China Merchants Bk Co H

Analysts, friends from the media, good morning. CNB 2023 Annual Result Announcement will now begin. I am CNB Securities Affairs Representative, Head of the Office of the Board of Directors, Xia Yongfang. Today, our result announcement will be presented both on-site and online live streaming. On behalf of China Merchants Bank, I'd like to extend warm welcome to your participation and thank you for your long support and investment in CNB. Now, I would like to introduce our attendee. They are Chairman, Mr. Miao Jianming, President and CEO, Mr. Wang Liang, Executive Vice President and Chief Risk Officer, Mr. Zhu Jiangtao, Executive Vice President, CFO, Secretary of the Board of Directors, Mr. Peng Jiawen, We also have online and offline participants, Mr. Li Menggang and Mr. Tian Hongqi, independent director, and also relevant department heads from CNB. There are two sessions of today's meeting. The first session will be given by Chairman Miao and President Wang on the 2023 performance overview, taking around 30 minutes. The second session is a Q&A session, takes around one hour and 30 minutes. The meeting will be concluded. in 11.30 a.m. The meeting will be provided with simultaneous interpretation from Chinese to English. Now I will give the floor to Chairman Miao and President Wang on CNB 2023 performance. Dear investors, analysts, friends from the media, good morning. Welcome to China Merchants Bank 2023 Annual Result Announcement. Today's performance presentation will be including three parts. First, I will introduce the company's 2023 performance overview, and then President Wang will introduce the detailed operational information, and then I will briefly introduce our outlook and strategies to 2024. In 2023, the group has taken to build a value creation bank as our strategic goal. make a steady development with progress, strengthen and optimize capital-heavy business, optimize and enlarge capital-light business, enhance wealth management, fintech, and risk management, three capabilities, and achieve the quality, profitability, and scale dynamically balanced development reflected in the following six aspects. Firstly, we actively and effectively respond to challenges in line with our operational performances. Faced with loan rate cuts narrowing fee-cut sluggish capital requirement and insufficient credit demand and complicated risk conditions and other unfavorable factors, we take active measures to maintain a stable operational performance. Net operating income, 339 billion yuan, down by 1.64% year-on-year. Net profit attributable to the bank's shareholder, 146.6 billion yuan, yielding an increase of 6.22%. ROAA was 1.39%. ROAE was 16.22%. Representing year-on-year decrease of 0.03 percentage point, 0.84 percentage point respectively. We make strict control on cost influenced by the decreasing revenue. Our cost-to-income ratio was 32.97%, a slight increase of 0.08 percentage point. Our net interest income was 214.6 billion yuan, year-on-year increase, a decrease of 1.63%. Although we're influenced by the continuous narrowing interest rate spread and also the structural change of our loan and deposit structure, our NIM was 2.15%, year-on-year decrease of 25 bps, but still maintain a good level. Influenced by the fluctuated capital market and the enhanced fee rate cut, our non-interest income decreased slightly. Our non-interest net income was 124.4 billion yuan, down by 1.66% year-on-year. Secondly, our asset scale grew steadily and maintained our liability advantages. Our balance sheet maintained stable growth, and at the same time, we continued to optimize our liability structure to maintain our advantages of low funding costs. Our total asset scale was 11.03 trillion yuan, up by 8.77%. Our total loan and advances to customers was 6.51 trillion yuan, up by 7.56% compared with the end of last year. Total liability was 9.94 trillion yuan, up by 8.25% compared with the end of last year. Interest-bearing liabilities average cost ratio was 1.73%, up by 0.12 percentage points year-on-year, maintaining at a good level. Cool. total customer deposit was 8.16 trillion yuan, up by 8.22% compared with the end of last year. Demand deposit's daily average balance Proportion to total deposit was 57.08%, maintaining at a high level. Thirdly, we maintain good asset quality, stable asset quality with strong risk compensation capability. We continue to enhance credit risk management, enhance asset quality management. Our NPL balance was 60%. 1.5 billion yuan, up by 3.57 billion yuan compared with the end of last year. 0.01 percentage point compared with the end of last year. Credit cost was 0.74%, down by 0.04 percentage point year-on-year. Allowance coverage ratio was 437.7%, down by 13.09 percentage point compared with the end of last year. Lowen's provision ratio 4.14% down by 0.18 percentage point compared with the end of last year. Fourthly, we continue to optimize our business structure and our capital maintains endogenous growth. We continue to solidify our structural advantages. Retail revenue and profit contribution account for over half of the total volume. Retail finance net operating income and pre-tax profit account for 57.31% and 56.57%, respectively, and giving full play of its balanced role. Non-interest net income account for... 36.69% of the total net operating income, maintaining at a good level. We continue to maintain capital indulgence growth. Under the advanced measurement approach, our core Tier 1 CAR, Tier 1 CAR and CAR were 13.73%, 16.01%, and 17.88% respectively. up by 0.05, 0.26, and 0.11% compared with the end of last year, respectively. Under the risk-weighted approach, our core Tier 1 CAR and CAR were 11.86%, 13.82%, and 14.96%, respectively. by 0.34, 0.57, and 0.28 percentage point compared with the end velocity. Fifthly, we continue to increase IT input and speed up to construct the AI plus finance model. We increase our input to increase our FinTech capability and empower digital operation and management, explore the scenario-based application of AI and speed up our transformation to smart CMB. IT input amount to 14.1 billion yuan, accounting for 4.6% of the bank's net operating income. We continue to optimize talent team with R&D personnel reaching 10%. 1,700 people accounting for 9.14% of the group's total employees. Our FinTech Innovation Fund established 3,700 projects and in total launched over 3,000 projects. We continue to promote new capability construction and exploration of new models and strive to build five smart engines and our intelligent application has released our full-time personnel of over 17,000 people. We launched the LLM ecology construction and established the LLM experience platform to enhance our tech capability. We also actively implement ESG to provide support to real economy. We further improve our ESG work efficiency and won the A-level rating in three consecutive years of the MSCI ESG. We continue to improve the corporate governance system and rename our strategic committee of the board into the Strategic and Sustainable Development Committee of the board. We fully promote green finance and green operation with green loan balance increased by 26% and innovatively launched a green deposit product issue the global's first blue floating rate bond, provide convenient digital financial service to hundreds of millions of customers and lower the carbon emission result from the customer's transportation and promote our own green transformation of operation. We actively fulfill social responsibility, provide support to real economy Our manufacturing loan, inclusive SME loan, and the SciTech loan increased by 25%, 18%, and 44.95%, respectively. We continue to promote the improvement of people's livelihood and further allocate resources to key regions in people's livelihood, such as education, pension, and etc., and upgrade pension finance into a strategic business. increase financial accessibility, and provide the elderly, the disabled, the foreign traveling to China to provide convenient services. We strengthen consumer rights protection, enhance our mechanism construction, improve our complaint handling mechanism, attach great importance to privacy protection, and enhance internet safety management. This is briefly my overview to the 2023 performance. Now I'll give the floor to President Wang on the company's operational detail. Thank you, Chairman Miao. Now I will give you a brief introduction over the company's 2023 performance. In 2023, the senior management has acted according to the board's strategic deployment. We adherence to stable development and maintain good asset quality, strong risk compensation capability and good profitability among complicated environment, consolidate our Thank you very much. As a liability management, optimize asset structure and increase the return of asset allocation. Make multiple measures to strengthen quality asset origination and maintain stable growth in our loan scale. Total loan and advances to customers amount to... increased by 7.56%, accounting for 59% of total assets, regards market opportunities to increase the allocation of investment type assets and make flexible adjustment of interbank assets and increase our capital utilization efficiency. Investment in securities and other financial assets, proportion of the total asset was 29%, increased by 1.61 percentage point, We see the opportunities arising from the recovery macroeconomy and the credit demand from retail customers continue to enhance retail loan extension and retail loans proportion increase. to 54.71% of the total, representing an increase of 0.39%. With rather weak growth of the residential mortgage loan, we make active adjustment to promote the steady growth of credit card loan. With the premise of controllable risk, we enhance the loan extension in terms of microfinance and consumer finance. and their proportion in retail loan increased by 1.97% and 2.44% respectively. Secondly, we enhance liability quality management and maintain balance in quality and pricing of the loan growth. we are faced with the challenges brought by more trending more deposit trending towards term deposit we stick to our liability structure a strategy to take core deposit as the as the core to enhance refined management and maintain balance in cost control and customer demand. Core deposits daily average balance was 6.62 trillion yuan, an increase of 12%, and taking 86% of the total customer deposits daily average balance. Customer deposits cost ratio 1.62%, a yearly increase of 10 bps. But the growth... rate narrowed quarter-on-quarter. The company's RMB-denominated customer-deposit cost ratio was 1.56%, yielding a decrease of 4 bps. Thirdly, we continue to enlarge our capital light business and remain resilient in our non-interest income. We deepen the business model transformation and strive to build up our wealth management capability and promote the extensive wealth management business development. Retail AUM surpassed 13 trillion yuan, an increase of 9.88%. Golden Sunflower and above customers AUM achieved a 10.82 trillion yuan, up by 9.66%. Asset management business totaled 4.48 trillion yuan. Against market downturn achieved an increase of 1.59%. Asset custody business totaled 21.12 trillion yuan, increased by 5.28%. Our non-interest income remains resilient, manifesting our capability to sell through the cycle. Non-interest income accounts for 36.69% of the total, remaining high. Net fee and commission income, 84.1 billion yuan, accounting for 67.61% of the total non-interest net income. Under the sluggish capital market, we increase the supply of stable and conservative products and enlarge the scale of asset management and custody, business and mitigate to some extent the pressure brought by lower net fee income our extensive wealth management business income was 45 billion yuan accounting for 53 percent of the total net fee and commission income our payment and settlement business contribution increase and its proportion of the total net fee and commission income was 41 percent 2.97 percentage point higher yeah bothly we continue to enlarge customer base and enhance our comprehensive service capability Firstly, we always take customer as our center and enhance our customer service capability building with good growth on our customer base. Retail customer group, 197 million, up by 7.07%, among which golden sunflower and above customer, 4.64 million, up by 12%. Credit card active users, 69.74 million. With credit card transaction value achieving 4.81 trillion yuan, maintaining top in the market, we promote to expand corporate customer base with 2.82 million corporate customers, up by 11.66%, among which newly acquired corporate customer was 481 million. 900 customers with withholding customers amounting to 1.19 million. We increase product innovation, increase product competency to better serve our clients. Corporate customers FPA. was surpassing 5.5 trillion yuan, up by 8.44%. SciTech Green inclusive manufacturing loan and loans in other key areas' growth rate were both higher than the average level of the company's loan. We forged features of our pension finance with pension custody scale surpassing trillion level, achieving both increase in the market share and scale. Investment banking debt financing lead underwriting business totaled $591 billion. Bill discounting business balance increased by 24%. Transaction banking wealth management cloud service customer increased by 62%, and in cross-border finance, our corporate clients' international BOP under trading goods volume increased by 9.92%, and in financial market, the derivative transaction volume totaled 64 billion yuan. We speed up to construct our advantages in key regions to promote Yangtze River Delta, Pearl River Delta, Chengdu, Chongqing, and West Strait of Taiwan Taiwan Strait region's key branches to tap into the market potential to adapt to the regional development pace to forge new growth point. Branch in key regions core deposit AUM and corporate low-end growth all were recorded higher level than the average of the bank. The key regions' corporate loan balance increased by 16%, whose proportion was increased by 1.95% of the total of the corporate loan balance. our subsidiaries' competencies continue to increase, and their contribution to the bank's profit also increased, with further manifesting of the synergy effect of the group. CNB Wealth Management's product scale was 2.55 trillion yuan, remaining the top in the industry. CNB Leasing enhances asset allocation with a total asset of 290 billion yuan, China Merchants Fund's AUM 1.55 trillion yuan, up by 4.73%, among which non-money market fund scale was 575.5 billion yuan, ranking top in the industry. CNB International actively worked together with the bank to forge the coordination of investment banking and commercial banking business and finished 30 Hong Kong IPO projects, ranking top among the market. And fourthly, we continue to deepen risk management to prevent risks in key regions. We conduct strict asset classification and fully expose risks and remain stable as a quality. Retail NPR ratio 0.89% remain flat with year-end. Corporate low-end NPR ratio 1.19% down by 0.07 percentage point compared with the end of last year. Special measure low-end ratio, overdue low-end ratio, both record decrease compared with the same period of last year, among which special measure loan ratio 1.1% down by 0.11 percentage point, overdue loan ratio 1.26% down by 0.03 percentage point. NPL to loan overdue for 60 days ratio was 1.19. New formation of NPL was 60.9 billion yuan, down by 1.9 billion yuan year-on-year, NPL formation ratio 1.03%, and year-on-year decrease of 0.12%. NPL disposal scale 58.1 billion yuan, among which standard written off 22.6 billion yuan, securitization 22.5 billion yuan, cash collection 11.2 billion yuan. We effectively manage risk in key regions and maintain controllable asset quality. In real estate business, corporate real estate business balance, 290.7 billion yuan accounting for 4.71% of the bank's total loan. Real estate NPR ratio 5.01%. representing an increase of 1.02 percentage point compared with the end of last year, mainly influenced by individual high-debt customers' further release of risk and slower progress of risk disposal. And those that real estate business that we do not assume credit risk was 249.4 billion yuan down by 16.95%. Consumer finance and microfinance loan, we continue to improve. risk management, select quality clients, and strengthen our quantitative risk control capability and closely follow the external risks to conduct active classification of risks and maintain good asset quality. Retail, microfinance, credit card finance, and consumer finance NPR ratio were 0.61%, 1.75%, and 1.09% down by 0.05%. 0.05 and increase 0.01 percentage point respectively. Special measure low-end ratio and overdue low-end ratio maintain stable. Thank you. We leverage AI plus to drive model innovation and strive to build a smart CMB. We embrace the cutting edge technology revolution and surrounding online digital intelligent platform based and ecological development to speed up the construction of digital finance to transform from online CMB to smart CMB. In terms of AI, we enhance core technology research and speed up the capacity building of natural language processing, cognitive computing, and etc. Explore the application of LLM. CMV application fully use the AI technology to further integrate our smart customer service remote advisory capability and promote the wealth smart assistant Xiao Zhao to provide one-stop wealth management service and customize advisory service to our clients. The number of customer we serve increased drastically. Customer service digitalization in terms of retail finance, we speed up to transform to digitalization Smart and intelligent retail finance. CNB app and CNB live app has MAU achieving 111, 117 million. Microfinance online approval has account for 66% of the total approval. In terms of wholesale, we use digital tool to increase relationship managers' service efficiency with 92% of financing business doing online and 75% of FX business doing online. In terms of risk management, we construct the smart risk control engine and use internal and external data to increase our capability and efficiency of digital risk control. Our Libra system has reduced the percentage of fraud and account takeover by non-cardholders to 0.1 in 10 million. In terms of internal operation, we build the smart operational engine to realize the balance among experience, efficiency, risk and cost over 400 operational process has finished smart reshaping and be put in application with a 27 efficiency increase in terms of digital infrastructure we build an industry leading financial cloud infrastructure continue to deepen the construction of tech middle office and data middle office, enhance R&D efficiency and lower data using threshold. Our big data service has already covered 60% of our employees. This is basically our operational information in 2020. Now I'll give the floor to Chairman Mao on our outlook and strategy in 2024. Now I will briefly introduce our outlook and strategies in 2024. Looking into the year 2024, the banking industry is faced with both challenges and opportunities. In terms of opportunities, the national economy remains stable while seeking progress. We transform ourselves, adjust structure, and speed up to construct the financial powerhouse. to build financial high-quality development, which were mainly reflected in coordinated development of the macro policy, which strengthen the counter-cyclical and cross-cyclical adjustment. Many policies, including fiscal, monetary, and etc., coordinate with each other. Along with the further release of the policy effect, the national economy's rebound will gain momentum. And secondly, new quality productivity speed up development. New industry model momentum is enlarging. SciTech, green, inclusive, pension and digital finance are having great market space. Third, technological advancement represented by AI will bring new opportunities to the banks. tech innovation for the deep and generative AI technology further iterate, promote the banking industry into the smart era, bringing new momentum to the bank by using AI plus finance. To see from the challenging side, there are frequent geopolitical tensions and more complicated international environment and more uncertainties. And secondly, the domestic economies are quite weak in terms of its foundation of recovery, insufficient credit demand, overcapacity, and bottleneck in the domestic circulation. These are all challenges. And thirdly, banks are having more difficulties to remain profit growth, narrower NIM, lower fee rates, and lower risk appetite of our customers, insufficient credit demand. These are all challenges. heightened regulatory management, complicated risk environment, these are all new normal, posing higher requirements to the bank's operation. And the bank in 2024 will stick to our strategic goal of value creation bank and build our three capability of wealth management, fintech risk management, build our mallet curve to create more value to our customer, employees, shareholders, partners, and societies. And our strategies are as follows. We will firstly maintain our characteristics and competence to build a new moat. We will stick to our professional and market-oriented mechanism and remain retail finance as the strategic mainstay and construct our core competency, featured by low liability cost. and construct a new mode that takes smart bank as the core. We will be driven by both management and innovation, secondly, to achieve new quality, high quality development. We will adhere to refined management, solidify foundation, prevent risk, enhance operational efficiency to enhance our quality and competency of service. We will uphold fundamental principles and break new ground, explore new models such as AI plus finance, human plus digitalization to make synergetic efforts to promote high-quality development. And thirdly, we will... Further explore new growth point in segmented areas. We will stand on the regional characteristic industry strength where our branches were located and make according policies to speed up the development of branches in key regions. and to increase their contribution to the bank and also their market share in the corresponding market. At the same time, focus on customer demand, focusing on our endowment to give full play our differentiated advantages to develop SciTech green inclusive pension and digital finance, to build up CMB characteristics and explore new growth point. And fourthly, we will strengthen fortress style risk and compliance management system, adhere to prudent and stable risk culture, enhance our forward-looking assessment to potential risks, and manage all types of risks to effectively prevent real estate, local debt, FI in small and medium size, risks in key regions and in weak links, deepen technological security management and strengthen compliance risk management and firmly guard our bottom line of asset quality. Thank you. Thank you, Chairman and President Wang. Now we will enter into the Q&A session. We will now take the questions from investors and analysts and then take the questions from the friends of the media. As we have numerous participants from today's meeting, please raise your hands to raise questions. Please limit your question to one only and please state your name and the agency you represent before you raise the question. We will rotate the questions from first question on-site and then online. We will now have the first question from on-site.

Thank you for giving me this opportunity. Good morning, management. I'm Mei from UBS. I'm very glad to Seeing that CNB achieved such a great result, and very solid results in such a complex environment. We are very pleased to see that you have raised your dividend payout ratio, and now it's the highest one among Chinese banks. And also we see that there's a high rise of your share price yesterday for each share, around 5%. So my question is for the dividend payout ratio. What is your consideration for increasing the dividend payout ratio at this time? Is there any further room for you to further raise the dividend payout ratio, such as for a two percentage point every year? But I know that it relates to your consideration for short-term and long-term growth. You are very strong in terms of profitability. But definitely you are facing pressure in terms of name. And you also need to take into consideration the capital for your long-term growth. And also you also need to take into consideration about the dividend payout to shareholders. So my I know, do you have any expectations or growth expectations for your RWA growth? Or will you slow down your RWA growth in the future? Thank you very much. I will take the question. For China Merchants Bank, we want to build a value bank for our shareholders. which means that there will be a higher dividend payout ratio. And it's an important part of the value creation, the meaning of value creation. Last year, I know that many of you have lost money or breakeven in this capital market. So paying more in cash as a dividend payout will help to increase your return. and now 35%. I think for each share, our dividend yield is around 6%, and each share around 7%. So I think that CMB is kind of a share which has a higher dividend payout ratio, but with a lower PB ratio. Increasing this dividend payout ratio, Once increased, we never thought it will come down again. But whether we will continue to increase that one to two percentage point, as you said, that we need to balance among different factors, such as cash pay, dividend payout ratio, and also the capital for long-term growth. We hope that We don't want to do refinancing in the share market, but also we want to maintain endogenous capital growth capability and at the same time with a higher dividend payout ratio. So we need to want to balance these three factors in the future. Thank you. Next question, please. Thank you for giving me this opportunity. I'm from CICC, Zhang Shuai. My question is for Mr. Wang Liang. Last year, you have said that CNB want to strike a balance among different business sectors. To be very frank, last year, we don't understand that. But this year, we would like you to elaborate the logic behind the thinking of this business model. Thank you very much. Before answering your question I would like to say a few words. On Monday, we published our annual report. And yesterday, our A share and H share, our share price has raised quite a lot in both A share and H share market. And thank you very much for the recognition from you, from investors and analysts. And for these past two days, I have read a lot of articles from investors Investors and analysts, I know there are some suggestions and there are some criticism. We lay high value on that. Thank you very much for your suggestion and also the criticism for us. And we will all take into consideration your suggestions and try to make a better work Last year, actually, we were facing a lot of challenges, both industrial challenges and cyclical challenges and also policy challenges. So that is why last year pressure was quite high and difficulties were mounting last year. But under the leadership of the board, and also supported by all the related parties. We maintain a stable result and try to make progress in different factors, as Mr. Miao said in the report, in our annual report, that we are still who we are, and we have laid a solid foundation for the future growth as a Mr. Miao also highly praised them. The board has highly recognized what we have achieved last year. So last year, I think that it seems to be a normal year, but actually it was quite a difficult way to go. The result seems to be quite simple, but actually it was hard to achieve that. And CNB will try hard to maintain our result in the future. And just now your question was about the balance development. Last year, according to the strategy put forward by the board, we laid out our idea of building a value bank. It means that you provide value, creating value for shareholders, for customers, for related parties, for customers, employees, and also society. And that is why we think among our business factors, we want all four business factors to move forward and also to reinforce each other among retail, corporate, and also investment banking, and also asset management. But it doesn't mean that we have changed the main priority to retail banking. That is a very important thing. This year is the 20th anniversary of our launch of Retail Banking Strategy. The first time we launched the strategy was in 2004. And now it's already over 20 years, about 20 years that we are doing the same thing. And that is why we have achieved very good results in our Retail Banking. 20 years was quite a hard period. That was a long time. And at the very beginning, We have the original computer and we have launched the all-in-one card and the all-in-one net. And that was all innovation from CNB. And in the internet period, we become the all-in-one net and we provide services to customer seven hours every week and 24 hours every day. And then in the mobile time, we have upgraded our strategy to using mobile phones. So currently, we think we will continue to insist on our retail strategy. We will not change that. But only relying on retail alone cannot suffice. If you only do one thing, you might be fast, but you cannot complicate each other, which means that we need to be strong both also in terms of corporate banking and specialized operation of corporate banking and also strengthen our characteristic investment banking to create new growth point for our business. And also for wealth management, also asset management, these are the very major product line for us. Otherwise, without these product lines, we cannot do very well in retail banking. That is why we say that these four business lines should all move forward, and this is in line with the trend of the international banks and also in line with the domestic banks. Last year, we have achieved quite good results, and this will continue to do so. I think that by doing this, CNB can be a bank with our own characteristic. By moving all the business units forward, we'll not dampen our advantage in retail banking, but make it even stronger. Thank you. Next question, please. Thank you for giving me this opportunity. I'm Catherine Lei from JP Morgan. I read from your annual report that your asset quality was quite stable. Even for real estate industry, your NPO ratio has come down a little bit. But in 2024, when we look at the sales volume, it comes down and also both in volume and also pricing. So, may I know what is your expectation or forward-looking idea about the real estate sector? And also, do you think it will spread over to other areas, such as microloans are collateralized by real estate? And if the collateral value comes down, what will be the impact on that? and how we balance between the policies which ask or require the bank to support the real estate companies, and on the other hand, to ensure that the banks as a quality remain stable, how CMB will balance on that. Thank you very much. For real estate risk analysis, By the end of 2023, our NPO ratio is 5.01%, up by 1.02 percentage point by the end of last year. But compared to June last year, sequentially, you can see that the ratio is declining sequentially. This year, I think the trend hasn't changed much. And for special mission loan ratio last year, by the end of them, was 4.7%. It's down by 1.44 percentage point compared to the beginning of the year. And if we look at the NPO formation amount in 2023, it's down by 36.6% compared to last year, compared to the year of 2022. This is our status or our risk condition in 2023. And for our judgment for 2024 from the current situation, we think that probably it's highly probable that our real estate NPO formation amount will continue to come down compared to what we have in 2023. And at the same time, we will try to increase our efforts to dispose the existing MPLs. So I think the asset quality will remain stable. This is firstly for our judgment for the risk management sector. And for the risk, whether it will spread out to other areas, definitely there will be pressure, such as construction and also for the collateral you just mentioned. such as for the upstream construction. We see that in some regions, some enterprises, we have seen also defaults even in our own bank. And also for upstream and downstream of the real estate sector, we have done a special investigation into that, and we think that as a quality is all under control. and for how we implement the national policy and how we need to satisfy the reasonable financing demand of real enterprise and also how to maintain the asset quality of the bank. I think our priority in 2024 will focus on three areas. and to make sure that it's a ring-fenced management on projects. Three areas. First one is that we will focus on our wireless customers for our head office and branches. Secondly, to focus on first and second tier regions and cities. And thirdly, is to focus on business that is supporting the rigid demand and to improve the livelihood of people. The demand supports to focus on demand in this area. And on the project base, we still emphasize on the self-fulfillment or self-repayment of the financing cost by the project itself, which means that it will mainly highly emphasis on the ring-fencing project management procedure. And I would think that there's no much fundamental changes in the overall real estate sector risk currently. And one more online.

Now is the online Q&A session. Please press the more button if you're joining from mobile and participate the participant and press the participant button. Please, we will have the question from Xu Ran from Morgan Stanley. Thank you for giving me the opportunity. I have a question for the low-end growth plan and low-end pricing. We can see that low-end pricing tend to be quite competitive in the market. SME low-end pricing especially We also see from other banks that they may consider the trend to be not that reasonable, so they will tend to be slowed down in the low-end growth. So I would like to learn from CNB about your arrangement in low-end growth and low-end pricing and how to digest the risks in the mid to long run. And what is your plan's influence towards NIM? Thank you. Thank you for your question. I will take it. To see from the year 2023 that CNB's loan growth tend to be stable. Our corporate loan growth, 9%. Retail loan growth, 8%. The overall low growth was around 7% to 8%. So the speed is slowed down a bit compared with the previous years. But considering the external environment and the macroeconomic environment, I think that the investors and analysts mostly recognize that the growth rate is satisfying for CNB. And we could fulfill the requirement to satisfy the need of the real economy and also take active consideration of the supply-demand relationship in the market. And we are also faced with other questions such as the low-end pricing issue. And indeed, low-end pricing also decreased last year. This is a common challenge faced by the whole banking industry and for CNB. Last year, the low-end yield was down by 10 bps for corporate low-end. And of course, the low-end yield decreased more in retail low-end, 42 bps down. So in average, 28 bps down for the general loan. And indeed, we have to recognize that they have cast influence on the bank's revenue. And from the annual reports released one after another by the banks, we can see it's a common challenge faced by the banks. We need to conduct further analysis on the reason behind. First, it's about the LPR cut. as we are faced by the repricing of the existing loan, regardless of our corporate loan or the retail loan. This is the common challenge faced by them. And the second influence is brought by the supply and demand relationship. From the last year, we can see supply in terms of asset side is way more than demand in the market. So therefore, the competition in the market is fierce. the pricing and the cycle tend to be an influential factor. When the supply is higher than the demand, of course, the loan pricing will go down. And the third factor is that Besides the repricing factor, the supply-demand factor, our structure in the loan portfolio also matters. Our credit card and residential mortgage loan remain fast growth in the previous stage, and their loan pricing tends to be high among other types of loan. But for last year, regardless of credit card or residential mortgage loan, they are under multiple influences. influencing factors, and therefore, their slower growth rate lead to lower loan growth and lower loan pricing for us. So to see our outlook in 2024, our strategy will continue to follow our long adhering stable growth objective for many years. This has long been our goal to maintain stable growth. So, therefore, our total low-end growth will be also set on a target of 8% to maintain a stable growth. And under such circumstances, for low-end pricing management, we will maintain a balanced methodology. And firstly, it is highly... align with the external environment, we shall take active consideration of the enterprise's financing cost. So therefore, we can provide reasonable low pricing. And at the same time, we are able to conduct active management of our asset liability structure so that we are able to achieve a more reasonable asset structure and maintain a rather stable return of our asset yield. Even though I have to admit that we have made every effort to achieve our goal, we have to still admit that the loan pricing will continue to decrease in this year because of the reason of the supply-demand relationship. And also, in February 25th, there is a further LPR cut, which leads to a further decrease loan repricing of our residential mortgage loan. So the influence will gradually be manifested this year. And for the existing residential mortgage loan, there will be one of repricing in this year as well. So we will bear in mind the expectation to lower the expectation for the banking industry that the low-end pricing, that the low-end growth might experience slower growth. We will have one more question from online participant. We will have the question from Mr. Ma Kunpeng from CITIC, from China Securities.

Thank you, senior management.

I have a question after I read the annual report in the President's statement, in the Chairman's statement that you mentioned about the differentiated development. And since last year, the banking industry is faced with complicated operating environment. And I would like to learn from the Chairman, what do you see about the external environment for the banks? terms of differentiated development differentiated and characteristics development and how will the board of cmb to provide support to cmb to sustain and realize such type of development so for cmb we have always emphasized to stick to be driven by innovation, to build up a leading model and to feature a distinctive bank that is a value creation bank. Driven by innovation, only by doing so can we increase our core competency, only by We use a leading model. Can we enhance our capability in sustainable development only by develop in a featured model? Can we build our new mode to create value for employees, customers, partners, shareholders, and society? What is, we mentioned about characteristic, distinctive characteristics. But CMB actually has a very great, has very distinctive characteristics. Before, as we established, we strengthened to take deposit as our core, as our foundation. And later, we emphasized on building the retail bank as our core capability. Some of the peers boast CNB as the king of retail. That might be a high comment for us, but which also conveys that we have a strong capability in retail banking. This is our characteristic, and now we are forging a new characteristic to increase our tech capability and build our new moat to bring CMB from the online CMB to smart CMB. This is how we aim to make our competitiveness stronger, make our customer service better in the market. We mentioned the four segments of balanced development. That does not mean that we have no longer distinctive features. We aim to maintain our distinctive features based on the balanced development of the four segments. We shall maintain our existing advantages and characteristics. We will continue to take low-cost core deposit as our competitiveness. This is how we aim to maintain our good level of NIM. And at the same time, we will continue to strengthen our retail finance. This can also contribute to CNB in terms of our sustainable development capability. And at the same time, we propose to build an extensive wealth management cyclical chain of value. This is also in line with the wealth management and the retail finance development. Last year, we have experienced challenges such as sluggish capital market and also the fee cuts. There might be some influences casted on our wealth management business. However, we don't see lower proportion of net fee and commission income, net interest income, net non-interest income in terms of our total income. And we have also aimed to increase higher level of AI application in the banking operation. This can even make our characteristic more distinctive and make our capability to build a sustainable development stronger. It's not just a slogan. It has very rich detailed and content. It is how we build our new mode based on our past strengths. Thank you, Chairman Miao. We will have another question from on-site. Dear senior management, I have a question.

I'm from CLSA. My question is for Mr. Wang. It's the first time you have disclosed the key branches in key regions, and you have disclosed data relating to that and saying that you want to build up a new growth engine. So, Man, what is your thinking for that, and is there any progress on that? And what is the potential for that? Thank you very much for your question. And actually for business units, we think that retail is our top priority. And also we are thinking about what are the aspects that is in line with the overall economic development of China and what areas will be our new growth engine. I think a very main characteristic of China's economy is the diversification in different regions. And major resources are even more concentrated in key regions, like in Pearl River Delta, like in the Bohai area, like in the Chengyu area, and also like the Haixi area. And these are the major strategic areas for China and have great potential. according to the original strategy, we will continue to invest more into this region and hope that our branches in this region can contribute more to the whole bank. So our major policy is to We will invest more, give more resources to the branches like the capital, like human resources, like credit resources to these regional branches. And we require that with a precondition that the risks should be under control, that these regions should implement the strategy of the bank. Namely, these regions are areas where have a great potential for retail and have a great potential for more population. And also have more potential for new economies. how they can implement the new productivity industries and also into retail business. We have set targets for them, higher targets for them than the bank's average level and hope that they can be faster compared to the average and to implement the national strategy. by giving them more resources and setting up higher targets. We hope that by several years that these banks can contribute more to the bank's profit and also to build up a better engine for CNB's overall growth. Thank you. Next question, please. Thank you. I'm Mr. Wang Xianxuan from Guangfa Securities. My question is quite simple. Now, it's already at the end of the first quarter, and we have done investigation that banks are under pressure. But I know that different banks differentiate from each other in the operation for first quarter. So may I know, could the management give us some expectations on the first quarter? What are the some negative and positive changes and more direct question whether you can maintain a positive profit growth in your first quarter. Thank you very much for your question. Your question is very direct, but my answer could not be very direct. Actually, I want to say that in the first quarter, we really feel that the pressure is higher and haven't turned better compared to last year. Why is this so? Last year there were many policy causes and policies are reflected in the first quarter of this year, such as for the repricing of the existing mortgage. The new policy was started from September last year, so that was affecting only one quarter last year, but it will affect the whole year this year. Secondly, to the decrease of the fee rate for insurance that was in October last year. It was also affecting only around one quarter last year, but it will affect the whole year for the bank and also for agency sales fee of the mutual fund. It was also launched by last year. This policy will also, the impact will also be shown in this year. And also the reduction of LPR. and even 25 bps down for the five-year LPR, all these policies all compounded together will have laid pressure on this year's growth in operating income and also on profit. And under these circumstances, to realize a positive profit growth, I think, as you have wished, is really a big challenge. For us, on the one hand, I think one of our advantages is the low-cost deposit. We want to maintain our main advantage in the funding cost side. Last year, for deposit growth, it was very obvious for the trend of term deposit And at the same time, for US dollar deposit, the rate was increasing. So aggregately, you can see that the compounding deposit cost ratio was up last year. But actually, if you look at the R&B side, it's still under control from the cost. And this year, that is why we will continue to maintain the deposit cost. And secondly, is from the asset side, as you say, there's an oversupply of credit and pricing was quite distorted. And for some clients, their loan rate is even lower than the deposit rate provided for them, and it's not sustainable. And this reflects the supply and demand situation of the bank. So banks need to have more effective allocation of assets, and that is why we will maintain a higher proportion of retail banking, and retail banking's yield is higher than corporate side. That is why we make more efforts in micro law and also in consumption law, so as to offset the shortfall coming from the yield side. And in fee-based income, we try to make fee income in different assets such as asset management, custodian business, and also financial investments by different means to maintain our fee-based income so as to offset the policy negative impacts. and we want to increase our efforts in terms of cost control. And to, as the board has required, that is a tough time to tighten our belt and to cut cost and improve efficiency and to increase our by taking all these means. We hope that we will try our best to realize our own profit target. But as you have wished for, it was quite a difficult and challenging task for us. Thank you very much. I'm from Goldman Sachs. Claire, you just said about the fee-based income. My question is about the fee rate for insurance and also fee rate for agency sales of mutual funds. And could you please also give us some more detailed forward-looking on fee-based income? From our own will, we do hope that it will not continue to come down, but actually whether there will be further room is according to the new policy, so it's not up to us. I would like to elaborate on the fee income. Just now, Mr. Wang Liang has also introduced to us the policy factors, the major impact on our fee income situation. including insurance and also including on mutual funds. These are the main two factors affecting our fee-based income. Currently, we think that the impact is quite big. But whether there will be further room for the rate to come down, we do hope that this rate will continue to be stable. For fee-based income, I would like to give you more introductions. Last year, for banking industry and also for CMB, all facing great pressure in the income. For CMB, we are having even a bigger income compared to bigger impact on compared to our peers. down by 10.18%. It was quite a big decline. The main reasons are as follows. The first one is from mutual funds. Agency sales mutual funds down by 21%. Second one is coming from the sales of the wealth management products down by 18%. And also the agency sales of trust products It also declines over 10%. And also for asset management and custodian business, they all declined by 8%. Only one highlight last year was around insurance is up by around 9.33%. So that was the only increase for fee income increase. Behind that, you can see that the sales volume of the insurance has increased by 33%, which means that by increasing the volume of sales volume to meet up the shop floor in the decline of fee rate, this is for our insurance business. And I think that the business increase slowdown may also will also lead to a decline in the income, such as for a wealth management business, the daily average sales volume is coming down and is one of the reasons why the total income was coming down. And such as for custodian business, the total volume for equity products under custodian is also coming down, which leads to a decline in all fee income. And for our wealth management products, even though we are still ranking first in terms of the total transaction volume, but structural change has also caused the decline in the overall fee income. And last year, we all know that the capital market has caused a negative impact on equity-related products, such as for mutual funds, equity-related funds, so quite difficult. And also for custodian business, also the same, the products relating to equity under custodian, the overall volume is also coming down. And these are all structural problems. Thirdly is the policy impact, such as for fee rate card and also for the new policies on the On the policy side, these are the three factors. First is the volume growth is slowing down. Second one, structural problem. And third one, policy are all leading to the difficulties in fee income for wealth management. But there are also positive signs. The first thing is that for capital market, we think that if we look ahead, we haven't seen a very strong rebound in the capital market. It will continue to impact on fee income. And also from the demand side, I think that we are also not seeing very strong demand for wealth management products. But there are some positive signs, such as for the overall economy, the overall GDP target rate is around 5%, and I myself was quite confident about that. And secondly, for the capital market, it's still building up the bottom. I myself hope that it will rebound. And also, there are structural opportunities for the debt market and also for the bills market. So these are also positive signs that we have seen, which might have some positive impetus for our fee income. And internally, I think that there are several opportunities we need to seize. The first one is the customer growth, customer-based growth, including corporate banking customer and also for retail banking customer. Customer-based growth is the... where fee income comes from. So it's the origin or source of all the income. So this is the top thing, top priority we need to focus on. And just now, as Mr. Wang said, our AUM growth rate was quite good this year. And this is the foundation for the fee rate for our wealth management. And very importantly, how we can better serve our existing customer and provide value for our customer. That is the way that we We can improve our fee income. And secondly is the structural product structure, such as for insurance products, even though fee rate is coming down. But we do hope that we can increase volumes to offset some negative impact coming from the fee rate. So we will set up our efforts such as for the dividend payout ratio, dividend payout insurance and also protection type insurance to improve the volume, sales volume of this kind of insurance by optimizing the structure and also by making progress in terms of customer-based growth so as to minimize the impact coming from the policies.

Thank you, Mr. Peng. We will have a question from online participant. The question will be coming from Zhu Chenxi from Guotai Jun'an Asset Management.

Can you hear me?

Dear senior management, good morning. I am Zhu Chenxi from Guo Taijunan Asset Management. Thank you for giving me the opportunity. My question is about asset quality. I noticed that in the previous economic downturn, except for the real estate sector, for corporate banking business, other corporate loans actually remain stable for CNB. Actually, the economic environment is not that optimistic. So I would like to learn more about the corporate loan in terms of its asset quality, in terms of its detail, and what is your outlook? Thank you for your question. Well, indeed, the economic downturn. we are faced by some new challenges and pressures. And as for the real estate risks, I've addressed and responded. And for the corporate banking aspects, we have a rather large type of asset that is manufacturing loans. We have a total scale actually increased quite a bit for the past two years. and totaled 550 billion yuan in total. And by the end of 2023, our manufacturing MPL ratio was 0.59%. It recorded a decrease compared with the end of last year, mainly focused on the traditional retail, wholesale and manufacturing. So our focus in this round will be focusing on the several aspects to strengthen our capacity building. The first is that through industry specialization, we increase our recognition and quality client selection in the industry. And secondly, we focus on one policy for one branch and namely list based operation to strengthen our operation and management of risks of our middle level clients. And thirdly, we enhance our post loan data risk warning and also relevant management. And at the same time, we enhance risk classification and existing of this type of clients and also our risk inspection efforts. So the overall risk is controllable. And at the same time, for some industries under key management is mainly focused on 14 industries. To see the total volume, it also decreased compared with the beginning of the year. So the overall risk is also decreasing. We stick to the nameless management. which is proved to be very efficient, and the focus on the strategic plans of the head office and branch level, and the focus on the name list-based management to strengthen our overall control of risk. And therefore, the risks generally decrease. We expect in the year 2024, the risk management can still maintain stable. This is my response.

Thank you.

Another question from online. We have the question from CITIC Securities, Xiaofeifei. Thank you for this opportunity. I have a question regarding the structural reform, your organizational reform. I noticed there are some changes in the retail banking sector. So in the organizational reform, what is the influence and what is your planning towards this transformation? And what is the influence over the equity? So in January this year, the retail banking sector, we increased a department called the Retail Customer Base Group Department. It is newly established according to customers demand and its responsibility is to serve the retail clients except for those of private banking customers and for the retail banking general office wealth platform and also private banking departments, we have conducted some amendments to their responsibilities and we aim to optimize their responsibility focusing on customer-centric philosophy. cater to the increase of our total volume of 197 million corporate retail customers and there will be another increase in this year very fast increase and how to better respond to these clients we believe will be relying on our organizational changes and uh we believe that the previous model, the previous organizational structure can barely respond to the demand from our customers. And we also rely heavily on online-based operation and also intelligent management to better reach and cover our clients and respond to their needs. I think that through this structural reform, it will be a better chance to enhance the service capability of the head office and optimize the responsibilities and duties of each department and to strengthen the strategy development of the retail banking sector. This optimization has proved to be quite good after several months of operation. And for the past two years, in the head office level, other business lines, other business departments, including the CNB branches, have also made flexible and active adjustment according to the requirement of business. We have also conducted those adjustments in a smooth manner to avoid big influences to our business. For instance, we established a new department called the Inclusive Finance Department to further promote the development of inclusive finance business and now having a balance of $800 billion and serving over $2 million. inclusive finance business. So this has been embedded in our development philosophy to better serve our clients. We established a new department called Crosswater Finance Department to better serve the cross-border finance demand for our corporate customers. For the past two years, the cross-border finance business also developed a lot against the market trend, ranking top among our banking peers. We have also conducted the comprehensive branches to make our branches as a force to pioneer in the market. So we resume what we have been doing in the past, that let the sub-branches be the force, very emerging force to manage in the market. So these changes in the organizational structure can better serve our customer, to better respond to them, to build up our capability. to provide our service and also our efficiency per capita and our sense of loyalty and recognition of our staff also enhance along the structural reform. We conduct this reform in a smooth manner without having large influence on the business operation. It is aligned with our strategy of our overall development plan. This is I respond to your question regarding the retail structural reform. This is all about how we are able to promote our business, how we are able to align better with our development strategy, and how can we respond better to our customer-centric philosophy. Thank you, President Wang. Now we will have the next question from an on-site participant. Thank you, senior management. I am Huatai Security. I have a question regarding asset quality. I would like to ask this question to Mr. Zhu. I've noticed that the external environment that the residents have been showing sluggish, a rather weak demand in terms of assets. residential mortgage markets, and also in the retail sector. I would like to learn more about the senior management, about your assessment in this field, and what other sectors do you observe that will be upticking of risks? And I have also noticed the higher migration rate of the sub-level and the doubt low end. I would like to learn about the reason behind it. Is it some active arrangement conducted by the bank, or is it about some other factors? Thank you for your question. About the risks in the retail finance sector just now. Finance. About the residential mortgage loan by the end of 2023. the NPL ratio was 0.37%, a little increase compared with the beginning of the year. However, we are lower than the average level of our peers. To see from the NPL formation, that is 0.22% remaining flat compared with the beginning of the year. So in terms of residential mortgage loan, the overall risk is, we could say, at a low level. So to be specific, the residential mortgage loan As a proportion, we can say that 87% of the essence are located in tier one and tier two cities. the risk-weighted collateral ratio was 32.93%. And to see from our stress testing results, under the medium level, the MPL ratio will increase to 0.66%. So generally, the risk is at a controllable level, at a low level. To be specific, in the small and micro-sized loan, The MPL ratio was 0.61%. The MPL formation ratio is 0.52%. So generally, we both recorded a decrease in the two ratio. We also observed that in this perspective, we are faced by insufficient effective credit demand and weak social expectation. And there are also some hidden risks. And these are all influencing factors we are faced by. So we will further enhance our strict risk classification and onboarding of our customer. This is what we will do about microfinance loan. And the third aspect is about consumer finance loan. Our consumer finance loans NPR ratio was 1.09% and the new formation ratio was 0.9% uptake from the beginning of the year, which is aligned with the overall market condition. So for CNB, the consumer finance loan, our customer base is focusing on three types of customers. One type is our payroll customer. And the second type is our customer from quality industries. And the third type is top tier enterprise in specific industries. So generally, the consumer finance customers is not that same with our credit card customers. And the risk manifestation is also different from that of the credit card. As you can see, the NPR ratio formation, one is 0.94 and one is over 4%, so it is quite different. Consumer finance loan yield is better than residential mortgage loan. and also better than the microfinance low end. This is about consumer finance. The last part is about credit card. By the end of last year, credit card NPL 1.75%, NPL formation 4.52%. Both record decrease compared with the beginning of the year. However, the NPL formation indicator is higher than that of the pandemic era. 4.25%. We will have to admit it's at a high level. So after we made some amendment to our credit card strategy, the trend is also showing a decreasing momentum. this is the general condition for our retail finance business so looking into the year 2024 the overall risk is controllable and remains stable this is your first question my response to your first question the second question is about the sub-level and doubt level migration level there is a policy factor that is since july last year our asset classification new rule is now coming into effect. 27 days and above loans will be migrated to the doubtful. For those over 360 days, we will be recognized as lost. So according to the regulation, we will implement according to the requirement and we have conduct relevant migration arrangement and therefore showcasing the higher migration ratio regarding the sub-level and the following. It is mainly about what we have been implemented according to the regulatory requirement.

Next question. I'm Gary from HSBC. My question is for Chairman Miao. Last past two years, many foreign investors, actually, they are lowering down their shareholding in Chinese banks. How do you think that you can help to increase the interest from overseas investors for the ROE and also your RWA growth rate? What is your long- and mid-term target for that? Thank you very much for your concern for China Merchants Bank. They have written me a note for that. Thank you very much for that. The first question is for the number of the shareholders is coming down, whether we have any approach to increase the interest from overseas investors. I know there are many factors for that. And how can we be more attractive to foreign investors? Firstly, is to increase our own value, to increase our value, no matter is for domestic investors and also for foreign investors. They can earn money or they can have return from us, because capital is chasing profitability. As long as we are profitable, I think the foreign investors, they don't care whether the money is making from which market. So fundamental way and the key way is to improve our return for investors. That is why we are saying we want to build us into a value creating bank, including creating value for investors. Secondly, of course, we need to improve our communication with foreign investors. There are many reasons why foreign investors are decreasing their increase in China. There are some misunderstandings, especially due to last past years, due to the COVID control. communications has been reduced since we cannot go out and foreign business was not able to come into China. So there were a lot of misunderstandings due to less conversation. So that last year, we are the first to go to different markets, including US market. We are doing roadshow there and have to have face-to-face communication there. And I think the impact is good. Because buying shares, overall speaking, is buying future. It's not buying the current. So improve the confidence of shareholders is very important. It's very important. So where does confidence come from? It depends on communication, especially for domestic market in mainland China. It's a long way from the Western markets. I think the face-to-face communication is the best way for us to improve communication, and that is why we are doing roadshow last year, and in the future we will continue to do so. So this is for your answer for your first question. Secondly, for continuous ROA and ROE, And I think banks are facing cyclical, are facing cycles, and also ROE are also facing cycles. Years ago, U.S. banks are also facing a zero interest rate cycle, and the ROE was quite low. And last year, they were going to the rate hike cycle as improving. And I think that for CNB, ROA and ROE were quite high among our peers. Just now ROA was 16.22 percent and ROE is ROA was 1.32 and ROE is 16 or above 16 percent. So we hope that even during the downward cycle we can maintain a stable ROE and ROA. As long as in the downward cycle, if we can maintain a stable, more stable, even though it might come down a little bit, but definitely I think we need to be better performed than our peers. So our target is to outperform our peers and to outperform ourselves. In the upward cycle, we can perform better than our peers. So no matter if it's a downward cycle or upward cycle, we are better. We can live a better life than our peers and have a better return for our shareholders. So our shareholders will be satisfied around that. Our customer employees and society will all be satisfied with that. Thank you very much. due to time constraint. And we also need to guarantee the interest of individual investors. So we have a question from individual investors. Many questions raised was quite the same as what we have just asked. And I think that our employee will also read out one question from an individual investor. A question from an individual investor. From China Merchants Bank's operation, whether you are seeing some recovery in the demand from retail customers' demand? What is your forward looking for the growth rate of retail customers' loan demand? Thank you very much. from our retail loan growth, consumer consumption loan. Actually, there are three business products. One is our credit card. Last year, was a growth around over $50 billion. And also, our retail banking department is also doing consumption loan. It's growing by around $100 billion. And also, under us, we have a JV, is a CMB, a consumption with last year, their asset volume around $180 billion and grown by around $10 billion last year. So, all these three parts are growing last year, but with a different speed, because they have a different risk reward, risk pricing, and also they're targeting different customer groups. And we think, overall speaking, with the recovery of the consumption, our consumption loan is also growing. why the growth rate is different, such as for LGV, for the consumption loan, they are targeting at a lower level customers, which means that they are facing higher risk. That is why they are having a lower rate of growth. And for retail loan, we have a higher growth rate because they are having the best customer among the three parts. their MPO ratio is around 1.09% and the growth was around 100 billion. It's more targeting at the quality customers and they have strong capability of repayment. And for credit card customers, it's quite in between these two types, the above-mentioned two types. So this year, within our consumption loan, the growth will be quite the same as what we had last year. Speed might be slower, but amount will be stable, so that slowing down by a little bit slowing down will help us to better control the risk, namely making an adequate or reasonable growth rate and also at the same time maintaining the asset quality and also taking into consideration the return on the asset yield and also to satisfy the consumption demand. Thank you. I think the last 20 minutes will leave to the media friends. I think one question from online. Thank you for giving me this opportunity. I'm from China economy. Just now you have some question about retail. Yeah, retail said that CNB's advantage in retail banking business are even more stronger. So I would like to know your view on the development of retail banking business this year. And just now you said about the retail loan. You said that you are still going to grow the retail loan this year. But also you also mentioned about the concern on the asset quality side. And other banks saying they want to learn from China Merchants Bank in terms of retail. But also thinking about there are higher risk in the risk asset quality side. So the other banks are also moving towards more quality customers. So my question is, for what is the change for CNB's strategy for retail business, retail loan business? And in retail business, do you have any indicator that can show your leading advantage in retail business? Thank you. Thank you very much for your question. You just said that how CNB can better have a better advantage in retail banking business. And I think that for the retail banks in China, there's still great potential in the market. China has a population of about 1.4 billion and around 400 million mid-class customers. And I think there will be more coming to the mid-class level. residents and this means that a great potential for retail banking business. That is why every bank is laying high emphasis on that. And for CNB, for the past 20 years, with the accumulation that we have made, we need to seize the opportunity. And I think for CNB, the two opportunities are in the four areas. The first one is wealth management. And with the increase of the residents' income, there's need for wealth management means opportunities. And this is the opportunities we have. The second one is for AI. artificial intelligence. A bank, especially in wealth management or retail banking business, if it still relies on the physical outlet or the relationship managers, it cannot suffice customers' demand. for more efficient and more smart customers, so we can only rely on ITs like the AI technology. And CNB are strengthening efforts in these two areas and have made leading advantage on that in wealth management. We want to build the extensive wealth management value chain and also to improve our capability to create value for customer and also risk management for our customer and to build the ecosystem for our partners and to provide better return and better product to our customer with our counterparties. So this means good wealth management, and we have achieved quite good results on that. And for digitalization and AI, With the support of the board, we have also set up a earmark fund for financial products and increasing our investment into fintech. Last year, investments were around 14 billion, and this has been so for many years. Namely, no less than 3.5% of operating income for technology. This is written in our memorandum of articles. And this investment into technology has helped us to have a fundamental change in how we service our customer. Last year, I think our IT department said that we have saved around $100 million. 17,000 full-time employees saved and last year it was around 20,000 full-time employee was saved so by using this technology that we have improved the efficiency of how we serve the customer we'll have an on-site participant

Dear senior management, I am Ma Chuanmao from Security Times. I have a question regarding the chairman's statement to forge a core of smart CMB to be the new mode. I would like to understand more about the proposal. Will it bring more changes in our IT input? what phase-based goal have CNB established in terms of such development, and how will you conduct inspection to check whether we have achieved the goal? Thank you for your question. Just now, I've mentioned this question in answering the previous question. As you may have all known, the development of AI and LLM we could say that they have brought great influences and the potential to the financial industry. And for CNB in terms of AI, we especially established an AI lab and establish a team of hundreds of personnel to promote AI application and to focus on cooperation with leading companies in the AI industry. On the one hand, we aim to enhance our capability in terms of AI application and to current observation, we can see that within the industry, The bank has been quite leading in the position in terms of such kind of application. And on the other hand, the wealth management smart customer assistant, AI Xiaozhou, can realize interaction with our customer based on the LLM, the large language model. we have enhanced our capability in a smart context and also RPA to relieve our full-time staff from the repetitive work. Our 95555 hotline to provide remote customer service is further enhanced in terms of capability. and we aim to further enhance its level of standardized service providing. For those questions that is hard to be taken and handled by RPA, Intelligent Customer Service, those will be given to our manual work. And we believe these have been all proved to be quite efficient in improving our efficiency. and relieve as many as 17,000 full-time staff in terms of using those AI application smart operation. This is what we talk about online operation. And we could say we basically realize online-based operation in all kind of business. And the second aspect is about database in terms of our core asset management. And the third aspect is about a smart operation. to increase our accuracy of marketing, lower operational efficiency, and increase the quality of our service to build a five engine, a smart engine, a wealth management smart engine, operation smart engine, risk management smart engine, customer service smart engine, and also marketing smart engine. The five smart engine is what we aim to further forge. and also platform-based management by the end of 2022, we have realized a full-scale cloud deployment. And by doing so, we aim to forge a very consolidated foundation of our technology. And based on our cloud deployment, we forge our SciTech platform, our data office and tech middle office. This is our upper limit that further free up our upper limit to further iterate and realize agile development and iteration. This is where the bank could further adapt to the development of digitalization. The next one is about ecological development. We cannot rely on solely some independent product offering to survive. We need to develop based on scenario-based services and solutions to embed financial service into daily life offerings such as meal ticket, smart transportation, utility, convenient payment. These scenarios have all been welcomed and recognized by our clients. The CMB application has already got a MAU of 117 million users. Around 20 scenarios has a MAU of over hundreds of millions of level. We embed different kinds of financial services into daily life scenarios to enhance the further integration of other scenarios into financial services. The five direction of development further enhanced our development in terms of digital transformation along with our full-scale cloud deployment. And these all contribute us from transforming from online CMB to smart CMB. and these could also contribute to cnb to be a modernized bank a company that is under modern corporate governance that is what advantages brought by technology to us thank you president want another question from the on-site participant thank you senior management i am honda xiao from the 21st century I have a question regarding the extensive wealth management strategy. You mentioned that the year 2021 is the first year about extensive wealth management, but due to last year's policy issues such as fee cuts in the bond management and policy distribution fees, I could also see that these infavorable factors were responded by CNB. with some structural changes, internal organizational changes. I would like to learn more about your understanding towards this trend and how will you respond to that? Thank you for your question. The extensive wealth management strategy is established based on our understanding towards the changes of the wealth management business. This is what we propose as a strategy. This is in line with what our chairman mentioned. about the development and enlarging of our capital light business and strengthen our capital heavy business. The wealth management business is the core of our capital light business, which include wealth management, asset management, asset custody, and et cetera. So in this perspective, CNB has already established our strengths, our wealth management scale. The retail AUM is amounted to 13.32 trillion yuan. The asset management level, including CNB world management, CNB leasing, etc., totaled 4.5 trillion yuan, which rank among the top in the banking industry. And as for asset custody scale, we reached 21 trillion yuan, which is the largest among all banks in the industry for CNB. In these sectors of wealth management, extensive wealth management, we have to admit it is what we have already achieved and we have to see the great potential in the wealth management market of the Chinese market. And it is, we have also achieved advantages and achievements in advance because of our careful and forward-looking assessments. We consider this area will still be obtaining great potential for Chinese FIs, for China's financial structures. We can still see that the credit demands, the credit-based financing is still the core, the majority of the banking business. In the future, we aim to see and construct a more reasonable structure. the financing market and to see higher proportion of contribution coming from the capital market especially for asset management we see there will be fast development in this area if we can adapt to this trend if we can seek progress in these areas if we can maintain our leading advantages we will obtain more prospect to develop in the future and we can also further learn from the international banks to strike more balanced develop among all business segments as mentioned earlier in the previous response about our balance developments achieved in the full business segments extensive wealth management, while at current stage, is under the influence of the policy factor of the capital markets downturn, it is undergoing some pressure. However, extensive wealth management, the path might be swerving, but the future is bright. We will stand firm to our choice. Well, just now, you have also mentioned the question about setting up a new department about a retail customer-based department. This is a response to our organizational structural adjustment and also what we live up to our philosophy of taking our customer as the center so that we set up such a department to provide services to retail customers except for private banking customers. It is just an optimization of our organizational structure to better adapt to our arrangement and responsibility fulfillment of the retail banking sector. We will have the last question for the media friend from onsite. This lady, please. I am Grace. I would like to learn more about the NIM around 25 bps lower. What do you expect about the NIM decrease and what is the rate of decrease? And can you share more about your view about the market interest rate? Thank you. Thank you for your question. Well, I was not expecting the last question to be the question about NIM, so I will take the question. About NIM, that is definitely a question that many of you may pay special attention to, and you may also notice it's a common challenge faced by all banks. NIM is a common challenge faced by all banks. 25 bps cut for CNB. No matter the decrease or the decrease rate, CNB, we could say, maintain a relatively good level among our peers. We have strived every effort to achieve such goal. And maybe I see that the more you care is about the trend. And I would like to learn more about, I would like to take this opportunity to explain further. NIM definitely will be further put under pressure I've been answering this question for many times. And for this year, the response will be the same. However, except for the decrease as a fact, we should still pay attention to its pace. For the existing residential mortgage loan, repricing pressure will be relieved in September this year. The LPR rate cut 25 bps lower will also be further released in this year and of course the dual factors will contribute the further decrease of the bank's NIM. We also see quarter-on-quarter mitigation in terms of the decrease in terms of the NIM and we can also see from the example of last year There is a decrease from 2.3% to 2.04%. There's a trend in the year 2023. And quarter on quarter, we could say the things might be better compared with the year 2023. But year on year, we could see the decreasing trend will be still there. For the first quarter, the NIM pressure is the highest. and the name for 2024 might be already at the bottom for the future several years. Thank you for the questions from our participants. Due to the time limits, CNB 2023 result announcement will now conclude. For more details, information that you may refer to our annual report that is released on the website. For more other questions, please feel free to contact our IR team of the board. Thank you very much for taking part in our annual announcement.