China Merchants Bk Co H

Good morning. CNB 2022 third quarter result announcement will now begin. I am CNB representative of Securities Affairs, the head of BOD office, Xia Yongfeng. Considering the pandemic situation, we will continue to broadcast our communication online. First of all, I'd like to introduce the attendees on site today. They are Mr. Wang Yang, President and CEO. Mr. Wang Jianzhong, Executive Vice President. Mr. Li Deling, Executive Vice President. Mr. Zhu Jiangtao, Executive Vice President. Mr. Zhong Desheng, Executive Assistant President. On behalf of CNB, I'd like to extend warm welcome to your participation in today's meeting and thank you for your long support and interest and investment in CNB. Today's meeting includes two sessions. First of all, we'd like to give the floor to Mr. Wang to briefly introduce CNB's Q3 results in 2022, takes around 15 minutes. The second is the Q&A session, takes around one hour. The meeting is provided with simultaneous interpretation from Chinese to English. Now let's give the floor to President Wang to the introduction of CNB 2022 Q3 results. Dear investors, analysts, good morning. Last Friday, CNB released the 2022 third quarterly report, and today, along with our senior management, to meet with all our investors and analysts. I'd like to take this opportunity to thank you for your long support and interest in CNB. I'd like to, along with my colleague, to conduct in-depth and open communication with all of you today. several minutes to introduce our CMB Q3 results and then take your questions. What's worth mentioning is that the below-mentioned statistics are based on the IFRS Calibri, also the Age Share Announcement Calibri. Since this year, under the complicated domestic and external operating environment, CMB continues to uphold a quality, efficiency, and scale dynamic balance development philosophy along our set target of direction and goals to continue to build a 3.0 model and strive our capability in wealth management, risk management and fintech to promote our operating and management level to realize the steady growth in our operating performance and consolidate our advantage in our fortress type balance sheet For the first three quarters, we are featured by the following six characteristics in our operation. First of all, we remain stable in our profitability and a high level of ROAA and ROAE. Till Q3, we have realized operating net revenue 264.8 billion yuan, up by 5.31% year-on-year. Net income attributable to the bank's shareholder, 106.9 billion yuan, up by 14.21% year-on-year. Realizing net income from the interest income, 162.13 billion yuan, up by 7.63%. Net non-interest income, 102.7 billion yuan, 1.85% up year-on-year. ROE AA and ROAE analyzed attributable to the bank's shareholder were recorded 1.5% and 18.2% respectively and up by 0.06 and 0.11 percentage point respectively. Under the advanced and weighted approach, our CET1 ratio continued to increase, reaching 12%. and 11.18% respectively. Secondly, we secure our growth in wealth management business. Non-interest and net income has increased steadily even on a high base. By the end of September, retail AUM 11.96 trillion yuan up by 1.2 trillion yuan by the end of last year with a growth rate of 11.16%. Asset management business totaled 4.72 trillion yuan up by 9.26% compared with the beginning of the last year. Asset custody business totaled 20.77 trillion yuan up by 6.72% compared with the end of last year. Under the drastic decrease of the capital market, wealth management business still maintain good growing momentum showing strong resilience. For the first three quarter, the group has realized non-interest net income 102.7 billion yuan up by 1.85% yearly. It is a growth secured based on the last year's growth rate of 21.87%. and accounted for 38.78% in our net operating revenue. To see from key items, our fee and commissioning come from wealth management, 25.5 billion yuan, a negative growth of 13.1% year-on-year. Fee income from asset management business, 9.4 billion yuan, up by 22.32% year-on-year. Custody business realizing revenue, 4.4 billion yuan, up by 6.59% year-on-year. Bank card commission fee income, 15.9 billion yuan, up by 6.54% year-on-year. Settlement and clearing fee income, 11.5 billion yuan, up by 8.87% year-on-year. Thirdly, our loan scale grows steadily. Consumption in credit card loan has demonstrated fast recovery momentum. With insufficient credit demand and a shortage of asset origination for the banking industry, we have made active proposal of the loan extension Total low-end and advances 5.99 trillion yuan, up by 424 billion yuan, a 7.62% growth. And the total low-end advances has accounted for 61% of the total assets, 1.53 percentage point higher than the end of last year. Under the bank's calibrate, our corporate low-end increased by 125 billion yuan, with a growth rate of 6.64%. among which green loan has increased by 56.6 billion yuan compared with the end of last year with a growth rate of 21.45%. Manufacturing loan up by 67.6 billion yuan compared with the end of last year with a growth rate of 21.12%. Retail loan 3.16 trillion yuan up by 175.8 billion yen compared with the end of last year with a growth rate of 5.89%. Among the retail loan, as we see less increment in the residential mortgage loan and more increment in the SME loan, it actually reflects our strongest approach to the real economy. And we have made very proactive graphs of the recovery of the consumption loan after the pandemic. And therefore, our third quarter newly granted loan are mainly invested in the retail business. And we see consumption loan and credit card loan experiencing fast recovery. They represent an increment of around $50 billion and accounts for 80% of our total increment for the third quarter low-end. To some extent, offset pressure brought from a fast decrease in the low-end yield. Fourthly, we see steady growth in our customer base and the customer deposits increase in its quantity while remaining good quality. By the end of September, we have 2.47 million corporate customers which is 153,000 more than the end of last year. Retail client amounted to 182 million, up by 5.2% compared with the end of last year. The growth in our customer base has promoted actively and strongly in the high-quality growth of our deposit. Total customer deposit is 7.09 trillion yuan, surpassing the 7 trillion threshold, up by 11.71% compared with the end of last year, among which corporate customer has contributed to around 4.39 trillion yuan, and the deposit from our retail customer has amounted to 2.7 trillion yuan up by 18.08% from the end of last year. We will continue to adhere to take the core deposit as our center and strengthen to attract and accumulate more settlement funds of our customers and at the same time conduct both quantity and pricing management over high-cost deposits. Demand deposit has accounted for 61% of our total deposit remaining at a high level. For the first three quarters, customer deposit cost ratio 1.51% up by 11 bps year-on-year, among which for the third quarter, customer deposit cost ratio 1.54%, which is 2 bps higher quarter-on-quarter. The degree of increase has narrowed from that of the previous quarter. Fifthly, we continue to dynamically adjust our balance sheet and to narrow our degree of decrease for the NIM. For the first three quarters, our NIM was 2.41%, down by 7 bps a year, mainly influenced by the multiple cuts of LPR, the weak financing need from the real economy, and people's intention to make more money fixed-term deposit rather than capital market investments. In order to maintain a stable NIM in the third quarter, we further enhance our strategy in portfolio management over our balance sheet. In the asset side, we extend our customer base, increase our loan extension, maintain the price, and guarantee our quality to make sustainable arrangement of loan extension and enhance our efforts in allocating more bonds and exit those interbank assets with low yield. Our net interest income has upped by 7.63% year-on-year. On the liability side, we promote the growth of low-cost core deposits and manage more on high-cost liabilities. To see from the third quarter, our interest earning asset yield 3.86%, interest-bearing liability cost ratio 1.61%, remaining the same, with that of Q2. Third quarter NEM was 2.36% down by one bit compared with that of Q2, but the degree of decrease has greatly narrowed compared with that of Q2. Sixthly, we have categorized strict asset categorization and strengthened the risk prevention and solving to control our risk, influenced by the risk brought by our real estate clients and brought by the retail loan influenced by the pandemic. The company's NPL, special mention, and overdue loan balance and ratio all increased compared with that of last year. By the end of September, our NPL loan... NPL balance totaled $57 billion, up by $6.2 billion compared with that of last year. NPL low-end ratio, 0.95%, up by 0.04 percentage point compared with that of last year. Special mentioned low-end ratio, 1.14%, up by 0.3 percentage point compared with that of last year. Overdue low-end ratio, 1.21%, up by... 0.19 percentage point compared with the end of last year. The company's NPL2 low-end overdue for 60 days ratio was 1.21%, the annualized NPL formation ratio 1.13% up by 0.18%, mainly influenced by the new formation of non-performing real estate loan and the recognizing time point adjustment of our credit card loan and the migration of recognizing loans overdue for 60 days and above as NPL. Targeted at current operating environment, the company will continue to adhere to our prudent and stable provision policy. Our provision coverage ratio, 455.6%, down by 28.2% compared with the end of last year. Loan provision ratio, 4.34%, down by 0.08% compared with the end of last year. high capability of risk compensation. The company's annualized credit costs 0.81% up by 0.32 percentage points year-on-year mainly because that we have made forward-looking and prudent provision increase for low and then advances looking into the fourth quarter on the the very challenging external environment in economy financial and geopolitical environments repetitive outbreak of the pandemic the adjustment in the real estate market the decreasing interest and interest rate and the fluctuation in a capital market, we are still faced with great pressure. CNB will remain our strategic positioning unremittingly, remain the free unchange, namely the president assumed full responsibility under the leadership of the board, our marketized system, and our stability of the talent team to continue to take customer as our center and create value for our clients. and continue to strengthen our capability construction in work management, FinTech, and risk management surrounding the value creation chain of increasing quantity revenue efficiency and value to comprehensively strengthen our management to prevent and to solve risk to build our new competitive edge and form a new mallet curve and continue to increase our long-term investment value of cnb thank you that's all for my introduction thank you president wang now we will enter into the q a session please Follow the instruction given by the operator and please introduce your name and the agency you represent before you raise the question. Now we'll have the first question.

Please raise your hand. to raise your question. And please open your microphone and also your camera and state your name and the institution that you represent. The first question is coming from Guotai China Asset Management. Mr. Zhu.

Great.

Thank you for the management for me to raise the question.

It's quite a simple one. My question is under the current external environment and whether CNB will have some thinking about business strategy or business tactics under the new external environment. Thank you for the question. This year you are seeing that the financial institutions have already encountered very difficult external environment. And just now I have give you a brief introduction about what we have achieved this morning for the first three quarters, why we have achieved such quite a stable growth. We think that this is mainly because we stick on to our retail banking strategy and retail business is the backbone of CNB's overall business. So under the current external environment, how can CNB develop further and to maintain our advantage and our own special characteristics and also how can we provide the investors stable return. I know it's a big interest and concern from the market, but it's also the same direction that the management are moving towards to. I think that why we have come to today is because, firstly, 20 years ago, we have already very clarified the direction of our strategy, namely retail banking. I remember that 20 years ago, our ex-CEO, Mr. Ma Wei Hua, he said, if you do not do wholesale banking today, you might not be able to be profitable today. But if you do not do retail banking, then you might not be able to be profitable in the future. At that time, the future he means is that it's now time for us. So we think that if we do not do retail today, we cannot be profitable. So if we do not do retail in the future, it's also the same. We'll not be profitable in the future. So that is why last year the board has reconfirmed that the bank will need to build up itself into a best value creating bank with extensive... business model. We think that it's in line with the traditional advantages that CNB have now and it's also in line with the with the trend of the time and the new era. So what is the trend now? Currently, you know, China has become the largest economy in the world, and we have a middle class for around 400 million. And our goal is to have inclusive prosperity. So our goal is in line with the national goal and also in line with customers' demands. And this is a conclusion that we made based on our efforts made by the 25 years. And we have quite accumulated our experiences, our overall and comprehensive mechanism, and also know-how in these areas. So that is why I say we definitely need to stick on this path that we have already embarked on. And last year, the chairman of the board has already said out the idea that CMB need to build up three capabilities, namely the capability for wealth management, for fintech, and also for risk management. The three major capabilities, one of them is for wealth management. health decides on how fast we can go and also technology decides on how fast we can go and risk management decides on how far we can go. So the chairman also, the requirement from the board and also the chairman also clarify the future direction of CMB. So we think that as long as we can stay on this path and stay true to our original purpose, So definitely, we think that we are able to provide value, create value for our investor, and also create value for our employees, for our shareholders, for the society, and also for our customers.

Thank you.

Second question, please. The second question is coming from Mr. Ma Kunpeng. Thank you for giving me this opportunity. Actually, now we see that there is kind of a sharp fall for the CNB stock price. Investors are quite concerned about whether CNB will change its market mechanism. us your view on the market's concern? Thank you for the question. Yes, indeed. Recently, the stock price, especially from October, has come down even further and has even break. Our PB has been even below one. So there are many concerns from investors and also many reports in the media. For the management side, we think we really highly lay high emphasis on your concern. Investors, analysts, and also media reports, I have already read your reports and have made some thinking on that. I think people are interested in, firstly, whether CNB's market mechanism can continue. Secondly, they are concerned that in this downturn of the economy, especially when the real economy is facing difficulty and the national guidance is to ask the financial institutions to support the real economy, will that have some negative impact or will that change CNB's strategy? So how CNB can balance to rethink the real economy and CNB's special strategy. And thirdly, I know investors are concerned about CNB's asset management, wealth management, whether CNB will change its strategy in these two business areas. And combining your questions, I would like to share with my view as the management. with you. I think the market mechanism for CNB will not change. CNB was established in 1987 with only 100 billion in capital and now our net assets is over 900 billion and if we calculate on the core tier one ratio, we are 11th among all the banks in the world. We started from Shekou area in Shenzhen and then we go to, we become the national bank and become an international bank. The reason, one of the reason behind our success is because we have market mechanism I think marketing mechanism is not a simple slogan. Rather, it has its internal logic. Firstly, it can be reflected that, firstly, CNB operates on its own, namely the profitability. CNB is responsible for its own profitability. I know it's quite easy to say right now, but at that time, during the very beginning of the period, it was a very challenging time, a challenging resolution at that time. when we firstly started in the 1980s. So definitely we will insist on that. And secondly, another reflection about market mechanism is that how we choose our talents namely our management can be promoted or demoted based on their performance and their income can be even high or low based on their performance. Performance is the important thing for our staff force. And even for us as a management, we have a three-year term. We are appointed by the board. If you are capable of leading the bank, then you will continue to be appointed by the board, rather you will not be chosen by the board. And also for our management and all the staff working in the bank, they need to compete for promotion, depending on their performance. So I still remember at the very beginning, when people started to join CMB at the start-up period, they think that it's not a guaranteed job. at that beginning, and we lay emphasis on the professionalism of our staff force. This is very important and it's embedded in our gene. And thirdly, is we have sound corporate governance structure. At the very beginning, we set up the, we confirmed the, namely the CEO room. resumes the full responsibility of the bank under the leadership of the board and also we emphasize on professional we rely on professional management to lead the bank and all these are based on marketing mechanism you can guarantee the development of the bank i still remember when we start first started the credit card business and also private banking business We also introduced professionals from other first-tier financial institutions abroad to join us in CNB to help to develop the credit card and also private banking card. Even some of them are still staying with CNB today. As you can see, we already set up a corporate sound, corporate governance, and it also ensure ensure that CNB can continue to be market oriented especially we are listed both in A share and H share market and it also helps us to perfect our market mechanism I have a deep understanding that every conversation with investors or analysts I know that investors and analysts you have and your advice on our strategy is also an important thing for us. It's a very precious value for CNP. It means how we can perfect our strategy and to perfect our mechanism. We think that for these past years, we have already formed our own characteristics and we will continue to do so And also our chairman Miao and the board have repeatedly confirmed that the CNB need to remember three things unchanged. Firstly, CEO take up full responsibility under the leadership of the board. Secondly, marketing mechanism will remain unchanged. Thirdly, stable staff force remain unchanged. and this is why we are successful in the past and these are the same reason or same thing that will continue to insist on in the future definitely market economy also means economy which is law-based and another thing we are sticking to market mechanism means that we need to operate in a compliant way means that we need to stick to contract based on we are interested by our customer and we need to fulfill our responsibility marketing mechanism doesn't mean high reward to performance but also at the same time it has reward but at the same time it also has constraint you need to, when you are enjoying the advantage of market mechanism, you also need to where the constraints from the market mechanism such as I just said, the management can be promoted also demoted and the income can be high or low based on your performance. There are two sides and also the negative sides that you need to take on. That is why I say we need to stick on the market mechanism and have better use of that to ensure our advantage. Secondly, we are concerned that there will be some changes to our strategy. I think that servicing the real economy It's not contrary to our strategy. Rather, it's in line with our strategy as a bank. Servicing the real economy is our natural duty. Only with a strong economy can we have a strong finance. For the past decades, especially after the 2009 financial crisis, Chinese banks have become even stronger and stronger. We are one of the four or five of the Chinese banks among the top ten banks in the world. The main reason behind that is because China has grown into the second largest economy in the world. Because the economy has grown stronger, that is why finance, especially banks, have become stronger. And CNB also benefits from the rapid economic growth after reform and opening up. So it's our natural responsibility to do our service, to service the real economy. And by serving the real economy, we can further develop this. Undoubtedly true. And at the same time, CNB is a bank based on market mechanism. And also we have our own special characteristics. So we need to stick to the differentiated path. And when we are expanding our balance sheet, we also need to focus on risk pricing. These are the principles that you need to stick to. And so you can both have a better development of yourself and also to serve the economy. And CNB also, we are Also, thinking ESG is a very important responsibility that we need to take on. That is why we are promoting the green loan and also green assets, green bonds, this business series. We think it's in line with the national strategy. And also for extensive wealth management, we are better serving the residents' wealth management demands in order to achieve the inclusive prosperity. So we think all the strategies are very much in line with the national strategy and also with the CNB's own characteristics. So we think that servicing the real economy doesn't contradict CNB's strategy and we can keep a balance. These are much in line with each other and we can develop our bank itself and at the same time to do a good job bit to the economy and serve the real economy and to take up our social responsibility. This is for the second concern about a balance between our own development and the business and the national guidance. And thirdly, I know the media reports, some were targeted at Mr. Tianhui's violation of laws. And there are some reports on that. And I know some investors are quite concerned about that, whether it will have some negative impact on CNB's wealth management business or asset management business. What I can say is that the case for Mr. Tian He Yu is his individual case. It has no direct relation to CNB. And according to the requirement of the chairman and the board, we need to stable our mechanism, stable our operation, and stable our staff force. That is why you can see we are very stable in all fronts, which can be also reflected in our operating performance. And no staff from CNB has been involved in Mr. Tianhui's case. And every business is moving in the right trajectory, such as I just said, the custodian business has increased over 20%. And our wealth management business, extensive wealth management business, even though it's negatively affected by the capital market, volatile capital market, even though we are facing quite difficult time for sales of mutual funds, the other business are moving ahead quite healthy in a healthy way and keeping a good momentum. So definitely we'll follow the direction from the board and our management will stick to our original strategy and to create value for our investors. We take value for your opinions and advice. That is why I would like to take this opportunity to share with you my views. Thank you.

Thank you, President Wang. Now we'll have the next question. The next question is from Ms. Yanmei Zhi from UBS. Thank you, senior management, for giving me this opportunity. I am Yanmei Zhi from UBS. As you have just mentioned, President Wang, that in risk management, I have a question for asset quality, especially for real estate business. We've noticed that by the end of September, the real estate business has decreased quarter on quarter. I'd like to know that if there is any changes on your development strategy in the real estate business compared with the previous arrangement. We see in the third quarter that the MPL from the real estate business has surpassed 3%. And we continue to see some default cases of the developers or unfinished projects in the market bringing influence to the market condition. I would like to know that From the end of this year and to next year, what do you see the trend of the NPL, of real estate business? Where is the peak? The NPL formation ratio, provision ratio, and the pace of disposal, what are your arrangements and what are the risk conditions of residential mortgage loan and credit card loan and other retail loan in your key areas? Thank you. That is all for my questions. The question will be answered by Mr. Zhu. Thank you for your question. As for the real estate risk, I believe it is of many people's interest question. For CNB, our strategy is that we will remain consistent with our previous arrangement with no major change. As for real estate MPL, we pay special attention to not only the ratio but also the special of the formation ratio. The MPL ratio is influenced by many factors such as the scale, such as the collection pace. The collection actually can reflect the trend of changes in the industry to see From Q1, the formation ratio is 4.7. Second quarter, 2.7 billion. And the third quarter, 3.5 billion. And generally, the gap is narrower and narrower. This is a trend we see. From my perspective, in Q4 and the next year, we will still continue to see this trend. This is all about the on-speed real estate business risk conditions. As regarding off-balance sheet risk by the end of September, wealth management products with underlying asset of real estate business is 145 billion, among which non-standardized 66.4 billion mainly focused on state-owned enterprises so that the risks are under control. Agency sales balance totaled to 38.4 billion, among which corporate agency sales 4.1 billion, and most of them are default products, PB agency sales products. 34.1 billion yuan, which is 10% of our peak. So currently... products that has already been defaulted with amounted 4.9 billion yuan, which is focused on very limited amount of clients and we have already get sufficient asset pledge. So in the further phases, we will continue to strengthen our management in the existing period and conduct active communication to the asset manager and to urge to perform their capability and their performance of management and protect the consumer's rights. This is the off-sheet asset quality condition in regard of wealth management and agency sales products. And as for the general risk and disposal policy we will apply on the real estate business, we will further enhance our efforts and take multiple measures except for the traditional methods such as collection. We will also take other investment banking way of settlement such as AMC and etc. The disposal of risk assets takes a while. understand that it will take a pretty long period of time to get it disposed. And as for the provision for real estate business, the provision level of our real estate business is already two times of our general provision level for the corporate banking business. So it has pretty strong resilience. As for Another case where you pay much attention to, that is the self-repayment event happening in some projects, by the end of September, we expect the total volume will be $369 million. which is 0.02% of the proportion, so that the risk level is controllable. That is so much for my answer. Thank you. That's the Executive Vice President, Mr. Zhu. Next question, please. Next question is from South Africa, from CITIC Security. Thank you, Senior Management. The question for asset liability allocation, as we see that there is a continuous asset shortage in the banking industry, I'd like to know your strategy in asset allocation, category asset allocation for Q4 and next year, especially a growth rate for total low-ins and total advances and low-ins and total assets. And I'd like to know whether you will still take retail loan growth as your newly granted loan scale. Thank you for your question. In this year, we have made our budget according to our deposit growth, capital consumption capability, and our market wallet share, and also figure announced by PBOC and also our asset structure and these factors all together contribute to our budgeting for next year's loan growth. For this year, due to market changes, we have made quite big adjustments. The reason behind is that we don't have sufficient effective credit demand. General loan growth was $300 billion and corporate loan $120 billion and for retail loan $170 billion and the rest are from the bills and from non-bank SI loan extension relying on the increment we see from the corporate low-end which is around 60 billion or so that has to some extent upset the gap from the retail low-end extension. Under such circumstances, we do not see sufficient low-end extension and therefore we have made corresponding adjustment in enhancing our efforts to low-end investment. including investment to local government debt, policy bank debt, and also foreign currency bond investments to flexibly arrange our asset allocation and make good use of the capital in Q4. we will act according to our plan established in the beginning of this year and strive our best to finish our target of loan extension. We will appropriately lower the loan extension to bills and interbank assets and encourage our support to credit card and corporate banking loans, which is also what we've seen for the past, for Q3 and Q4, the credit card low end and the retail and the consumption low ends are getting back on their feet with good recovery momentum. And I believe this momentum will, to some extent, offset the gap we see from other types of retail low ends. We will also encourage the low end extension to SME low end in the following period. And we hope that even though we have finished our budgeting target for SME low end and for these types of low ends, we will still maintain our support in this area. For corporate low end, we will still continue to enhance our efforts in extension of banking field, especially for M&A loans and for manufacturing loans. We've seen from the PDOC policy that a lot of new instruments were encouraged to be extended to the advanced manufacturing and green finance and some other fields. This is our overall plan for this year. For next year, On the one hand, we will make a good finish of this year, and we also get prepared for a good beginning of next year and make relevant and corresponding plans for low-end extension for the next year. Like last year and previous stages, we will maintain an appropriate growth rate. According to our RWA report, allocation capability to maintain our capability of capital indulgence growth. With limited RWA, we will take full consideration of our future investment and loan expansion plans to guarantee the growth of our retail loan, the growth of our net interest income, so as to finish our general and final target of revenue growth. And of course, we will act according to our risk management level and will not act too aggressive, too fast, nor will we be too low in our pace of development. We will make very reasonable arrangements of our low-end extension plan. And we will also take a look at the nationwide low-end growth and speed. I believe we will remain a double-digit growth in our loan growth, which is similar to what we have done in the previous years. That is for the size. In terms of our structure, we will follow our established strategy, encourage our loan expansion to retail banking business, SME, retail, consumption, real estate, mortgage loan, But for housing loans, we need to follow closely to the trend of the market and make accordingly our plan. By the end of September, the residential mortgage loan was only increased by 18.8 billion yuan, which is far less than what we are making the target in our budgeting. And therefore, we need to innovate the way we promote such business and strengthen our efforts in promoting the second-handed houses. And this is for the low-end structure. And as for the corporate banking low-end extension, we will serve the real economy, SME, green finance, manufacturing low-end

And these aspects will be our focus.

We will act according to our allocation of our industry understanding and our regional focus. All these conditions will be the considerable factors for our next year's plan. Thank you, President Wang. We will have the next question. Thank you very much for giving me this opportunity.

My question is about asset quality. We see from the third quarter report that the ratio has been kept at a low level, below 1%. But overdue loan and special mention loan are rising. So looking into the fourth quarter and next year, what is your view on your overall asset quality? This question will be answered by Mr. Zhu. Thank you for your question. Look into fourth quarter and next year, I think that the overall asset quality of the BAS will remain stable and the MPL ratio will be kept at a relatively low level. For corporate banking, for the first three quarters, the new NPL form is coming from the real estate sector, and around 70% are coming from that. But you see that, as I just said, sequentially, the new NPL formation of real estate is coming down. And so the other sectors are remaining quite stable. For virtual banking, and we think that the risk has raised a little bit compared to the beginning of the year and the main reason one is the coveted impact the second one is real estate and thirdly is we we ourselves have further increased our standards for how we identify risk so our MPL ratio for mortgage is only at 29%, and also for overall retail is 0.49%. It's all at a low level. And another area that you might emphasize on is credit cards. As we can see that in the third quarter, the early indicators for risk for credit cards is performing better than what we have in second quarter and first quarter. So we think that for credit card, we'll stick to our policy with a stable and low volatile policy to maintain the risk of credit card on the controllable level. Thank you. Next question, please. Next question is coming from Mr. Yang Shuo from Goldman Sachs. Thank you. Thank you for giving me this opportunity. My question is about the needs. What will be the trend for the second half for next year? And another thing is about the repricing. How will the repricing affect the needs next year? How will you take access to counter the negative impact coming from repricing. The third question is about what's your view on the decline in your deposit rate and will that be sustainable next year? What is your view on that? Thank you. Thank you for your question about means. For the group level, the int has been down by 7 bps on a year-on-year basis for the first reporters. But for third quarter, sequentially compared to second quarter, it's only down by 1 bps. So the degree of decline has been narrowed sharply. As you may remember, in second quarter, we have a sequential decline of 14 bps. And third quarter, we have seen very obvious improvements. Looking into the future, we think the trend of being declined is still very obvious. And that's in a sense our pressure for us to manage the need. It's very large. The main pressure is coming from the asset side, especially there's a lack of effective demand in the market and very fierce competition for quality assets that There is some distortion of pricing. Some of the pricing for loans is even lower than the deposit rate. It's a kind of irrational competition in the market. So for T&B, we need to take a rational way for competition in the market. We need to risk-wise fight for availability. The price with a very, very low pricing, we might give up the chances for the competition for those of them who cannot cover risk. That is why you see from the asset side, we are still facing downward pressure on that. And from the liability side, in the third quarter, The reason of the uprise of deposit cost is because this year's capital market is not performing well, and many customers like the term deposit products or term saving deposits. So in order to satisfy our customers' demand, we need to provide these kind of products to our customers. our customer. Another good news for deposit side is state of banks and the holding banks in September we collectively have decreased our deposit yield by 10 bps and this help us to relieve our burden on deposit side and help us to maintain stable in. This is the first time that banks collectively to reduce the deposit costs. We think that is a reflection of the marketization, liberalization of interest rates. In September, after we adopted the new deposit rate, definitely it will have positive impact on fourth quarter and also for next year. We'll have a check on the deposit cost. So, overall, we think that the NPO, the NIN will be still continue old. under pressure and another thing it will say about is repricing. This year for long-term LPR has been down by 45 bps and for first home buyers, the pricing can be below 30 bps below LPR and this can all be reflected in the first quarter of next year. I noticed that after the release of the third quarter, some banks have shown a symptom of a negative growth of operating income. I think that for the yield of assets and deposit costs, a steep growth, we can now make a further pressure on the growth of our operating income. So, BNP needs to be cool-minded and have a right judgment of the external environment and to make sure that our operating will be stable in next year to to minimize the impact coming from the LPR rate crisis on our operating income. And our goal is to achieve stable growth next year. And it's also a very important thing that the management is laying services on. In the first quarter, we are already starting to take approaches to counter the negative impact on the LPR rate crisis. Thank you.

Next question, please. Next question is from Morgan Stanley.

Thank you, Senior Madison, for giving me the 我想问一个关于一个手续费的问题。 我们看到这个3D度,不管是手续费, 这个飞机收入,以及这个用心收入吧, 这个下滑都比2G度或上半年更加的明显。 那请问主要的原因是什么? 那么再往前看上呢, 我们看到这个不管是公关还是资本上, 可能现在还都很多不确定性。

As you are faced with so many uncertainties in the external environment, what is your expectation on the commission fee income's growth? Thank you for your question. For commission and fee income, We have recorded 102.7 billion yuan up by 1.85% year-on-year. It is a growth secured on the high base of last year's 21% growth. It is the 1.85% growth based on last year's high base. It is not very easily to achieve. The major reason of our drop is because of the agency sales of our fund business. The degree of decline is around over 40% year-on-year. We are faced with the fluctuation and challenge and difficulties brought by the capital market and we have taken multiple measures to dig deeper into business from other aspects to offset this negative influence brought by the agency sales of the funds. We have made achievements in agency sales of insurance products and wealth management products in asset management, asset custody, and the bank card settlement commission and fee income. These aspects have all contributed to stable growth. to offset the negative influence brought by the capital market. This is the overall situation in Q3. To see from the quarter-on-quarter growth, the commission and fee income has slowed down a bit, decreased. Non-interest income in Q3 was 31.3 billion yuan, and the For the quarter-on-quarter decrease, it's around 7%. This is mainly because of the capital market fluctuation. And we see even more drastic fluctuation in the market. And as for the insurance product fee income, we have slowed down a bit in Q3. And for the first half, the insurance product revenue is very good, which has brought us some gaps in a decrease. For the next year, we will take various measures to guarantee the growth of non-interest income and commission and fee income. On the one hand, We will make efforts in multiple aspects and we will not rely the commission and fee income on single type of products in case of the changes happening in the external environment. And for the second aspect, we will continue to enlarge our customer base, enlarge our AUM. The cake, the AUM will require us to enlarge Even though with the very unsatisfying environment, we continue to bring our AUM scale up by 1.2 trillion yuan. As the AUM scale is larger, we believe there are still assets that can make generation, make contribution to the profitability. Hence, therefore, we will still stick to our strategic direction of extensive wealth management By leveraging this capability, we can enhance our capability in asset management, asset custody, and in some other business segments. And that is what we can depend on. in our future growth. We believe the strategy of extensive wealth management can better optimize our structure of revenue and therefore we can remain a stable growth in our revenue, especially net non-interest revenue. Next question, please. The next question is from CICC, Zhang Shuai Shuai.

The economic growth rate this year is relatively poor. As we have new credit expectations of Ignore, and we have been in the real estate factor. We have also mentioned some of the figures from the wealth managers that I'd like to know your expectations.

on future retail time base and other growth.

And also, next year, it's the second year that we're proceeding to build two kinds of wealth management business that we think will get to capital markets this year. We also see some more on the retail, wealth management management business. I believe CNB will be one of the best banks in doing retail wealth management business.

I would like to know what are the highlights of your wealth management business and if there are any rebounds in the capital market, will you be faster and better compared with your competitor? Thank you. This question will be answered by Mr. Wang. Just now, Mr. Wang, President Wang has mentioned the commission of fee income in excess wealth management. It is under pressure. So therefore, your question is quite a good one. TMB's retail banking business, especially in wealth management, our core competitiveness is, what is our core competitiveness? I'd like to answer your questions from the perspective of PlanBase, AUM, and some other aspects. So first of all, AUM is the key. to your retail banking business. This year, our client base has a good growth. This year, retail clients are now totaled 182 million until Q3, which is a 5.2% growth year-on-year. To see from the growth of our type of customers, we are featured by following four characteristics. First of all, our customers tend to be younger. Golden card level clients have shown fast growth rate. Among the clients from golden card level clients, we see young customers' ratio increase from 28% to 33%, representing a fact that we are recognized by our young customers, especially the college students. The second aspect is that we have seen fast growth in major city clusters, such as Yangtze River Delta and some other regions. There are higher proportion of growth from these areas by 20 bps. The third characteristic is that online wealth management has been a trend. Omni-channel wealth management business has increased to 42 million, which is 11% higher than that of the previous year. So generally speaking, Acting according to our structure of retail business, the portfolio itself is quite rational. From basic level to car level to golden car level to the above, the structure is now rational and quite qualified. So we are satisfied with the results we have achieved in managing our client base. Although influenced by some external factors such as the pandemic control, our customer acquisition might be a little less than that of last year since we have not completed this year. But the management quality is actually better than that of last year. Especially, we have comprehensively promoted the group-based finance. It has generated results. A group-based solution is actually a closed-loop business operation from customer to C and to B. It is integrated with corporate, IB, and retail finance, and we have seen quite healthy development path in this regard. This is about our customer base. The second aspect is about AUMs. we see pretty good growth in our AUM up by 1.2 trillion yuan compared with that of last year. We also see structural change due to the external factors' influence. Deposits grew a lot, and the second is banking wealth management products. It is quite normal as there are fluctuations in the capital market, so Investors, our clients tend to be more risk-hedged driven. And therefore, we will definitely provide relevant arrangements due to our understanding of the timing and provide it to our clients. This is also reflected on our non-interest income. So therefore, there will be a drop in our agency sales of fund products. But generally, CNB has constructed a very long-term capability in our wealth management business. First of all, the first aspect is that our value. We have always taken customers as our standard, and we create value for our clients. This has been our core value. This is closely related to our staff's understanding, our performance evaluation, our system. and our results has generally been demonstrated. The second is that our Tree as an Allocation philosophy has comprehensively launched the Tree T R E E Allocation Key is to put in our customer segmentation and categorization to better understand your client and have established an equity-based allocation discipline for our clients. we have a very scientific evaluation to see how much equity product to allocate for what type of assets. So therefore, it is also reflecting our philosophy to take our customer as a center. It is quite advanced in the domestic banking industry and we have finished system establishment.

After implementing this system, C&D will be even more

resistant to saturation in the capital market. And we can also enhance our competitiveness in the market. For the third aspect, insurance products. And this year, through the arrangement of insurance products, it is not just good performance from the statistics, from our results. It is also a reflection of the increase in our capability in our capability of making allocations. The structure we see within the increments of the insurance products are mainly regular paid insurance products. It is quite a complicated product and we are relying on our system capability our staff capability and the product selection capability, can we deliver such solution to our clients? And that is what we say that we are building our stronger and stronger capability in our wealth management business. So therefore, the increase in our capability in building the insurance products has given us confidence overall. Well, actually, the slowdown in Q3 actually represents that we are doing too good in this year's target. So therefore, we proactively slow down our pace. But moreover, we will still follow our overall strategy and follow the direction given by President Wang to continue to strengthen our capability and the fourthly, online capability. it actually reflects our reach to our clients, our increase in our efficiency, and the cut of further costs. By the end of September, the wealth management product clients that hold positions has increased by 11% year-on-year. Especially for some indicators, wealth management transaction clients has increased by 3% in their repurchase ratio. The 3 percentage point is very substantial, representing our online operation capability actually increased compared with the previous stages. Our online-based, our digital-based operation capability in the wealth management business actually has been further enhanced. From January to September this year, the agency sells products through the online channel has remained a double digit growth. Even though the agency's sales of funds business has been quite difficult this year, but the online channel remained a double-digit growth. So therefore, it is another aspect reflecting our capability. The third aspect I'd like to talk about some of the questions you're interested in. First of all, trust-based products. we actually see quite large drop in the products of the trust-based business. We also see the performance in the overseas market, non-standardized trust in products. This era has gone. Just now, Mr. Zhu has mentioned that CMB has accessed most of the products and remain a little volume within this product. So therefore, the exit is also to some extent reflect in our non-interest income, but we remain a very limited proportion of such business. And the second aspect is the equity-based product. As the capital market fluctuates, we also see very natural decline in agency sales of equity funds. In order to cope with this situation, we have taken multiple measures such as to enlarge our customer base and to verify our product selection to our clients. And therefore, you can see we have secured our position in the market. And we will wait for further warming of the market. And we believe our equity fund-based products will bring better customer experience to our clients. And we believe that it is also another key factor for us to pay attention to when we are facing with the market fluctuation about how we serve our clients. And we believe it is also a good timing for us to allocate equity fund-based products to our clients during the lowest point in the market. We have continued to consolidate our capability and therefore we have full faith in the future.

Next question, please. Next question is from Spring Capital, Mr. Shi Xu. Thank you for giving me this opportunity. I have two questions. We see that the net operating income is up by 14.1%. And it's a little bit slowing down compared to the first time. And it's quite the same as just Mr. Wang has said. So looking into the whole year, what would be your judgment or your view on the whole year's operating income and net profit? Secondly, looking into two and three years with enough capital, what will be your target for net profit and for RE? Thank you. Thank you for your question. For the first three quarters, our profit has gone by 14.21%. saying that it's in line with our expectation but negative thing that we are facing is a slowdown of our operating income. Operating income is now only 5.31%. Comparing with our peers, it's above the average level but definitely there is a declining trend and one of the reasons behind is the contraction of NIM and a slowdown of NRI and also low-based growth of the fee income. All these have resulted in a slowdown of the operating income growth. We think that the operating income under the current current situation. Namely, we are continuing to face the lack of effective real economy economic demand under this negative environment. The pressure for NIM is very large and the trend that slowdown of the operating income growth is also still there. And in terms of the profit, we will strive to keep a stable profitability. But the key factor is asset quality. When we are facing slowing down operating income only with a good as a quality insurer that there will be no loss or eroded by risk factors. This is the key to the profitability of the bank. Otherwise, the profitability and operating income will not be able to meet our expectation. I remember in In 2018 and 2019, we have single-digit operating income, but we still have double-digit of profit as well. The main reason behind that is we have a very good management of risk management at that time. So it's the same cycle again. What we are trying to do is to strive our best to keep a stable operating income and better and the risk side and ensure the quality and to reduce credit costs and to maintain stable profitability. This is how we can realize the value chain and to increase revenue to increase profitability. and look into the next two to three years when there's a forecast for that. I think we need to look at the changes in the macro environment and look at monetary policy side and also financial markets and need to look at ourselves how we can control the cost side and how we can price the loans and also for fee income, how we can grow the fee income. So that will be decided by many factors. My judgment is for CNB.

I try to be more neutral.

I should not be too optimistic or pessimistic. So frankly speaking, I think that CFE can maintain our ROE at a relatively high level and can provide a reward or value for the investors. It will be an object that is worth investing in. This is the target or goal that we are working for. But we need to take into consideration manufacturers like profitability, capital constraints, structural change, credit, displacement, service-of-will economy, and risk management? And how can CNB maintain a stable operating in a down cycle? I think many emphasize on the five areas. It's like the five figures of your hand. First is transformation, namely transformation from traditional banking business model to the new banking model based on extensive development and based on digital operation. Secondly is to be innovative. innovation means vitality and to enjoy the benefits from innovation. In the past, we were successful because we were innovative and now we'll continue to be so. And thirdly, is to maintain the bottom line of our asset quality and to prevent risks Fourth is to have a stronger staff force, especially for management. This should be in line with the future trend of the banking system. I think it's the key to the success of the bank. Fourth is management. We need to strengthen management, like cost management, risk management, strategy management. These are to be an emphasis of the bank. I think it's like a fist, namely five fingers of your hand. Neither of them should be shorter than each other. And then if you put the five fingers together, it will be a fist to make sure that the capability of the bank can be strengthened and further improved so as the profitability can be returned to the investors. So that is why I say these are the five areas we need to emphasize on and to make a strong force to maintain a stable operating income and to give you rewards within your situation. Thank you. In order to ensure the interest of... all the investors that is why we have broadcast this results conference that many investors have come in not only the participants online but also we have collected questions through email I think the questions are quite the same as the question that has been raised just now and Now I would like to pick up another quite more representative question from email. Our colleagues, brokers will share that question. In the third quarter, in CNB, in the structure of your credit loss, as you can see that the provision for loan is rising quite fast, but the provision for non-loan assets is coming down quite a lot. What is the reason behind that? And look into the whole year and next year, what is your view on your coverage ratio, credit cost? This question will be answered by Mr. Zhu. Thank you for the question. you may have pay attention to the uprise about the permission for loans which is mainly first one is because of the risk coming from real estate sector and also Covid has some impact First one is for interbank assets and the reverse repo assets. The total size of that has been down by 90%. And secondly, for the contingent assets, because last year we have made ample provision for that, and this year it has declined a little bit. So these are the major reasons behind the decline of the provincial 49 loan assets. For the whole year, we think that the coverage ratio by the end of the year will decline a little bit compared to what we have at the beginning of the year, but it will continue to be kept at a relatively high level. And for credit costs, at the end of September, the company level is around 1% by the end of third quarter and by the end of the year we think it will be smaller than what we have in third quarter but will be higher than what we have in the beginning of the year. Thank you. Now last question please. The next investor we are going to invite is from Guosheng. Thank you for the opportunity to ask me this question. I would like to ask you a question. Since this year, the interest rate of the entire loan market has been continuing to fall.

The bank industry is also generally taking a strategy of loan price imbalance.

However, the capital supplementary pressure of the entire industry is still rising. Recently, some banks have also launched debt financing plans. So I would like to ask our recruiters whether there will be such a system of supplementary financing in the future. Have any plan to raise capital or raise funds in the capital market? we have replenished our capital from the market for over half 10 years. And to keep our indigenous capital growth is our own requirement for ourselves. And currently we don't have any plan for that. And as I mentioned, our goal is to maintain a stable, reasonable profitability. And our profit is significant. factor for our capital replenishment is one of our strategy for that thank you due to the time constraint in 2022 this quarter results conference will now come to the end if you want to know more details you can search for our third quarter report online or to line up with our IR team. Thank you very much for taking time to attend today's conference and thank you very much for your support for us. We will continue to do our work and to provide a better return to the investors. Thank you very much. Goodbye.