Bank Of China Unsp/Adr

investors, analysts, and media friends, good afternoon. Welcome to the Bank of China 2023 entering results release. I am Yu Ke, securities representative of BOC and general manager of the board secretary department of Bank of China. Today's release will be co-chaired by me and Mr. Jia Tianbin, spokesperson and chief of staff of the Bank of China. I see many friends here today in person and some are joining us online via video link or by telephone calling. Thank you very much for showing your interest in us and support of the bank. First of all, allow me to introduce to you the leaders of the bank who are attending today's release conference. They are President Liu Jing, Vice President Zhang Yi, Vice President Zhang Xiaodong. Party Committee Leading Group Member Cai Zhao. Chief Risk Officer Liu Jiantong. In accordance with the regulatory requirements, we have especially invited Mr. Jiang Guohua, representative as an independent director, to participate via video link. And we have two agenda items today. First, I would like to invite President Liu Jin to make a speech on the performance of the bank and followed by a question and answer session. As a reminder, all financial figures presented today have been prepared using international financial reporting standards unless otherwise stated. The performance presentation is not available for download from the bank's website or can be viewed at the bottom of the live stream page. Now I would like to invite President Liu to tell us more about the performance of the bank. Good afternoon, investors, analysts, media and journalists. It is a pleasure to meet with you all again. The annual and interim results release conferences have become an annual engagement opportunity with all friends. Today, we are here again for our appointment and for the first time since the outbreak of COVID-19. We are back in the B2 venue of the head office building and we hope that we can once again deliver a satisfactory answer to our friends who are present here in person and online. In 2023, it was the opening year of the comprehensive implementation of the spirit of the 20th CPC National Congress. BOC conscientiously implemented decision-making and deployment of the CPC Central Committee and State Council tightly focused on the primary task of high-quality development, surgically serve the real economy, prevented and mitigated risks, promoted reforms and innovations, with the trend of business performance improving the first half of the year. First, financial efficiency performance subsided, operating income amounted to $319.7 billion. point seven oh seven billion yuan an increase of eight point nine two percent year on year of which net interest income net fee income increased by four point seven five percent and four point three four percent year on year respectively profit before provisions amounted to two hundred and fifteen point four oh seven billion yuan up by five point seven two percent year on year post Profit after tax amounted to 127.688 billion yuan, a year-on-year increase of 3.35%. Second, earnings efficiency remains reasonable. Net interest margin is 1.67% down 9 basis points year-on-year. Non-interest income amounted to 26.81% up by 2.91 percentage points year-on-year. Cost-working ratio is 25.77% down by 0.57 percentage points year-on-year. Third assets and liabilities continue to be optimized. The group's assets and liabilities grew by 7.59% and 7.95% respectively compared with the end of last year. An increase in domestic RMB deposits and loans reached the record high. The share of net customer loans increased by 1.24 percentage points and the share of customer deposits increased by 2.26 percentage points. Fourth, risk resilience has increased. The non-performing loan ratio is 1.28% and a decrease of 0.04 percentage points from the end of the previous year. The provision coverage ratio is 188.39% and quality of assets in key areas remain healthy and stable. Continuously strengthened endogenous accumulation and steadily replenishing external sources, the capital adequacy ratio stood at 17.13%, maintaining a sound reasonable level. In the first half of the year, in the face of complex and severe external environment, Bank of China restlessly fulfilled its role as a major bank. effectively combined the implementation of central government's deployment with the promotion of its own sound development and achieved new breakthroughs in serving high-quality development with the new results and development of its new major businesses firstly fully committed to the implementation of national strategies the quality of service to the real economy has been continuously improved in the face of the wave-like development and zigzagging economic recovery process, we have optimized our financial products and services, continue to increase credit support, helping to boost confidence and expectations and cultivate endogenous momentum. Actively supporting the construction of modernized industrial system loan for strategic emerging industries and medium and long-term loans for the manufacturing industry grew by 45.46% and 22.56% respectively compared with the end of last year. Firmly established and practising the concept, green mountains and lush mountains, green and lucid waters are invaluable assets. The balance of green loans exceeded 2.62 trillion yuan, increased 31.99%. Contributing to the regional's energetic development strategy, loan growth in key areas such as Beijing, Tianjin, Hebei region, Yangtze River Delta, the Guangdong, Hong Kong, Macau, Greater Bay Area, etc., were significantly faster than the bank-wide average. Increasing support for key areas and weak links, the balance of loans, inclusive small and micro enterprises, Exceed 1.55 trillion yuan increased 26.27%. The balance of agriculture-related loans grew by 16.75%. Efforts have been made to do practical work and solve problems for private enterprises. And the balance of the loans to private enterprises increased by 16.46% for 2%. launched the 1,000 jobs, 10,000 homes campaign, which issued more than 120 billion yuan in specialised loans for 27,000 small and micro enterprises, benefiting more than 1.4 million workers. Supporting the expansion of domestic demand, promotion of consumption and personal non-housing consumer loans grew by 17.59%, serving a higher level of opening up to the outside world, granting over 290 billion dollars of credit support to countries along the Belt and Road, secondly, actively responded to the needs of enterprises and effectively consolidated the foundation of corporate finance business together with the majority of market players, stepped up credit investment with domestic corporate loans increasing by 1.39 trillion yuan, seized market opportunities and built a strong customer base with the increase in domestic R&B corporate deposits hitting a record high in the same period of the last 10 years, the average daily deposit market share continued to rise. The number of direct and inter-participating banks in the IRB cross-border payment system, the SIBs, remain the first in the industry. The number of clients of business scale of the custodian service for qualified foreign investor, QVs, and agency service for overseas central bank type institutions ramped among the top in the industry. As the only main cooperative bank for central counterparty clearing, the bank helped the official launch of SwapConnect, promoting foreign trade stabilised by scale and optimised structure, international trade settlement, cross-border R&B settlement clearing, cross-border guarantee and cross-border fund pulling of domestic institutions, Maintain the leading position industry. The scaled cross-border e-commerce settlement business has increased by more than 130% year-on-year. The volume of import-export trade financing has increased by 10% year-on-year. Driving PNC's digital transportation, the share of the new PNC online loans increased by nearly 80%. The size of pension trustee funds increased by 12.59% from the end of the previous year. thirdly the bank is always here to the people's position and capacity of personal financing services have continued improved the customer and business base has been continuously optimized with the full number of personal customers reaching 516 million the scale of full financial assets of personal customers have been reached by 14 trillion yuan The scale of financial assets of private banking customers have reached 2.69 trillion yuan. Cumulative insurance debit cards have reached 660 million. Cumulative insurance credit cards have reached 142 million. Starting from the financial needs of the public, we have created full journey surveys, accompaniment model, and improved the BOS investment strategy, Global Investment Advisor Information Survey System. Enriching the product shelf and further increasing the market share of the balance of financial products distributed to individual customers. Expanding consumer finance scenarios providing differentiated housing credit services. Accelerating the online transformation of non-housing consumer loans. Consolidating the service advantages credit card, automobile installment products. Consolidating the business foundation in key consumption areas. Fourthly, firmly grasp the opportunity of opening up the traditional strength of the financial market is making steady progress. Increase investment in local bonds, green bonds and other key areas in the RMB portfolio and maintain the first place in the market in terms of investment volume and green debt financing instruments. Continuously exerting the professional advantages, the market share lead in settlement and scale of foreign exchange continue to expand. Other writing of asset securitization, panel bonds, Dingsen bonds, China offshore bonds and other fissure products remain number one in the market. Created a new fortune to serve the two-way opening up of financial services, launched the BOCS and management global brand and continue to lead our Chinese counterparts in cross-border custody scale. Fifthly, continue to consolidate characteristic advantages, and our globalised and integrated operations have shown new highlights. Further utilise the century-old advantages and promoted international economic and trade cooperation, providing exclusive financial services for the China Central Asia Summit. As the President of China-France Enterprise Committee, we successfully co-organised the Sino-French Entrepreneurs' Symposium. The contribution of the pre-tax profits of foreign commercial banks increased by 4.45% points year on year. The market share of deposits and loans of foreign currency companies expanded. The representative office of Papua New Guinea was opened, and overseas branches cover 63 countries and regions around the world. Deepened regional intensity management steadily promoted the construction of offshore regional headquarters. The comprehensive operating companies developed well with the BOC Wealth Management BOC, Full-Term Deposit and Loan, BOC Consumer Loan, BOC Group Assurance, BOC Insurance, and BOC TriStar Life, Samsung Life premiums all increased in their all increased their market share. Six, in-depth promotion, scientific, technological innovation, digital transformation, and to empower our business with new breakthroughs. Accelerated process of building enterprise-level architecture, completed the commissioning of new debit card and credit card lines, and the full rollout of OEO. domestic branches, restructured and upgraded new generation integrated group anti-money launching system. Application of enterprise-level technology platform has begun to show results. The daily transaction scale distributed architecture has exceeded 2 billion transactions with strongly supported business development and smooth operation. New results have been achieved. The digitization of key areas such as mobile banking, corporate internet banking, Continuously operated smart counter services ecosystem in region government affairs and livelihood of other scenarios. Promoted branch transformation. More than 5,000 business-focused specialty branches have been established. Construction of the digital R&B ecosystem continued to improve. Seventh, effectively responded to risk challenges and achieved new improvements in our overall risk management capacity. In the first half of the year, US dollar rates hiked interest rate several rounds. The international financial market fluctuated frequently. We insisted on saving for rainy days and knowing what to expect, continued to monitor the market, proactively adjusted the business structure, placed liquidity risk management in the more prominent position, responded to changes in the market in the fall for an effective manner, with the main risk indicators remaining stable, increased control of non-traditional risks. incorporated network, cybersecurity, employee, and productivity into a comprehensive risk management system, accelerated the construction of an intelligence risk control system, actively promoted the reexamination of risk strategy overseas institutions, and proactively improved the risk management system of the integrated operating system. effectively control the credit risk strengthening customer risk identification a potential risk mitigation steadily promoted the disposal of non-performing assets maintaining stable asset quality continuously improve the level of operational risk management constantly strengthen the foundation of anti-money laundry and sanction compliance and shape a compliance culture for steady development. In the face of recent typhoons, heavy rainfall and floods in some areas of the country, BOC acted swiftly, activated emergency plans for key disasters at the first place, formulated specific measures for financial support to defected areas and opened emergency channels to ensure the smooth flow of the financial services during the special period, increased credit support, simplified the credit approval process, lowered financial costs, accelerated insurance claims, The Bank has actively assisted disaster-stricken areas in relieving difficulties and supported post-disaster production recovery and infrastructure reconstruction, and has been working with the people in the disaster-stricken areas in Singapore through thick and thin. Looking ahead to the second half of the year, we will adhere to the guidance President Xi Jinping sought on socialism with Chinese characteristics in the new era, fully implement the spirit of the 20th CPC National Congress, insist on making progress amidst stability, consolidate stability with progress, give full play to our distinct strength, continue to enhance our value creation and risk prevention and control capabilities. First, focus on serving the real economy and show the role as a large state-owned bank. Insist on sufficient strength, stable rhythm, excellent structure, increased support for construction and modernized industrial system, strongly support key areas such as small and medium and micro enterprises, green development, scientific, technological innovation, Manufacturing made every effort to serve the self-reliance of science and technology, coordinate development of region, revitalization of the countryside, high-quality development for the population, actively and steadily support the construction of public infrastructure like the Shantytown renovation projects, practice the two unswerving, unwavering principle, continue to improve the quality of the service.

Second, we will strengthen the foundation of business and enhance market competitiveness. We will enrich the product and service system, promote the synergy between deposit business in terms of volume and price, and improve the efficiency and coverage of credit services and enhance the sustainability of financial support for the real economy. Third, consolidate the advantages of a specialty business and unite the development synergy of the group. We are committed to cultivating overseas markets, seizing strategic opportunities such as RCEP, Belt and Road, Guangdong, Hong Kong, Macau, Greater Bay Area, the New Land and Sea Corridor in the West, and supporting the internationalization of RMB and serving the country's foreign affairs, international economic and trade exchanges. The integrated management insists on one policy for each division, highlights business characteristics, strengthens the synergy mechanism, and expands the value contribution of diversified services. Fourth, promote digital transformation and change and stimulate the vitality of science and technology innovation. We'll accelerate the construction of enterprise-level architecture and accelerate the production application of a new patch of technology platforms such as privacy computing and Internet of Things. Fifth, to improve risk prevention and control capabilities. We will continue to deepen the construction of a comprehensive risk management system, conduct forward-looking research, properly respond to potential risks, improve our ability to control and manage risks of new forms, industries, and modes of business. Dear friends, in the face of various uncertain, unstable, unpredictable factors, we will win new opportunities for high-quality development in responding to changes in the situation, demonstrate new actions for high-quality development in deepening the self-revolution, create a new situation for high-quality development in serving the country's overall situation, and walk the path of financial development of Chinese characteristics in a progressive manner with a sense of urgency. so as to make more contribution to the country and nation. Thank you very much. Thank you, President Liu, for your excellent presentation. Now we will have the Q&A session. So we will first invite analysts from this area to raise questions. So anyone who want to raise a question can raise your hand. Okay. The first question goes to the analyst from Morgan Stanley. And you come a long way from Hong Kong. Please. Thank you for giving me this first opportunity. So I'm interested in the NIM. We know that there has been a lot of pressures on NIM. What's the driving factors? So how do you see the future of NIM, the trend in the second half of the year? Thank you. So Vice President Zhang Yi will take that question. Thank you for your question. So we attach great importance to NIM management. In the first half of the year, the NIM of the bank was 1.67%, down by 9 BP year-on-year. And it remained relatively stable compared with the peers. So on the one hand, this reflected the advantages brought by the bank's unique business in the context of diverging domestic and overseas monetary policies. And on the other hand, it also reflects the effectiveness of the bank's implementation of high-quality development strategy. As for the reasons for narrowing NIM, I think we have the following reasons. First, the decline of RMB asset yields remain the main reason. In the first half of the year, Bank of China supported the real economy and implemented the national requirements on fee reduction. So the domestic RMB asset yield was 3.52% down 34 BP year-on-year. This is mainly due to the impact of the gradual repricing of loans as a result of the three LPR cuts in the last year. One-year LPR and a five-year LPR were cut by 15%. and 35 BP respectively, and the RMB loan yield declined by 43 BP year on year. Meanwhile, the yield on bond investment decreased by 16 BP year on year. So these two factors combined has lowered the group's net interest margin by approximately 25 BP. This is the main reason. And secondly, the impact of the decline in RMB yields was mitigated by the improvement in asset and liability structure and the decline in the cost of liabilities. So on the RMB asset side, the bank continued to increase its support for the effective credit demand of the real economy, and the share of loans in interest-earning assets continued to rise by 0.8 percentage points to 67.5%. So on the RMB liability side, the bank strengthened its strategy of synergy between volume and rate of loans, the deposit, and we have maintained a basically stable deposit structure amid the trend of deposit deregulation and enhanced efficiency of the use of high-cost deposits, with the cost of deposits declining by 7 BP year-on-year to 1.84%. Meanwhile, the decline in market interest rates contributed to a 21 BP drop in the cost of interbank deposits and debentures. So these factors combined has boosted the group's NIM by approximately 8 BP. And thirdly, benefiting from the interest rate hike of the US dollar, the bank's foreign currency interest rate spread continued to improve, further alleviating the impact on the downward trend of the RMB interest rate cuts. Since the second half of last year, the Federal Reserve has raised interest rates for seven consecutive times for a total of 350 BP, and the bank's foreign currency asset liability structure still shows an asset-sensitive characteristic in general. And the rise in market interest rates has led to a year-on-year increase in the domestic and foreign currency spread of foreign institutions by 47 BP and 26 BP respectively, which has raised the group's net interest rate. margin by a total of 8 BP. So domestic factors has a drag, a 25 BP drag on NIM and the other two favorable factors has increased NIM by 16 BP. At the same time, we're also concerned about the faster rise in the cost of foreign currency liabilities due to the impact of persistently high interest rates on large domestic U.S. dollar deposits resulting in a slight narrowing of the domestic and foreign currency interest rate spread compared with the first quarter. And this marginally weakens the contribution to the group's overall NIM. So therefore, looking forward into the trend of the second half, the downward pressure on NIM is still great. Domestically, LPR was cut twice in June and August this year. The one-year LPR and the five-year LPR was lowered by 20 BP and 10 BP respectively. As a result, the lending rate level will be further reduced, driving RMB spreads to continue to go down. And from an external perspective, since this year, the Fed's interest rate hike has weakened. and the market expects that the fourth quarter will be The interest rate in the fourth quarter, the hike will be close to an end, so the bank's foreign currency interest rate spread have limited room for improvement. So in the face of downward pressure on the NIM, the bank will adhere to the strategy of high-quality development and do a good job of active management. First, continue to coordinate volume and rate to promote high-quality development of our liability business. On the one hand, we strengthened RMB liability cost management We will focus on the improvement of the service capability of key products such as cash management and supply chain finance. We will promote the growth of funds with high stability and low price sensitivity such as the settlement category and optimize the deposit structure. On the other hand, we continue to optimize the liability structure of foreign institutions by focusing on key institutions. We'll focus on key customer segments, consolidate the foundation of high-quality deposits, control the proportion of active liabilities, enhance the diversity of liability structure and the stability of funds. So we'll mainly focus on domestic RMB deposits and overseas foreign currency deposits. Second, we will optimize the asset structure and increase support in key areas. We will continue to strongly support the real economy, increase the proportion of loans in assets, and further strengthen financial services in innovation, manufacturing, green loans, and private economy. On the other hand, we will focus on expanding the channels for utilizing foreign currency funds, give full play to the traditional advantages of foreign exchange business, increase investments in foreign currency loans and bonds, and enhance the level of return on foreign currency assets. Thank you. Thank you, Vice President Zhang Yi. Next question, please. from CICC. Thank you for this opportunity. My question is about loan supply. So the major banks are increasing their loan extension quite quickly, and in the June Politburo meeting, it further proposed to strengthen counter cyclical adjustment. So in terms of the whole extension of loans, how do you evaluate this year's credit supply plan? And in terms of structure, the central bank has indicated that it will continue to provide structural support to inclusive finance, green, low carbon. So what is BOC's plan? Thank you. Vice President Zhang Xiaodong is responsible for corporate finance and he's very familiar with credit business. He'll take your question. Thank you for your question. Since the beginning of this year, BOC has adhered to the general principle of seeking progress while maintaining stability, has given full play to the role of a major state-owned bank as a stabilizer, accurately convey the requirements of monetary and fiscal policies, and actively met the financing needs of the real economy. In terms of total volume, as the end of June, the bank's domestic RMB loans has increased by 1.46 trillion yuan, a record high for the same period in history, and we had consecutive months of year-on-year increases. Structurally, the bank continued to increase its support for key areas and weak links of the national economy and has implemented a series of structural monetary policies. In the first half of the year, the growth rates of the bank's strategic emerging industry loans Green loans and inclusive loans to SMEs has reached 45%, 32% and 26% respectively, higher than the growth rates of all loans, and the leading role of credit supply in key areas has steadily enhanced. We have given full play to its international advantages and has granted credit support of more than US$290 billion to countries in the Belt and Road Initiative, and its ability to serve high-level opening-up continues to improve. At present, the domestic economy is operating steadily and positively, but it is also facing difficulties and challenges. Opportunities and challenges both exist. So in the second half, the Bank will unswervingly implement the decisions of the CPC Central Committee, take initiative to play its role, and continue to make great efforts in high-quality services to the real economy and high-quality service to China's modernization so as to realize its own high-quality development in the service of the country's overall situation. First, we'll give full play to the pillar role of us as a large bank to effectively support the real economy. The bank will be forward-looking in coordinating the macro monetary and fiscal policies. So based on the needs of the real economy, we will tap into our credit growth points, identify the direction of strength, continue to expand the scale of new loans on the premise of controllable risks, enhance the stability and sustainability of credit growth, and going all out to help the real economy to rebound and to boost market confidence. We expect that domestic RMB loans for the whole year will realize a significant year-on-year increase. Second, we'll take a proactive approach in... connecting structural monetary policy and accurately support credit supply in key areas, especially in supporting SMEs, innovation, green development and other key areas. We'll continuously expand the customer service to realize comprehensive effect of promoting consumption, stabilizing investment and expanding domestic demand. Third, we will provide comprehensive services for independent innovation construction of a modern economic system. We'll focus on advanced manufacturing and credit supply to specialized, refined and featured businesses. We'll focus on restructuring of manufacturing loans, increase the proportion of mid- to long-term loans in the manufacturing sector, Increase support for key industries such as integrated circuits, new energy vehicles, lithium batteries, and communications equipment manufacturing to promote the high-end green and intelligent development of the manufacturing industry. We'll make every effort to meet the financing needs of the real economy for green and low-carbon development and steadily increase the proportion of green credit. Thank you. Thank you for Mr. Zhang Xiaodong. And Yanlei Zhi from UBS. The President So in Q1, the fee-based income has declined a little bit, but in the first half of this year, it grew by 4%. It means Q2 has been very good. So what are the main drivers of fee-based income growth in the first half of the year? And could you share with us more details about... agency sales, settlement, clearing, and credit cards? What are the major trends? And how do you see the – how do you expect the growth of fee-based income in the second half? Thank you for your question. So the management has talked about the fee-based income growth in the annual results release. So we have reversed the negative trend of fee income growth. Mr. Zhang will take your question.

Thank you very much for your question. It has always been a concern of many analysts and the bank. In the first half of 2023, the group's net free income amounted to 46.38 billion yuan, an increase of 4.3% year-on-year. And in Q1, it dropped by 0.8%, so now we are back in the positive range. As you actually mentioned in your question, we had two driving forces. On the one hand, we fully grasped the opportunities of market development, continued to intensify our efforts to serve the real economy, realized a faster growth in syndicated loans, driving 42.3% year-round increase in handling fee income from syndicated loans. Meanwhile, the gradual recovery of personal consumption and cross-border activities led to year-on-year growth of 16.7% in bank card handling fees and 13.8% in private international settlement fees. On the other hand, we continue to intensify our business development efforts. We strengthened our corporate customer base and optimized our comprehensive financial services to them. And also, with the corporate domestic settlement fee income up by 5.9% year-on-year and expanded the scale of pension custodianship, As President Liu said in his opening remark, he talked about the growth of pension business. The fee income increased by 64.1% year-on-year. In addition, we strengthened our insurance marketing efforts in line with the growing awareness of insurance in the society as a whole, leading to a year-on-year increase of 29.2% handling fees for insurance sales, agency sales, and 30% 8.6% in quarterly fees from insurance custodianship. And of course, there were also individual items that did not perform very well. The capital market related fee income from funds, wealth management, and commissions from buying and selling stocks on behalf of customers continue to grow negatively year on year. So we all know that for the whole capital market, the total net asset value of domestic market wide funds was basically flat year on year. The total net asset value of equity and hybrid funds declined year on year. The scale of wealth management declined, as a result of which the bank's commission from fund distribution and wealth management businesses decreased by 5.6% and 29.2% year-on-year, respectively. In addition, the turnover of the Hong Kong stock market hovered at a low level. The bank's commission income from the sale and purchase of stocks on behalf of customers dropped by 30.7% year-on-year. In H2, the Bank will, on the premise of building a bottom line of compliance, continuously increase the business development efforts, maintain positive growth trend in fee income by providing customers with high-quality services. First, we will seize the opportunity of continuously cultivating and expanding market players to improve the quality and quantity of customer accounts and consolidate the basis for the growth of settlement and clearing fee income. Second, the bank grasped national policy guidance of expanding domestic demand and stimulating consumption growth and enhanced the precise marketing to customers, such as to maintain the growth trend of fee income from bank cards, consulting and advisory services. Third, we will give a play to the bank's advantages in globalised operation, promote the growth of international settlement fees and consolidate opposition as the number one bank in the market niche. At the same time, it should be noted that the future trend of the capital market remains an important factor affecting the growth of fee income. Many positive signs are observed. We expect the capital market to perform more robustly, which will correspondingly improve the downward trend of related handling fee incomes. We will also respond proactively by optimizing our product portfolio to minimize the impact of uncertainties arising from the volatility of the capital market. Thank you, VP Zhang Yi. More questions, please. From Taikang Fund, Mr. Ji. I'm Ji Yinxuan from Taikang. So, thank you very much. I want to ask a question about banks' asset quality. Because we are all concerned with the real estate and urban investment sectors, I want to ask the management to introduce the latest changes in exposure and asset quality of real estate development loans, mortgage loans, loans to urban investment platforms, and how do you see the trend of the evolution of the related risks? Thank you. I want to invite CRO Liu Jiandong to answer your question. Thank you for your question, Mr. Ji. Yes, these are the two major concerns of the investors. The property market is an important pillar industry in China. And we already have consensus that it is undergoing a stage of adjustment. The operations on property developers have encountered certain difficulties. There are exposure of debt risks, especially regarding leading property developers. which affects the market expectation. In the medium to long term, China's property market is shifting from the past high-speed development stage to a stable development stage, which is determined by the property market development stage evolution, market supply-demand dynamics, etc. Recently, the first-tier cities for example, in North China, in Guangdong and some other places are supporting the rigid improved housing demand. Tier 2, Tier 3 cities are also introducing new property control policies which can boost market confidence. The new policies will take time to show results and effectiveness, but in the whole process, we believe that the market will continue to stabilize. For BOC, our property credit is growing at a steady rate with a reasonable regional layout. The growth rate of domestic property loans was basically in line with that of major peers in the industry. More than 70% of domestic real estate development loans were distributed to Tier 1 and Tier 2 cities. In addition, the bank has done a solid job of credit risk classification and the stage-by-stage difficulties in the real estate sector have been fully reflected in the asset quality data. We also had full information disclosure and a good balance of provisions. And also we are implementing the national policies and also we stepped up the resolution stage. And actually, by the end, we had 846.2 billion yuan of balanced domestic loans, corporate loans, an increase of 9.35 percentage points from the end of last year. The non-performing rate is 5.11%, down by 2.12 percentage points lower from the end of the previous year, basically dropped by 12.8 billion yuan. And NPL was around 5.11%. With the gradual functioning of the market adjustment mechanism and adjustment optimisation of real estate market policies, the risks of the property enterprises are expected to be gradually resolved and the quality of the bank's credit assets will continue to improve. As for mortgages, in the first half of the year, the asset quality of mortgage loans was under pressure and the bank intensified the efforts to clear and resolve the problem and the non-performing balance of mortgage loans basically remained stable. Overall, by the end of June, We only had the 20 billion yuan of MP assets for microchips, 0.49 percent NPR ratio, 0.12 percentage points higher than the previous term. Overly speaking, the sovereignty of our residents, borrowers are not deteriorating and mortgage loans are still among the bank's high-quality assets, supporting the quality of the bank's assets. The next step would be to closely follow the direction of national policies, take regulatory requirements at the bottom line, adapt to the new situation. and significant changes in the supply-demand relationship in our property market, proactively study and judge real estate financial risks, and on the premise of controllable risks and compliance with the law, keep real estate financing reasonably moderate and promote market-based liquidation of risks in the industry. and also as one of the biggest banks will continue to support reasonable needs for mortgage loans to fully implement the decision by PBOC and administrations, especially how to deal with the existing in the inventory and incremental growth of mortgage loans continue to improve our services to the personal borrowers. You also talk about government-related businesses. In recent years, with the downturn pressure of the economy coupled with the deeper adjustment to real estate markets, some financing platforms in local areas had overdue credit and other risky matters and events. The regional risks began to emerge. However, as far as the bank is concerned, LGFV business has remained stable in general total amount of credit granted is moderate compared with our peers and the overall risks level is controllable despite the decline in asset quality compared with the beginning of the year. The bank will always adhere to the principle of commercialization and selected clients or projects with relatively abundant cash flow and the regional distribution is mainly concentrated in eastern developed regions of China with a better level of cash flow coverage from platform clients. and overall good repayment situation for matured loans. In the future, we will continue to adhere to the principles of claims and a law-based marketisation, always regard the non-creation of new LGFV debt as a red line, the bottom line of our business development, in accordance with the principle of prudent operation We will continue to strengthen the concentration and control of government business and government credit risk management, pay attention to the changes in the regional credit environment, fully understand and analyse hidden debts of local governments, government performance and credit default records, and prudently assess the financial strength and debt burden of the local governments. On the basis of compliance and market mechanisms, focus on supporting projects with a certain degree of return in the area's infrastructure to fill shortfalls, dual-use infrastructure for both flat and emergency use, basic public services such as health, pension, culture, sports and tourism. We will carry out a local government-type business in compliance with market-oriented law-based principles, taking advantage of the strength and comprehensive operation characteristics as a large bank in accordance with the subsequent instructions of the country's debt resolution programme. focus on the assessment, control and evaluation of potential projects to forestall and defuse local government financing vehicle risks. Okay, thank you, Mr. Jian Dong. We also have some investors and analysts joining us online via video link. We want to give them an opportunity to ask questions. The assistant, please read out the questions from online. Thank you. Yes, we can hear you. Management, good day. I'm JP Morgan. Can you hear me? Thank you. I want to ask management how to study the trend of all credit asset quality in the year. In addition to the questions raised by my colleagues regarding the property and the LGA fee issues, What about other types of asset classes which we should be concerned with, especially overseas? Inclusive credit card and credits. What is the situation of these areas? What is the outlook for credit cost trending? Thank you. Thank you from JP Morgan, Madam Li. It is also related to risk management. Okay, I want to invite CRO Liu Jiantong to answer a question. Thank you, Miss Li. So, in the first half of the year, the overall asset quality of the bank remained stable. As at the end of June, the group's non-performing balance amounted to $246.882 billion. The NPL There was an increase of 15.205 billion RMB over the end of the previous year. Non-performing rate was 1.28%, decrease of 0.04 percentage points over the end of the previous year. There are two main reasons. And also compared with the previous year, the non-performing loan dropped by 4.9%. The overdue rate is 0.98%, 0.12 percentage points lower than the previous year. there was a negative 59 billion yuan between the non-performing and the total balance, 15 months consecutively. So on the one hand, since the national economy has recovered post-lockdown, we are seeing signs of resilience and recovery of the national economy. And at the bank itself, we have taken some countermeasures. In particular, in the first half of the year, we looked into the liquidation and the resolution of the non-performing assets. I mentioned this before. So in the first half of the year, the resolution liquidation efforts were stronger, increased by 30% compared with the same period of last year. That stabilized the quality of the asset. And also just to say that apart from the property and government-related loans and credit, inclusive credit card and overseas credit card business are also areas where we closely monitor. In terms of inclusive lending, our inclusive business maintained relatively good development trend in the first half of the year.