China Construction Bank Corporation

investors and analysts and friends from the media community. Ladies and gentlemen, good afternoon. A big welcome to the 2021 annual results announcement of CCB and also a big thank you to all of you for your care and support for CCB. Because of the COVID control and prevention needs, this announcement will take the form of conference call and live streaming. So present at this venue are Mr. Tian Guoli, chairman of CCB and also Ji Zhihong, vice president of CCB and Mr. Wang Hao, Ms. Zhang Min, Mr. Li Yun and also Mr. Chen Yuan-guo, CRO of CCB and also Mr. Liang Jingsong. Anthony is also joining us online and we also have some representatives of the directors and supervisors at the venue and also heads of other departments. My name is Hu Chang-miao, secretary of the board. So the announcement of CCB in 2021 was made last night and also the papers were already released on the official website of CCB for your information. So the interest of time, we will not present the details on this occasion. So now we would like to invite chairman Tian Guoli for the speech. Dear investors, analysts, media friends, good afternoon. On behalf of all the staff of CCB, I'd like to welcome all of you to this announcement. I'd also like to take this opportunity to express our appreciation for your long-term support for CCB. In 2021, in face of the complicated situation, home and abroad and also the different challenges and risks, CCB has been earnestly implementing the deployments of the CPC, Central Comedian State Council in promoting the new concept development and also the new finance action. And we guided the financial resources to flow into the key areas and weak links in the economy. And of course, we contributed to the construction of the new development model and of course, the new high quality development. So actually we have the balanced growth in asset liability. So the net profit for 2021 increased by 11.09%. We had an average growth rate of .25% for two years and the MPL ratio is down by .14% and we plan for 91 billion of dividend payments. So we had a very good beginning for the 14th five-year plan. So we actually handed out a pretty excellent report to the shareholders in the society. So I think all of the indicators are already in these papers. So I will not go into details on this occasion. The new finance explorations by CCB is not only reflected in those data and indicators, we actually share in the creation of solutions to the national problems and also the social issues. Of course, we also have won a lot of trust and support along the way. The CCB community actually enables the citizens to enjoy the services that we can provide everywhere in this inclusive lending that is digitalized and targeted actually has grown from the thin profit business to a major driver business and that over 270 billion yuan of Yu Nong Tong has contributed to the rural revitalization drive. More importantly, new finance explorations can help us jump out of the box to seek answers. Now the path has really become wider and wider. And so we have more momentum for sustainable development. And the second development curve is becoming more robust. We have won a lot of recognition from the international community. So we got more confidence as a result. Now the COVID pandemic and the changes and also the geopolitics, of course, we have more uncertainty surrounding the market. However, we can still expect a pretty long-term rosy prospect for Chinese economy. In recent days, the State Council, Financial Stability and Development Committee held a special meeting and called on financial institutions to look at the big picture and support the development of real economy. And of course, we will continue to be people-centric and we will continue to integrate resources along the path of new finance. And of course, we will reward you with better results and better performance so that we can jointly safeguard the stable development of the capital market. Of course, we are also looking forward to all of you landing us your support and increasing your holding of shares. Thank you. So now let's head on to the Q&A session. In order to have more chances for you, we actually propose you each ask one question. Please identify yourself and your organization before you ask your questions. So now the floor is open for questions. Ladies and gentlemen, now let's move on to the Q&A session. If you have a question, please press asterisk plus number one and then wait for your turn. The first question comes from Lu Yuheng from Financial Times, sir. First of all, big congratulations on CCB on your good results. We could see the net profit actually hit a record high. I also heard, Chairman, you actually talk about the new finance action and we heard about it on multiple occasions. Also to ask you, can you give us more details? What are the differences between the new finance action and the traditional finance and what roles does it have for the performance of CCB? Thank you. Thank you for your attention to new finance. Actually, new finance action is a new thinking about finance under new development philosophy. The traditional finance has been developing for civil centuries and it has actually played very important roles in promoting human society. And of course, we actually have seen great changes as a result. And there is one basic issue. Now in this digital and information era, people's demand for physical stuff and also for spiritual stuff is increasing. So we need a new language, new logic to talk about new finance. In particular, after the financial crisis, we actually should think more about how we can serve the society better rather than become a social issue. Let me give you an example. In the past, in order to gain efficiency, to serve about one, if you invest in 20% of the companies, you can expect 80% of benefits or profit. This is very, very sharp calculus. However, in this new development era, with the people-centric philosophy, if we are over pursuing the value, then you might forget that 80% of the customers and they will be left unattended. They will be marginalized. So this new finance action all boils down to the attention to people. But of course, we also should be supported by tools. If you want to serve that 80%, the majority of the people, it can not only be done by your wishes. You just were not able to do that. But now with the fintech going on, we are better empowered to do that. On the one hand, we have very lofty aspirations and we are more able to serve the society. I can give you one more example. Just recently, we were developing the Yu Nong Tong, which actually serves the villages. So that is the connection of the villages. In every village, CCB built about 520,000 outlets that cover basically all villages, or I should say 80% of the villages in this country, because some natural villages are extremely small in terms of the population. But we can cover 80% of the villages in China through that Yu Nong Tong project. In the urban areas, you might not need to go to a CCB outlet to handle your business. But actually, there's no boundary in the cities. And the countryside should also have access to modern financial services. A marginalized, marb farmer can enjoy the same level of service that can be enjoyed in the city. And this itself plays a very important role in financial equality. It's very simple. We can take advantage of the communities level, health clinics, and also the CPC grassroots outlets. We can put some machines there, and then people can get their service. We cannot do it all by mobile phone, because people might not be that internet capable or mobile phone capable. So basically, if we can use this as a tool, then we can pretty much deliver all the services that are delivered in the busiest urban areas. So for example, withdrawals and deposits, and also some wire transfer, and also fast loan, et cetera. All of these can be enabled. In addition, we can also help the village level government in terms of the e-governance and also employment service, et cetera. So it's just a one stop service platform. Another example is inclusive finance. In the past, in the old days, people were trying to compete for the big accounts. And we used to have this too big or too big strategy. But now, with the transition from the high speed development to high quality development of this country, now when it comes to high quality, we should not only look at the big ones, we should also pay attention and spare our attention equally to the small ones or the mid-sized ones to improve the whole quality across the society. So inclusive finance is very important. And several years ago, we made this strategy. So when you lend to the mid and small or micro, medium businesses, without the help of FinTech, you just cannot do that. It's impossible. However, the return is different. If you can just add one zero to lend to a big account, but of course you need to make a lot of investments to lend to the micro and small businesses. But with the big data and FinTech, we can be better able to lend to the macro and small businesses. In the past, we can lend to about 20 to 30 billion in the oldest to the small businesses with an MPL ratio of seven to 8%. But now with the internet technology, with the latest IT, and also with the AI technology or big data or blockchain, you name it, basically with all of these tools, we are better able to do such things. In 2018, in the very first year, we lent 230 billion with an MPL ratio of 1% and 350 billion in 2019. And the MPL ratio is still at around 1% in 2020. And then we had 450 billion of loans and the MPL ratio still was kept within 1%. So basically, it took us less than five years for CCB to develop the inclusive finance lending to grow it to over two trillion. Let me give you some data points for your comparison. We all know that CCB is closely linked to the real estate industry and our lending to real estate. And we actually granted a lot of mortgage loans. And it took us about 30 years to have a lending about five trillion in real estate. But it took us just three to four years to grow inclusive finance lending to five trillion. So maybe it's very hard to think that CCB handles inclusive finance because inclusive finance has been tried by a lot of people. It's not that people do not want to serve micro and small businesses, but that means very high MPL ratio. The banks do not have that capacity to withstand it.

But we have new strategies for new finance and with the support, CCB has only used three to four years to grow our scale to two trillion. And also for our MPL is over our expectations. Our CBIRC had a tolerance of 3%, but for us, it was only around 1%. So I can say it is pretty effective and which really provided us with a lot of confidence. In the future, we will try better and try harder to realize our ambition of providing services to the overall country and to the majority of the people so that we can have a more expensive scope of services and we can better help the small, micro and mid-sized businesses so that we can leverage more capability of new finance and FinTech to do better, to do more, and more people can enjoy those financial services and resources in an equal and fair manner. Moreover, for CCB, we are also pushing forward our house leasing strategy. In the past, this is not something by traditional banks, traditional banks only offer loans. But when we are trying to contribute to a mature or a developed market of house leasing, it is very difficult to do. And we also call that new finance. So we have a whole set of ideology of serving the society. And under that umbrella, we have reconstructed some of our logic for new finance and reconstructed some new product. So we have a lot of innovative product for that and with great result and great benefits to both economy and the society. Thank you. Thank you, Chairman. Next question. Next question, Shiran from Morgan Stanley, please. Thank you for the opportunity. I'm Shiran from Morgan Stanley. I have a question regarding the structure as well as loan issuing. So in 2021, the overall growth for loans is very good, specifically for corporate loans is growing very rapidly. So we were wondering, what are the reasons behind that? Moreover, we can see that it is proposed by the regulatory department that the social financing growth speed should be in line with the nominal economic growth. And actually this year, our overall economic growth goal is adjusted downward compared to last year. So would our goals adjust accordingly? And what are some changes that we might see in the issuance of loans in key areas? Mr. Ji, thank you so much for your question. And thank you for following us. As a major bank, CCB has been promoting the roles for services of finances, and we try to achieve six guarantees, six set abilities, and the more of the financial resources will be contributed to the key areas and the weak links. And we try to achieve a sustainable and continuous growth at the same time. So in 2021, we have a very good growth compared to the end of the last year, we have an increase of two trillion with an increase of 12%, and for domestic corporate loans with an increase of 1.2 trillion up by 14.8%. And we've contributed more and stepped up for infrastructures. And on that basis, we've supported more for green, inclusive manufacturing, as well as rural rejuvenation. So we issued more loans in those regard to better fulfill the need of the real economy financing. One is that we've provided services to the major program of the country and to leverage our traditional advantages with an increase of 733.1 billion RMB up by 16.9%. And the second is that we are trying to be more green and trying to increase the quality of that greenness so that we can establish a long-term developed mechanism, explore new product, new services, and new measures for green finance. And we issued more loans in terms of clean energy, energy conservation, as well as carbon reduction. We have an increase of green loans, 515.5 billion RMB up by starting 5.6%. And the third is that our inclusive finance continue to lead the market, and we continue to diversify our system for inclusive finance. And for CBIRC, the inclusive finance balance is around 1.9 trillion RMB up by 449.9 billion. So we are leading the industry in that regard. And number four is that we continue to support the high quality department for the manufacturing industry. We have a increase of 152 billion up by 29.2%. And we are trying to build a assessment system for the innovation capabilities of the tech industries. And our strategic increase for emerging industries has an increase of 306 billion up by 49.8%. And number five, we are trying to consolidate our result of poverty alleviation and build our service brand for rural rejuvenation. And we're continuing to innovate our models of product and services. We have a new increase of 377 billion RMB for rural loans up by 18.1%. At the same time, we are also promoting this mega retail ideology. We have 7.9 trillion RMB for individual loans balance up by 658.1 billion up by 9.1%. And we're still continuing, remaining our first and top one status. As of now, our economy is still facing many challenges and pressure, including the downward of expectations and impact to supplies, as well as the drop of demand. And we need to be more proactive, need to take initiative and keep everything stable. So in the next step, we will push everything forward while remaining that stability, continue to consolidate the micro policy, support the real economy, and to continue with an appropriate increase of new issued loans. And at the same time, we are following the macro policy orientation, as well as the demand of the customers to appropriately control the pace of the increase of loan increases. And with regard to our key areas, the first is that we focus on the key areas and the weak links of the real economy. We continue to provide financial support to inclusive finance, technology, innovation, manufacturing, green development, and rural revalidation. And we try to have this increase while remaining stability. And the second is that we continue to provide good services for the major projects of our country and to increase or to focus on our issuance of loans for key areas, as well as for infrastructures. And number three is that we keep a stable issuance of real estate loans so that more of the appropriate needs of the property purchases will be fulfilled. And number four is that we continue to increase our internal demand to build up our ecology scenarios and to develop consumer finances. And at the same time, we have this good cycling of original economy, including Beijing, Tianjin, Hebei region, Yangtze River Delta as the Greater Bay Area, as well as Chengdu and Chongqing areas. And we, at the same time, focus on the support of Midwest as the Northeast. So CCB as a major bank are also trying to leverage our good capabilities of both the parent banks and the subsidiaries to have this overall increase as well as for different debts and to increase our scale of asset management. So this direct financing channel in the recent years is very good. And in the next step, we can continue to guide the social financing and social funding into supporting the real economy and they can bring a greater role in the future. That's it, thank you so much. Next question. Next question from Mr. Zhang Shuai, CICC. Thank you so much for giving me this opportunity. I'm from CICC. So previously, we can see that the chairman was attending the press release conference of the Information Office of the State Council. CCB is doing a lot of tryouts and trials for intelligent governance. And in the early of 2021, we attended the open day of intelligence governance hosted in Kunming of Yunnan province. And we know that there are a lot of services provided by CCB and also online, we can see there's a lot of good implementations of new finance. And there are a lot of good cases. So thank you goes out to the management and thank you to the information release so that we can understand better than competitiveness of CCB in this area. So I was wondering whether the management can introduce more regarding the intelligence governance and what are our ideas behind that from the perspective of the group and what are some impact it could have for our performances? Thank you. Thank you so much. So actually for this intelligent or smart governance, this is also part of new finance. For new finance, we have a new development ideology and the core is innovation. To be green, to be more inclusive, to be more open. So those are our principles. So if you follow that logic, a lot of the answers will become very obvious. So including our financial products, in our designing of scenarios, allocation of resources. So you can have the answers for all of that. For example, CCB has a great team of technology. But in the past, traditionally, we leverage that to compete with our peers. We try to innovate to issue more new products, but it is not necessarily will boost our competitiveness because you are not having a wider or more comprehensive perspective. If you don't focus too much or be obsessed with that, if you focus on serving the society, when you win the trust of the society, when you have a very good reputation, after that, you will have greater potential. You have more room and space in the market. So that is our underlying logic. And for our digitalization and our technology, we have such great ideology so that we can empower the society very early on when we were in the Yunnan province and we were working with the executives or the management of that province, they were thinking, oh, you are so innovative. Oh, you can do this. And we proved that yes, this is something we're capable of. Because to be honest, for intelligent or smart governance in terms of technology, it's not that difficult or tough. Because for our banks, we deal with the numbers for a long term and we have a very good capability to deal with those numbers. So we can design different platforms or different products for smart governance. So for our perspective, for the benefit for the public, it could be a lot better. So based on that, we were working with the Yunnan province and we've established a strategic cooperation agreement. And everyone was having this attitude of to try this out, but yes, indeed within a very short period, we have this one phone connection for dealing with different affairs. And in Shanxi province, it is the same. So a lot of the local government believes that, oh, this is a pathway that we can pursue. And when we try to build those areas up, we weren't focusing on profit. We weren't focusing on the revenue. With our partners, including with the tech companies, we had a very good relationship of collaboration. So this is to modernize the governance capability of the local government. And this is our responsibility as a major bank. This is our obligation. In the past, last year, we have a more than 300 billion profit. So with that profitability, you should be paying back to the society. So we weren't focusing on the profit when we tried to help with the intelligent or the smart governance. And we had a very good result, exceeding our expectations.

Now we have already signed the agreement with 29 provinces and cities. We were part of the Jingjingji and also the Internet Plus Governance Plus Supervision Scenario Development. So now, we provided governance service, an inquiry, and also a reservation for over 200 million users. And we actually are connected to over 25,000 governments. We actually assisted in the processing over three million government affairs and over seven, implementation of over seven million lists. So basically, we increased their efficiency by 30%, reduced their handling time by 38%, and we can cut the errands by over 60%. I'm citing these data just to show you that with better data, we can reduce the trouble that people should take to do them, but this requires concrete action. It's not only the part of the government and financial institutions like us has the capability, so we should just give back. So this is part of sharing and being open. And on ATM machines, we actually delivered cross-provincial service. So you might hear a lot of news coverage in Shanghai. In Shanghai, we can actually ensure that if you are in Shanghai, then you can do things at home. For example, if you're a migrant worker living in Shanghai, work in Shanghai, if you lost your ID card, then actually you don't have to go back home to do these things. You can actually go to a CCB outlet to handle such things. So 14,000 outlets of CCB can deliver over 6,000 governance issues. So actually it's all enabled in Shanghai. You can handle the issues, all the issues across the country in Shanghai. And then here in Beijing Tianjin, Hebei province, it's all connected. And you can, we've already delivered over 6,000 increase in other services over 40,000 such transactions. We serve over two million, two million people. So I'm talking about these outlets because in the past, you have to really join a very long queue to process, to get these service. But now the traditional function is disappearing. 100% can be handled online. But CCB has such a wide outlet, network of outlets, and they are very strategically located. So just think about it from the internet perspective, you can use them to handle governance issues, to serve the public. And also we can change them into workers' harbor. So that those truckers, those cleaners, and those express delivery people can come there to use outlets for bathroom, to get some water, et cetera. And of course we also work with the disabled association to make it accessible to all the disabled people and to deliver better service to the marginalized group. So if we can follow that logic, then we can actually make a difference to the everyday life of the ordinary people and provide more convenience. I just touched on Yuenong Tong moments ago. So this is also part of the governance. How can we better ensure a fairer and more equal distribution of financial resources when it comes to rural vitalization? A very important point is that, since we've just completed the most important battle against poverty in order to consolidate this achievement, without financial resources, you can hardly make it sustainable. How can we take advantage, build on the very successful battle against poverty and develop the rural areas? Financial resources are really the most important resources that you should put in place in the first place. So the Yuenong Tong project, I just mentioned the number across the villages. We just want to put our tentacles there in those villages so that people living in those remote areas can enjoy the services, those people that grow crops, those people that actually raise animals or animal husbandry can get such services. So it's part of the governance. On the other hand, it also gives us a lot of opportunity to grow new business. And of course, we're also trying to work in the field banking plus governance. And I'll... So... Let me give you one more example. We established those specialized platforms to enable payment products. And this alone, in medical diagnosis, we actually did over 10, 100 billion in business. So finance can actually also make a profit out of business for the majority of people. It's better than those name-based profit because we can make a difference to the society and really tangibly improve people's life. And for us, people working in the banking industry, we also feel a very strong and lofty sense of mission. As a financial practitioner, we can actually serve the people and give back to society. And that is really quite an inspiration for us and for our staff. So under new development strategy, we really can do a lot of things and there can be a lot of opportunities so that we have the opportunity to really better serve the society. Thank you, next question. Next question is from Pinko Zhonghua Nan. Pinko Zhonghua Nan. I'm Zhonghua Nan with Pinko. My question concerns asset quality. Because in 2021, the overall asset quality, the whole banking industry, including CCB, was looking up. However, there have also been some risk exposures in certain fields. So now we're the triple whammy from the real economy this year. So my question to the management is that, what's your view on the trend in this year's asset quality and credit cost? And I also like to ask your view and judgment and also some countermeasures relating to the real estate industry. So CRO Zhonghua, thank you. Thank you for this question. Now the economic operation is overall stable. And of course, we have made important preliminary progress in guarding against the risk. So in 2021, we actually maintained the stability of the risk. The MPL ratio is .42% down by 0.41%. So we know the risk exposure is closely linked with the overall economy and also the endowment of our sources and also the internal management capability. This year, we will continue to deliver very strong management to deal with the triple whammies like the geopolitics and real estate, et cetera. And of course, we will also try to make our countermeasures even better targeted. So we expect stability in the credit costs. On the one hand, Chinese economy is still improving in spite of the difficulties. This long-term rosy prospects for Chinese economy remain unchanged. In the first two months, we can see that the major economic indicators are showing improvement that further bears it out. And then we will actually pay attention to the three missions and three measures to further improve our credit mix. We will continue to boost the inclusive finance, consumption finance and rental house support. So assets in these fields are overall good. And then we will continue to increase our efforts in the disposal of non-performing assets. And then fourthly, we will also try to improve our governance. We have always been adhering to the balanced, coordinated and sustainable strategy to improve the comprehensive and smart risk management and improve our capability. And of course, we have also optimized the pre-landing process and strengthened the mid-landing procedure and post-landing management. Of course, we also focused on the... That gave us some post-some challenges for us, but now real estate is going on the right path. But this will not affect the overall stability of CCB in 2021. Our asset quality in real estate remains stable. MPL ratio was lower than the average MPL ratio in corporate loans. And the proportion of the real estate landing was still pretty small and the impact was manageable. And real estate had an impact on financial and economic stability. And the central government economic meeting continued to decide to squeeze out the bubble in the real estate industry. And of course, we strengthened risk mitigation. As the next step, CCB will continue to implement the deployments of the central government. And we will continue to improve the risk mitigation and promote restructuring and promote the basic rental house development. Of course, we will also pay more attention to the risk profile of the industry to maintain the stability in the industry. Next question. Next question comes from Chou Zhao Yan with the insurance newspaper of PBOC. Thank you. My name is Chou Zhao Yan. So I still like to follow up on that previous question. You just mentioned that we need to support the new financing needs. And of course, we also need to increase our support in key areas. So in real estate, the rental house support has been the call of the government. And the government report also mentioned that there should be more development of the long-term rental house and basic housing. And CCB has also tweaked its policy in response. In the past, people went to CCB to buy a house and then people went to BBC to go to BBC to rent house. So I'd like to ask your measures in this regard. And of course, the lending in the rental house, which has already been included into the concentration, lending concentration management for CCB, how much impact does it have on CCB? And the personal housing loan is a traditional advantage for CCB. And what's your strategy for this year? And I'd also like to ask about the proportion of real estate lending. And so it's slightly down in 2021. Will there be more change since 2022? Thank you. Thank you for the questions. So if you want to rent a home, then come to CCB. And this has been recognized by more and more people. And this itself is the best approval of our achievements over the past four years of work. So people have been paying close attention to rent a house, basic house, rental housing, et cetera. And local governments have been coming up with a lot of the specifications for implementation. And the environment is improving. And CCB, of course, will make the most out of our experience and of course, take advantage of our Lego to do a better job in the field. And now we're focusing on three things. First, on the financing, and we are improving our financing service. Now we actually have the evaluation and screening mechanism. On that basis, we can increase our support for a house rental. By the end of last year, the balance in this regard, it topped over 130 billion. And then this year, we also witnessed very strong growth. In the meantime, we are also providing the green service. This can help clean the exit channel and attract more funds into the field so that we can have a virtuous cycle.