors, NIM in the second half will be kept at a stable level. We will also strive to realize further margin improvement of NIM. That's all for my response to your question. Thank you, President Wang, for your response and to Depp's explanation about the new trend. Next question. Gentleman in the middle, please. Senior Management from Pungpai News. In the first half, ABC Loans have got a very stable level. What will be the future top priority areas for loans to serve the real economy? I'd like to ask BP to answer the question. Thank you, dear journalist, for your question. For ABC, we have been upholding the principle of serving the real economy through five major initiatives, financial initiatives to provide credit support for weak areas. There are following features. First of all, the growth is balanced and evenly distributed. Current loan balance is 24.4 trillion yuan, an increase of 1.8 trillion, a growth rate of 7.8%. For a real economy, loans increased by 2.1 trillion, growth rate is 10.2%. taken as a whole, credit expansion has kept a reasonable pace and the overall size is increasing. Second feature, credit structure is fit for purpose for transformation. ABC is sticking to our main businesses, county level loans increased by 9.4% higher than the average growth rate by 1.6 percentage points. We also focus on key areas of green finance, credit balance, increased by 8 trillion yuan, growth rate higher than average. The manufacturing industry increased over 270 billion yuan, a growth rate of 8-9%, increasing finance loans, a growth of 600 billion yuan, a growth rate of 24.4%. And for personal loans, we are leading an increase of more than 500 billion yuan, a growth rate of 7.3%, both the increment and the growth rate are at the leading position compared with our peers. But personal business loans increased by more than 270 billion yuan, For personal consumer finance loan, including credit cards, it increased about 130 billion yuan. In the second half of the year, with the Chinese economy further rallying, the real economy's credit demand will also be rallying. And it is estimated the total credit loans of ABC will keep a reasonable growth. In the second half, we'll keep working on following priority areas. First of all, based on the central conference on financial work, according to the requirements for high quality development with optimized allocation of financial resources. We'll get more credit resources to be put into five major chapters, and key areas set by the country to further optimize the credit structure. First of all, we'll continue to focus on main businesses, including poverty alleviation, in the industry development in rural areas, totally seven areas to increase credit support for rural revitalization. Second, we'll strengthen inclusive finance services, which is still a blue sea with great potentials and great demand. ABC is committed to building ourselves into a bank with the widest coverage and the biggest support for inclusive finance loans. Third, we'll serve green transformation with positive support for low carbon transformation and the green in upgradation of ecosystems.

And fourth, to make tech finance even stronger to follow the technological guidance from our central government and focus on the key client base to improve the credit extension support and also adapt it to all kinds of FinTech services system related to the latest development to stably expand the scope of the pilot projects as well as to further accelerate iteration so as to provide a whole life cycle services to the tech companies, and fifth, to deliver the more comprehensive individual financial services. Recently, you can see continuous growth of the farm holds are great support to our business development. In the second half of the year, we will focus on the production, consumption, and operation of the farmholds so as to increase the extension of the credit to the farmholds. Generally speaking, we will coordinate the balanced aggregate as well as a good mixed structure so as to enhance the quality of the credit extension. Thank you, President Zhang. Next one, please. This gentleman. Hi everyone, I'm the analyst from Guo Xing Securities. In May, you can see that Western policy of the real estate sector, the government has been promoted commercial banks participated in the reasonable finance of the real estate developers. So what about the wet list of the Agriculture Bank of China and what are the related projects and the corporate real estate loans, whether the NPL already hit the bottom, what will be the priorities in the future? And how are you going to consolidate new model to serve the real estate sector? Okay, we would like to give the floor to Vice President Liu Hong. Thank you for raising this question. Since the first half of this year, the government has been positively guided real estate sector policy optimization. We downgrade the loan interest rate and to reduce the down payment ratio and lifted the extensions as well as restrictions so as to provide a loose environment. So you can see there are some positive changes on the market. In some of the geography, the commercial house projects sold are very positive and on the upward trend, the confidence of the market is slowly recovering. Our bank has been resolutely implement the decisions as well as the policy so as to play our role as a counter cyclical. So we follow the market oriented as well as the legal based rules to satisfy all the developers reasonable financing needs to facilitate the stability and optimization of the real estate sector. In the first half of 2024, So our real estate balance is $892.3 billion, an incremental of $131 billion, mainly to the urban renovation as well as the social housing projects, et cetera, as well as the commercial projects with better promises and a stable cash flow. So the client base also covers SOEs, mixed ownership, as well as the private companies. So you can see that with the urban real estate financing mechanism established in the first half of the year, you can see the three batches of the white list. ABC strictly follow the regulatory requirements and also, you know, capture the projects and implement the closed and management of all the funds. So actually there are SOEs, mixed ownership, as well as the private developers are all in the name list. So actually, We also positively push forward the smooth progress of the projects. By the end of June, you can see that the real estate NPR ratio has remained flat, much lower than the peak time of the previous year. The newly added NPR is also decreasing. Our bank will continue to strengthen risk control of the property sector to have full provisioning and to actually ensure the stability as well as the quality of our assets so we will continue to construct a new model of real estate development to construct the good houses satisfied with the needs of the people so as to satisfy people's needs for living better and live a wealthy life in the future we will continue to implement the rules of the third platinum about the new decisions of the real estate to satisfy the reasonable financing needs of the developers so as to push for the sound and the positive development of the real estate sector. First, we will continue to ensure the delivery of the houses. We will strengthen the connection with the government to inevitably use different approach to finance the projects and to dispose the risks. And the second, we will continue to enhance the quality of the coordination mechanism, continue with the white list mechanism, so as to pay attention to both the quantity as well as the quality. And instead, we will continue to provide finance to the three major projects, in particular for actually the civil use list to actually have the approval procedures accelerated for the social housing projects. Okay, that's all from my side. Thank you, President Liu. Next question, please. Thank you, management, from Financial Times. My question is about rural revitalization. So in promoting rural revitalization, what will be the major measures adopted by the management? What will be the future outlook? And in the future, how are you going to implement the spirit of the subplenum of the 20th Party Congress as to do a good job in rural revitalization? We would like to give the floor to President Lin Li. Okay, thank you for this question. In Agriculture Bank of China, we regularly emphasize one philosophy, which is also our working language. We always see that, you know, we should be agriculture prioritized, which means we should serve agriculture rural areas as well as the farmers. These are our main businesses. We delicately implement the spirit of the central government and state council, promoting comprehensive rural revitalization, and highlight the political center as well as the people-centered nature. So strengthen serving the clients, product elimination, and tech empowerment, et cetera, so as to build us into a leading bank in terms of revitalization in the first half of the year the three agriculture balance is about 9.6 trillion an increase of about 800 billion so you can see the growth is 1.6 percentage higher than the average speed so we have five major actions been taken first implemented the grain finance so in terms of the farmlands as well as the seeds we actually formulated the specific and dedicated policies for farmlands and seas. We had the farmlands loans and agriculture and the grain warehouse loans, as well as the other whole product or chain product. So you can see that the supply guarantee loan is more than $900 billion, an increase of $144 billion. 10 percentage points higher than the average growth and a second we implemented and further expanded poverty elevation achievements so there is a dedicated campaign to do three things first we continue to consolidate achievements of the poverty elevation and a second we continue to promote revitalization is a area and for those low-income people we will also regularize their support in 160 key supporting areas we support in their featured products as well as the poverty elevation and we coordinate eastern and western regions in terms of the support delivery in 160 key counties the total loan balance is at more than 400 billion an increase of about 300 million. So you can see that this is also a very big increase. So certainly, we also support the wealthy development project or campaign. We support more on the tourism, e-commerce, as well as the coaching. By the end of June, you can see that the total loan balance is 2.26 trillion and 15 percentage points higher than a global average growth and falls with support of farmers to become more wealthy. We greatly support the farm households loans development so as to develop the credit worthy households development. So you can see that The continued development has been further related to the farming households last year, with the loan balance exceeding trillion level. It also kept a faster growth. In the first half of the year, you can see that agriculture-related loans is about $1.6 trillion, an increase of $300 billion. The growth is about 29.5%. The farming households is actually $6.95 million. and will cumulatively serve more than 17 million farming households. In particular, in the second half of the year, with the guidance of the Mohawk, we also have the dedicated products of Lang Nong Yi Dai. So the balance is about 94.3 billion. It will be mainly targeted for the poverty area and major supported area, as well as the revolutionary area. And the balance is 72.6 billion. And six will also implemented. the loans to support the livelihood development of different counties and countryside for example the infrastructure and public utilities as well as the other environmental improving projects by the end of june you can see that rural construction balance is 2.2 trillion an increase is 200 billion and 5.8 percentage points higher than the bank's average growth Such planning focused on promoting the China style modernization and also proposed the integrated development of rural and urban areas and focusing on promoting the common development and prosperity of both areas to empower rural as well as the urban areas, there's a series of reform measures being adopted. So you can see that county level rural areas has a new round of opportunities. For example, we will see the faster development of the rural industries and rural consumption will be further upgraded. And the rural infrastructure development will be further intensified. And rural basic public services and supporting facilities will be accelerated, et cetera. All of this will play a very important role for ABC to better serve rural revitalization. And in the future, ABC will continue to implement the spirit of the subplenum of the 20th Party Congress, in particular, focus on the key areas of rural revitalization in five major priorities. We will make dedicated efforts. First, we will intensify the loan extension to the street agriculture as well as the county area to strengthen the food security development to further upgrade the consumption in rural areas and to develop the public utilities as well as infrastructures. And the second, we should focus on the policy product as well as service model innovation. In particular, we focus on the new business format and new players and new and production players so as to build a featured supply chain development for the rural areas to precisely satisfy the needs of rural areas as well as the agriculture. So here I would like to say for natural disasters as well as agriculture price downward trend, we will comprehensively consider about the low extension rollover or the other solutions as to mitigate the challenges as well as difficulty of the farming households. And third, we'll be very much dedicated to integrate technology With finance, we use a new generation of the fintech to build a more convenient and beneficial products to the farming households. In particular, we comply with the smart bank development trend to play dig into the value of the value of the data in the rural areas as to support the business model innovation so that data can play a bigger role and the farming households, they will see more convenience while at the same time we use remote sensing of the satellites and big data and accelerate the AI deployment so as to actually facilitate rural revitalization.