China Merchants Bank Co., Ltd.

Ladies and gentlemen, friends from the media, good morning. Welcome to the 2024 Annual Results Presentation of China Merchants Bank. I am Xia Yangfang, General Manager of the Office of the Board of Directors. CNB has announced our 2024 Annual Results on Tuesday evening. Today's event is being conducted both offline and via live webcast. I would like to introduce the participant of today's event, They are Mr. Miao Jianming, Chairman of the Board, Mr. Wang Liang, President and CEO, Mr. Peng Jiawen, Executive Vice President, CFO and Secretary of the Board of Directors, Mr. Zhou Tianhong, Chief Information Officer, Also joining us today, both on-site and online, are Mr. Zhu Liwei, non-executive director, Mr. Shi Yongdong and Tianhong Qi, Ms. Li Jian, independent director, independent director, and non-independent director, as well as department heads from relevant departments of CNB. On behalf of CNB, I would like to extend a warm gratification to your participation, and thank you for your long-term support. Today's event, I will first invite Mr. Miao Jianming and President Wang Liang to first review our results highlight, and then we will enter into the Q&A session. Simultaneous interpretation in both Chinese and English will be provided. I would like to give the floor to Chairman Miao and President Wang. Dear investors, analysts, and friends from the media, good morning. Welcome to CNB 2024 Result Announcement. Today's result presentation will be divided into three parts. First, I will give an introduction over the company's 2024 results highlights, and then President Wang will give a brief introduction to operational information. And finally, I will briefly address our outlook and strategies for 2025. In 2024, facing the complicated external environment, the group took the strategic target of building a value creation bank, take active measures and comprehensive policies, and realize steady operation with momentum and even more distinctive features and more significant advantages and realize dynamically balanced development of quality, profitability, and scale, which was reflected in the following six aspects. Firstly, we effectively respond to multiple challenges with operating results steadily improved. We withdrew challenges such as insufficient effective credit demand, declining interest and fee rates, intensified competition in the industry and capital market fluctuation. Our four-year net profit record positive growth and ROAE remain at a high level. Our net operating income 337.12 billion, YOY decrease of 0.58%. Net profit attributable to the shareholder of the bank was RMB 148.39 billion, YOY increase of 1.22%, ROAA 1.28%, ROAE 14.49%, YOY decrease of 0.3%. 11 and 1.73 percentage points. NII, 211.27 billion yuan, YY decrease of 1.58%. NIM was recorded 1.98% YY decrease of 17 bps. Still maintain a leading position in the industry. Net non-interest income, 125.84 billion positive growth. YOY increase of 1.15%. Cost to income ratio, 31.92%. YOY decrease of 1.05 percentage points showcasing effective cost reduction and efficiency management. Maintain stable growth in asset scale would be the second point and we continue to strengthen liability advantages. We actively respond to market competition and persist in increasing effective asset origination optimize our structure with liability costs significantly reducing. Total asset exceeded 12 trillion yuan, an increase of 10.19%. Total loan and advances to customers was RMB 6.89 trillion, up by 5.83%. Total liability exceeded 10 trillion yuan, up by 9.81%. Total customer deposits exceeded 9 trillion yuan, up by 11.54%. Interest-bearing liabilities average cost ratio 1.64%, yield year decrease of 9 bits, maintaining an outstanding level in the industry. Thirdly, we maintain good asset quality with strong risk compensation capability. Our NPL balance was 65.61 billion up by 4.03 billion yuan. NPL ratio 0.95%. remaining flat with the year-end. Our allowance coverage ratio was 411.98%, a decrease of 25.72 percentage points. Allowance to loan ratio, 3.92% down by 0.22 percentage points, remain robust risk compensation capability. Credit cost ratio, 0.65%, a year-on-year decrease of 0.09 percentage points. Fourthly, we continue to optimize income structure and maintain endogenous capital growth. Our net non-interest income proportion continues to increase, reaching 37.33%, up by 0.64% year-on-year. Retail finance contributes to more than half by value, with net operating income and profit before tax from retail finance accounting for $58. 0.37% and 50.74% respectively. We have an industry-leading level of cash payout ratio. Our plan for 2024 was cash dividend payout ratio 35% above. Dividend for every share was 2 yuan. We will conduct intermediate cash dividend payout this year. Our CAR at all level continue to increase core tier one CAR, tier one CAR and CAR were 14.86%, 17.48% and 19.05% up by 1.13, 1.47 and 1.17 percentage points compared with the area end. Under the weight measurement approach, Our core Tier 1 CAR, Tier 1 CAR, and CAR were 12.43%, 14.63%, and 15.73%, up by 0.57, 0.81, and 0.77 percentage points compared with the same period of last year. Fifthly, we further increased input in technology and accelerated to build a digital and intelligent CMB. We adhere to IT empowerment philosophy and maintain our IT input. In 2024, our input amount to $13.35 billion, 4.38% of the bank's net operating income. We have over 10,000 R&D personnel accounting for 9.3% of our total employees. Recent years, we have seized the opportunities arising from the rapid development of AI and built our core competitiveness around AI plus finance, which is mainly reflected in the following aspects. Firstly, we start early in AI. As early as 2017, we have established our AI lab to follow the future development trend of AI technology, increase our resource input, and tackle key challenges, make breakthroughs. And secondly, we have strong in-house R&D capabilities with leading model. We have independently developed a new generation of intelligent computing infrastructure and put into operation large model arithmetic clusters composed of thousands of computing models and released the first open source financial AI model with tens of billions of parameters in domestic banking industries. Thirdly, we have comprehensive large model architecture. We have built a full tier architecture covering infrastructure models, AI middle office and large model application, which features full stack large model capabilities and build intelligent bank foundation and reduce the cost and thresholds of AI application and development. Large model technology have been widely used across the bank with over 120 application scenarios. Sixthly, we proactively implemented ESG concepts and provided financial services to real economy. We improve our corporate governance mechanism and fully integrate ESG philosophy into our management, enhance sustainability development capability, and our MSCI ESG was upgraded to AAA level. We actively participate in climate governance, improve green investment philosophy and policies. Our green loan and green leasing balance increased by 9% and 19%. We have released the first climate change mitigation-themed green bond among all Chinese banks. And the funds raised from the bonds mainly support industries such as energy conservation, environmental protection, clean production, and other sectors, enhance our own carbon management capabilities. We actively fulfill social responsibility and provide further support to real economy to support people's livelihood. Loan to key sectors continue to increase and we continue to enhance our financial accessibility. The information security and privacy protection and consumer rights protection. The above is my brief review of the performance in 2024. Now I'll give the floor to President Wang on the company's operational performance. Thank you, Chairman Miao. I would like to introduce the company's 2024 operational information. In 2024, the management has act in accordance with the BOD and stick to the strategy of building a value creation bank and establish a high quality development model driven by strict management, fundamental principles and breaking new ground and overcame the impact of multiple unfavorable factors through a multi-prolonged and multi-measured approach and achieve good results. This is mainly reflected in the following six aspects. First, we optimize asset liability management and achieve continuous growth of business scale. In face of insufficient effective credit demand, LPR cut, adjustment of interest rates of existing mortgages, deposit trend towards more deposits, we strive to optimize our AL structure, strengthen deposit cost control, and realize a stable growth of both deposit and loan, and our deposit costs decreased significantly. Total loans and advances accounted for 56% of total assets. Retail loans accounted for 52.91% of total loans and advances, an increase of 0.09 percentage point. Investment assets balance increased by 15.47%, accounting for 30.5% of the total. The ratio of total deposit to total liability was 83.31%. Balance of demand deposits accounted for 52%. Average daily balance of core deposits accounted for 86.24%, maintained at a high level. Customer deposit cost ratio was 1.54% down by 8 bits. Second, we vigorously developed fee-based business with higher proportion of non-interest income. We strive to overcome challenges study more on the market to grasp opportunities to receive gradual change on our net non-interest income. Net non-interest income increased by 1.15%, accounting for 37.33% of the revenue, up by 0.64%. Among them, net fee and commission income decreased by 14%. Other net non-interest income increased by 33.37%. Influenced by the fluctuated capital market, fee cut, profit concession, our wealth management income was down by 16%, but the decline was gradually changed quarter by quarter and account for 46% of the total fee and commission income. Payment and settlement income decreased by 7%, mainly due to sluggish consumption, and representing 39% of fee and commission income, an increase of 2.09 percentage points. Third, we continue to consolidate strength in retail finance and achieve coordinated development of the four business segments. We resolutely secure the strategic dominant position of retail finance and place equal emphasis on the quantity and quality of retail. The number of retail customers exceeded 200 million, an increase of 6%, 6.6%, among which Golden Sunflower and above customers, 5.23 million, up by 12%. AUM from retail customer grew to a new level. AUM from retail customer was approaching RMB 15 trillion, with an annual increment increase of RMB 1.61 trillion, hitting a three-year new high. Among them, AUM from customers in the level of a golden sunflower and above increased by 12.9%. Retail loans grow steadily. The balance amount to RMB 3.64 trillion, up by 6%, and the increment market share continued to increase. We adhere to the stable and low volatility strategy by steadily developing our credit card business. We have 69 million active credit card users and the credit card transaction value of the company amount to RMB 4.42 trillion. Second, customer acquisition of corporate finance continue to increase and we continue to deepen our characteristic development. The coverage expansion of corporate business received remarkable results with exceeding 3 million number of customers from the retail finance. The corporate balance of the financing products aggregate to corporate customers exceeded 6 trillion. Among them, traditional financing increased by 12% and non-traditional financing increased by 11%. We continue to innovate characteristic specialized products Supply chain finance business grew by 23%, and the core enterprises and upstream and downstream entities we served increased significantly. Users using the treasury management cloud increased by 28%, and the international BOP for corporate clients increased by 19%. We upgrade customer service model and give full play to our special service mechanism, such as all... one entire bank for one customer, IB, PB, integration, and etc. And third, the investment banking and financial market continue to strengthen our competitive position. For debt financing instruments with the company as the lead underwriter, we rank third among the peers. We also rank first by the underwriting size of ultra-long perpetual bonds and side-tag innovation notes underwritten and our M&A financing business volume increased by 6%. In terms of financial market business, the transaction value of RMB bond investments increased by 7% year-on-year. In terms of bill business, the direct bill discounting business increased by 35%, ranking second in the market. In terms of FI business, We have partnered with 107 securities companies and third-party depository service, and the customer we serve increased by 11.2%. Wealth management and asset management business continue to increase. We follow our customers' risk preference and provide a diversified asset allocation service. For customers holding wealth products reached 58.22 million, increased by 13%. Customers using CHI as an allocation service reaching $10.38 million increased by 13.84%. The balance of retail WNP increased by 12.38%. Agency sales of non-money market mutual funds and insurance policies increased by 101.48% and 21.07%. The average daily balance of corporate WMP grew by 30%. The total asset management business amount to RMB, 4.48 trillion, remained stable. Balance of asset under custody was 28.86 trillion yuan, up by 8.24%, ranking among the top of the industry. Fourth, we accelerate the development in key areas and enhance our level of comprehensiveness and international development. We respond actively to the challenge of low interest rate environments expand development, room, and forge competitive advantages and promote the diversification of income to enhance our sustainable development capabilities. We accelerate our development in key regions and key areas. The growth rates of customer base, AUM, core deposits, and loans of branches in key regions were higher than the average level of domestic branches, continuously making higher contribution to the bank. The growth rates of loans in key areas such as side-deck finance, green, inclusive finance, and manufacturing industry were significantly higher than the average growth rate of the loans extended by the company. We built distinctive advantages in retirement finance with the pension funds under custody increased by 26%. Scale and market share steadily increased. A total of 11.3 million individual pension fund accounts have been opened. We accelerate the improvement of our level of international development and promote our overseas institutions to consolidate our capabilities. We focus on key scenarios such as Chinese enterprises going global, foreign enterprises bringing in, and other key scenarios to provide comprehensive service such as global accounts, cash management, and et cetera. Total assets of overseas branches was RMB $236.5 billion, an increase of 10%. Profit before tax, $2.6 billion, up by 8%. The total assets of CNB Wing Long Bank was $453.05 billion, an increase of 6.19%. We leveraged on the advantages of our full license operation through our subsidiary, enhanced our comprehensive operation capabilities. CNB International completed 38 Hong Kong IPO projects ranked first in the market in respect of the share of ipo underwriting in hong kong scale of wmp under management cmb wealth management amount to rmb 2.47 trillion ranking the first for cnb leasing they continue to increase its efforts in asset placement and for the scale of ag management business of cnb china merchants fund amount to RMB 1.57 trillion, an increase of 1.29%. This will continue to strengthen risk management and maintain stable asset quality, affected by several factors such as the continuous adjustment of the real estate market. Some of the risk indicators increased slightly, but the overall asset quality remains stable. The NPR ratio of corporate loan was 1.06%, down by 0.13%. The NPR of retail loan was 0.96% up by 0.07 percentage point. Special measure loan ratio, 1.29% up by 0.19 percentage point. Overdue loan ratio, 1.33% up by 0.07 percentage point. We strictly classify assets, and NPR formation remains stable, and we closely follow the changes in the external environment and enhance our risk prevention in key areas. The ratio of NPR to loans overdue for more than 60 days was 1.17. NPR formation ratio was 1.05% up by 0.02 percentage point. Balance of corporate loans granted to the real estate industry was RMB 18.55 billion, 4.62 of the group's total loans, with the NPR ratio being 4.94% down by 0.32 PPT. In terms of corporate loans granted to the manufacturing industry, we strengthen industry research and take other measures to maintain good NPR formation and NPR ratio of the manufacturing industries. In terms of retail loan, we focus on high-quality customers, optimize regional structure, and improve the accuracy of risk identification. Percentual mortgage loan, and retail microfinance loan, and for credit card loan, and for consumer loan, their NPR ratio were 0.48%, 0.79%, 1.75%, and 1.04%, remaining low in industry. Sixth, we explore AI plus finance model and accelerate the digital and intelligent transformation. We accelerate the application of AI in customer service, risk control, operation, office, and other areas, to comprehensively promote the intelligent transformation of operation and management. In terms of customer service, we use large model to upgrade our smart wealth management assistant and enhance the self-service capability in high-frequent complicated scenarios. And we generate a digital PM for wholesale finance. In terms of operational management, we launch the intelligent assistant for RM and apply large model in capital management risk warning, HR management, and et cetera to enhance our operation efficiency. In terms of internal operation, we use intelligent technology to enhance our business handling efficiency, and over 730 operational processes expanded its application by using the large model and the efficiency of key business process increased by 58%. We realized the replacement of more than 26 million man-hour by intelligent application and 8 million man-hour by conch RPA. The above is the main operating information in 2024. Now I would like to invite Chairman Miao to introduce the outlook and operational strategy for 2025. Now I will briefly introduce the outlook and the business strategy of the company for 2025. Looking forward to 2025, the banking industry faces both opportunities and challenges. In respect of challenges, firstly, the external environment is more complex. Secondly, the China economy still faces many difficulties and challenges. The foundation for economic recovery is not yet solid with insufficient effective remains, luggage consumption, and some enterprises are still facing difficulties in production. The banks are facing pressure. in its operation. We are facing with narrow NIM, lower fee rates, any sufficient effective credit demand and other challenges which further promote the involution of the banking industry. In terms of opportunities, China's economy adheres to the principle of making progress amidst stability and promotes stability through progress. We see many policies coordinate with each other to spur vitality. bringing new opportunities for the banks, which was reflected in the following aspects. Firstly, macro policies became more proactive and effective. The fiscal policy will continue to ramp up efforts and become more supportive. Monetary policy will be further easing, and there are continuous launching of a bunch of policies. And at the same time, we see these policies revitalize the market confidence stabilize economy and improve the operating environment of the banks. And secondly, industrial transformation and upgrading are accelerating and the high standard opening up continue to expand. Technology innovation drives the development of new quality of productive forces, accelerating the construction of a modernized industrial system. There are many and many enterprises going into global operation. They explore into diversified markets, And third, artificial intelligence drives a new wave of technology revolution and industrial transformation. At present, we're in a critical period of transformation from digital to intelligent. Bank in the future may be divided into intelligent banks and non-intelligent banks. The AI technology's rapid development can lower the cost and threshold of using large model technology, providing strong impetus for the transformation of commercial banks. Looking into 2025, we will stick to the strategic vision of building the best value creation bank with innovation-driven development, leading model, and distinguished features. We will confront challenges, continuously improve our three core capabilities of wealth management, fintech, and risk management, and accelerate to create more and greater value for customer, employees, shareholders, partners, and the society. Firstly, uphold fundamental principles and break new ground and promote continuous improvement in high-quality development. Secondly, maintain strategic focus and further consolidate and expand core competitive struck advantages. And thirdly, adhere to technology leadership and create a new mode for intelligent banks. And fourth is to adhere to distinctive development and accelerate the level of international development. And fifth, adhere to a risk-oriented approach. Thank you. Thank you, President Wang and Chairman Miao. We will now enter into the Q&A session. We will first invite questions from investors and analysts, and then we will have time for the media. Before we raise the question, please state your name and the agency you represent before you raise the question. This lady, please.

Thank you for giving me this opportunity. I'm May from UBS. And thank you very much for Chairman and also Mr. Wang's introduction. And first, congratulations to the results of 2024. My question is for Mr. Miao. You mentioned a lot about the macro situation, including less ineffective demand and those interest rates coming down. So I would like to know what's your judgment for the macro situation and in this challenging environment how CNB can maintain your own strength and advantage. Now CNB actually now has the highest PB among the Chinese banks over one time PB. So how can you maintain your highest level of ROE in the long run. We hope that that could be over 15%. And your valuation and also your valuation are all better than peers. And thank you very much. How can you maintain that in the long run? Thank you for this question. It's a very big comfort. Yeah, you think that you are quite positive on our results. In this micro situation actually we are facing challenges but definitely there are opportunities and I think it's mainly I would like to say it's uncertainties especially like in the U.S. the new government saying they want to show up the tariffs on Chinese imports and also there are a lot of uncertainties in the U.S. market and they are saying in Last year, on 26 September, after a series of policies have launched, and I think the economy is restoring, and I think the uncertainties in China can respond to the uncertainties in the world. And very recently, I think the recent central government also sent out the signal that that once there are shocks or bigger shocks coming from the outside external environment, then there will be more stimulus policies rolling out. So I think this provided certainties in the external environment for banks in China. But the main challenges for Chinese banks is less effective demand, especially from the demographic level, which the aging population lead to a decline of the interest rate, That is why I say it's a cyclical problem for the bank to face the interest rate coming down. And it's also a trend that the interest rate will come down. And at the same time, the lower fee rate is also a challenge for Chinese banks as well. And I think that our advantages of a CMB among the peers are still very obvious. If you look at the NIM side, that we are having one of the highest name among the banks. Definitely our name is narrowing down, but the level of magnitude of narrowing is smaller than the other banks. So this is the main advantage of CNB. And from the fee-based business, and in terms of wealth management, I think we still have a strong advantage on that. Definitely in financial markets, we also have advantages and strengths, but I think we're even stronger in wealth management. So if our name can maintain to be one of the highest, and also our strength of wealth management can be one of the best among the peers, then I think definitely CNB can be one of the best banks in China. Definitely my hope is also to... We really hope that your hope is our hope, namely to maintain a high level of ROE. But it's a very good wish. This cannot be fully guaranteed, namely over 15% for a long run, because this is also determined by external environment. But what I can assure you is that as long as our advantages in human wealth management can be maintained, which means our ROE can be better than the peers'. So you see our equity is, the size of equity is stable. And as long as our return is better than others, then the ROE will be better than the peers. Then our benchmarking peers are much better than their ROE. So I'm very confident on that. And are you satisfied with my answer? Next question, please. Thank you. I'm Zhang Shanshan from CICC. I read from your words, the letter from the CEO, namely you were talking about internationalization and building up a comprehensive capacity, and I read your annual report. So would you please give us more elaboration on that? Yes, indeed. In the letter I said about how we can build up our internationalization and going to a more intelligent, building up a more intelligent bank, and also to build up our strength and our comprehensive capabilities. I think this is mainly to responding to the external environment, like Mr. Miao just said, like the low interest rates, low fee rates, And in this external environment, how banks can expand their revenue source and maintain a stable revenue is very important. And also at this time, we see opportunities that a lot of Chinese companies are going global and operated in a global market. So banks also need to provide this international service to accompany the companies when they are expanding their business overseas. And also we are seeing opportunities in terms of AI, namely these also provided opportunities to banks. And CMB started as a bank which emphasized highly on technology. We were the first to launch the mobile banking, to launch the Internet banking. And also in terms of AI, how we can – continue to be advanced than our peers in terms of AI technology application and to improve our service capability. This is also very important and how we can respond to the external environment. And fourthly, the environment as we see is that banks are having the same services, namely we are seeing involution among the banks. And in this kind of environment, how we can be differentiated from our banks. It's also very important and to even foster and consolidate our unique strength. That is why I say the four aspects, namely internationalization and comprehensive operation as well as diversification and to be more intelligent are the very key four important strategies. And as for overseas operation, we have overseas branches and also we have overseas subsidiaries. In terms of comprehensive capacities, we have different licenses. And they are performing quite well in their own unique market, like wealth management, asset management, investment banking, financial markets, credit card, and also financial leasing. These are unique businesses that they can... have their own advantage in their own niche market. And all this will be combined, will become the very good strength of CMB to provide a whole comprehensive solution to the customer and become the new growing points or growing area for CMB. And at the same time, for unique areas, we also want to build up our new strength, like in terms of technology, to be advanced in technology and to be advanced in AI. We have set up the technology fund, and investment is around $3.5 billion every year. And we will continue to invest more into technology. and to be more advanced. So I think by doing so, this will help us to realize diversification of income resources and help us to go through the interest rate cycles and to build up our own competitiveness and to have stable return to our shareholders. Thank you. Thank you. Next question, please. Good morning. Congratulations for the results that you have sent. I really say that during my career, yesterday I sent out my report, namely strong and compelling results. because I think your result is very persuasive. Yesterday, actually, we have seen your stock price has come down a little bit. And some investors ask me whether your result is not so solid or whether there are some problems that we haven't seen. But my point is that shares sometimes cannot fully respect the fundamentals of a corporate stock. So I'm still very confident in CMB. My question is about NIM. And I think that this year, China has actually slowed down the pace of interest rate cut down. And I think what is your expectation for your NIM trend this year? In your report saying that this year's plan for loan growth is around 7.8%. Whether it's quite optimistic plan and whether it will be difficult for you to realize that Thank you. Your first question is about name. Last year, Our name is 1.98% down by 17 bps. And as we said that the level of the narrowing down is contraction is better than it appears. I would like to share with you some of the trend of last year's four quarters. The first quarter is down by 27 bps year-on-year, first quarter. And second quarter down by 17 bps year-on-year. in the third quarter 14 bps year-on-year and the fourth quarter 10 bps year-on-year decline so if you look at the trend the magnitude of the decline is also narrowing down from quarter by quarter and yeah why I share this trend with you because I think that this kind of trend might continue and the reasons I think just now Mr Wang and Mr Miao has already give you some hints on that. The main aspect is that there are three LPA cut down. and also for adjustment of existing mortgage rate. So this impact will continue into 2025. Last year, when we released interim results, I said that NIM might continue to follow, will slow down to decline, but a precondition is that there will be no major external policy changes, but just a while after what I said is that new policy has been rolled out namely banks need to adjust the existing mortgage and this year within the PBOC statement is that to choose the right time or proper time to cut down the RR and also to cut down rates. So our expectation for this year is there will continue to be interest rate cuts this year, which will pose definitely pressure on the NIN trend this year. And at the same time, I think another challenge is more competition for the assets. Since there are less effective demand and competition for loans and assets, it's also very fierce, which will continue to lead to a decline in asset yields. And especially at the same time for the assets which have enjoyed quite a high yield as in the past like retail, like credit card, retail loan. Now we are also seeing decline on the yields as well. These are all challenges. But these are the challenges. But I think there are also opportunities like the decline in deposit cost. Last year our deposit cost declined. Actually, as you know, it's always one of the lowest among the trans-banks, but we last year continued decline by 8 bps. And at the beginning of the year, we are also seeing the trend of decline of our deposit costs. I think this is quite beneficial. I'll contribute some positive things to the name. For the interbanking, funding cost is $1.09 for CMB, and this year I think that the cost of the demand deposit from financial institutions will continue to decline. And also at the same time, one thing we are seeing positive marginal positive trends for the trend of the term deposit growth. Last year, I think that our demand-deposit ratio has been back to over 50% at the end of last year. I cannot firmly say that it has already been a firm trend that people are trying to choose demand-deposit instead of term-deposit, but I think we still need to observe that. But a good sign is last year we are having a good balance of our demand-deposit ratio, And this year we are seeing higher growth on demand deposit as well. So these are the positive trend that we are seeing for NIM side. So in 2025, I think that the trend of the contraction on NIM will continue. But our goal or our hope is that the level of contraction will, compared to last year, can be improved. and we can be ahead of our peers in terms of NIM absolute level. And secondly, responding to your second question about the loan growth, in our annual reports, our budget for loan growth rate in 2025 is around 7% to 8%. And this is our budget. But whether it can be completed will also be decided on external environment and also our own arrangements. But for a long time, we think that we hope that the loan growth rate for every year, there are two determinants on that. One is to be in line with external environment, including like GDP, like the PBOC's budget for social total financing. And second consideration is that we want to be more stable on long growth rate through cycles. We think that excess volatilities is also a risk. That is why the long growth rate for CMB is quite stable even to go through the cycles, even though we are facing volatilities in external environments. Long growth rate is around 5.8%, but if you exclude bill discounting, then the pure long growth is around 8% last year. So compared to years before, I think this growth rate in 2024 is also stable. So in 2024, I think that will continue to originate effective assets, and hopefully that we can maintain a stable long growth rate. But whether we can realize this goal, definitely we'll work hard on that. But whether we can realize this goal still depends on the external environment. It's highly related to that. Thank you. One thing I want to supplement, in the domestic market, As the interest rate liberalization continues to evolve, I think it's very important that the asset decides the liabilities, namely the competitiveness on assets or whether you can originate good assets decides the competitiveness of the bank. So around 7% to 8% growth rate. This is also one consideration behind this growth rate determination. As long as we can have a long growth rate, then this will help us to maintain a sound NIM level. As long as we can maintain a stable long growth rate, this will help to... help us to originate more customer and to originate more low-cost deposit and also to bring us more valuable business. So that is why I think asset origination is very important. This will be determined on by capital, by external environment. And yeah, this also will be constrained by capital. So this kind of a balance among business development and also the capital constraint. Thank you.

We'll have the next question from the row four. Thank you for this opportunity. I am Claire from GS. As you have also mentioned about the application of AI in the bank, I would like to ask How would you assess AI application in a bank operation and how will it influence your efficiency enhancing and cost reduction and what measure have you taken and what result have you achieved? I will invite our CIO to answer this question. Ever since our establishment, we continue to adhere to the strategy to empower the bank by technology. In the internet banking and mobile banking era, we see every opportunity arising from technology revolution and launch many innovative products and services. Including our technology system, it is also continuously iterating and upgrading. For instance, our mobile banking that we serve our retail customer, as you all know, it is widely recognized as the best mobile banking application. Our migration to cloud is a major trend, and by the end of 2022, we have completed our fully migration to cloud, which is also the first batch of banks among the Chinese banking industry. Just now, President Wang also mentioned the full transformation node development, among which the intelligent and digital transformation is one of the most important strategies. And of course, there are many key points within the transformation. And among the important focuses, you have mentioned about our application of AI and what influence will AI bring into our cooperation. It is hard to give you a very accurate answer, but I would like to answer first on the application of large model. Of course, the disruptive changes brought by large model could be viewed from two aspects. The first one is technology. LLM, in understanding knowledge in the inference capability, this breakthrough is very disruptive in the history. It is undoubtedly very historical. Will it change our operational model? It still remains to be debated and see. I am not sure whether you have noticed that the CEO of Microsoft mentioned in an interview in February that he has an idea, he has a hint. If it is a technology that is equal to the level of industrial revolution, we will see a 5 to 10 percent of GDP growth of all countries. But the sign is not that obvious. It is an given by the CEO of Microsoft. Maybe it's an overheatedly discussed topic within the market, so we need to remain to be cautious and reasonable towards how AI technology will pose influence on our life, on the world we're in, and on the bank's operations. In some small areas, we have already seen some great changes brought by applying UI, but for bank itself, it is a highly digital scenario, a business model. Large model will undoubtedly give full play to bank's operation. Well, actually for CMB, we start very early. In 2017, we have established our first AI lab among our peers. We have get well prepared for entering into the smart era, the intelligent era. We have also received many talents, many technologies. As in 2022, when OpenAI released ChatGPT, we attach great importance to the senior, by our senior management. And in 2023, and also our chairman, Chairman Miao, have also proposed a statement of intelligent and non-intelligent bank. And they have totally different fate and future development. So we have significantly increased our input in developing AI, in developing large model. And secondly, in order to do a good job in large model, we need to construct a full stack architecture. Our large model architecture was consisting of four tier. At the very bottom of it was the intelligent computing infrastructure and then middle office of AI. And then the scenario application, we have already developed over 120 scenarios within the bank this is our full architecture that consists of four tiers we have quite deep understanding over the application of ai and large model and how it will promote our faster pace of development and bring us more competitiveness in the market i can also show you some examples of how AI is applied in our business. For instance, in the retail finance business, we have developed an assistant called AI Xiao Zhao, and many of our employees, regardless of being relationship manager or product manager, they have also been benefiting from this assistant. In corporate finance business, and also the inclusive finance business, the business model is very distinctive. The business tend to be quite short in its period of time in its tenure and the frequency tend to be high and we use the AI assistant to help the relationship manager to increase the efficiency to approve business cases in inclusive finance. We have also developed the asset and liability assistant within the bank to help increase the 50 percent of our efficiency in quotation pricing and also we use the assistant in also risk management capital management and other areas within the bank so in various scenarios we have already applied deeply ai and large model technology in a year 2024 by using large model we actually generate quite good productivity equaling to over 5,000 manpower, full-time employee. In this regard, we will resolutely remain our input to IT and try to build us into a flagship of AI-driven bank. As you all know, there are some AI delusions. We also attach great importance to it. We will always adhere to a cautious attitude to take multiple measures to exclude the uncertainties brought by technologies to be compliant to follow the requirements given by our regulator and bring every aspect of the positive momentum given by AI technology large model. This is my answer to your question. Thank you. I will have another question from the lady on site. Thank you, senior management. I am from Huatai Security. I have a question regarding asset quality to see from your annual report. Your corporate asset quality remains good, but retail asset quality fluctuates a bit. So combining your experience from the past economic cycle, what is your outlook towards the asset quality of retail loan, and when is the tipping point of the retail loan asset quality? Thank you for your question. Just as you said, for the whole bank, our asset quality remained good. NPR ratio 0.95% and allowance coverage ratio remained high, but we still attach great importance to the overall condition of the asset quality, and we noticed that the retail loan asset quality are showing some signal of increasing pressure. Well, our NPR formation ratio was NPR formation balance was 39.3 billion mainly from credit card business and credit card business we can say that the NPR formation remained high but stable. Consumer finance NPR ratio was 1.04% but the special mention loan ratio and the overdue loan ratio have also shown increasing tendency. For mortgage, the NPL ratio was 0.48%, but special mention, and overdue loan ratio also increased. So generally, the overall retail loan asset remain leading in the industry, but the trend combining with the backdrop of the macro economy actually increased. We have attached great importance to the asset quality of retail loan business. We have optimized the risk management model, and we have optimized our customer selection. Customers from credit card, consumer finance, and microfinance business, we will optimize our customer selection. We will also optimize our region selection, which areas tend to be lower risk, we will focus more on these regions and customer base from these regions. In mitigation tools for mortgage, for microfinance loans, we have also shipped our model to have more pledged and collaterals for these types of loans with the pledge and mortgage rate being 37%. And for mortgages, the pledge rate was as high. For microfinance loans, the mortgage rate was as high as over 80%. So for different positioning for different customer base, we have different risk principle. We will act according to different business model and have targeted risk management and control policies. So at present, when will we see the tipping point of retail risks? I think that it is still depending on the macro environment, the external environment. As the residents' income continue to decrease, the unemployment rate is still increasing. These influence will bring pressure to the external environment. Along with our macro environment tend to be steady with a positive trend, the unemployment situation will be improved so that as the general backdrop improves, so is our asset quality condition. Even though we are facing a very challenging external environment, CNB will still take retail finance as our mainstay. We will act according to the risk condition and give accurate and appropriate risk pricing for different retail finance businesses. We have large proportion of retail finance business larger than the corporate finance business. And we believe the retail finance business can also bring us higher yield. So we will maintain appropriate and reasonable growth of retail finance business. Thank you. Thank you, President Wang. I will have the next question. Thank you, Senior Management. I am Lily Li from JP Morgan. I have a question regarding the core tier one CAR ratio. Actually, it is very high, much higher than your domestic and even international peers. And on the other hand, you have quite large pressure in the decreasing ROE. How is your idea or new plan for increasing the return to shareholders? Thank you for your question. Regarding the high CAR, how do we view the high level of it? Of course, from the statistic level and the advanced measurement approach and weighted approach, our CAR, Core Tier 1 CAR, and to see the reason behind why would this indicate us all be high. Well, on the first place, we have conducted many works and enhanced our level of capital endogenous capability, which bring us more strong CAR level. But on the other hand, it is also influenced, contributed by our new capital regulation. So these two altogether contribute to the high level of CAR, but I don't think the high level will continue for quite a period of time. It is not something we can naturally sustain. We hope that we can act under the regulatory requirement and maintain a 2.5% cushion as buffer. Well, on the one hand, as a systematically important bank, there would be capital requirement for us. So according to our internal calculation, 2.5% of buffer is quite sufficient for us. Our core tier 1 CAR should maintain at the bottom line requirement of about 10%. Under the Advanced measurement approach, we have already satisfied, but under the weighted approach, we should remain cautious and keep a close eye on whether we have already met the requirement. We will also save some capital to tackle with the future challenges that we may encounter. So this is the first reason that I want to explain and how do we look on our CAR level. So I think another reason behind your question is that how do we remain an appropriate level of ROE and how to maintain a good equity to deliver a good ROE indicator? So my answer is that to deliver a balance between the two. From the bottom, we hope that we can deliver a good return to our shareholder, but according to my analysis, to CAR, we cannot say that we are fully comfortable with our CAR to reduce our capital level. And for ROE, our idea is to whether We have a target, even though we may not maintain above 15%, but we still aim to outperform our peers. That is our target. Thank you, President Peng. And now we are having the next question. Thank you. Hi, I'm Xu Ran, Richard Xu from M.S. Your retail customer base is quite strong. Your deposit and retail AUM continue to be robust. I would like to know what is the future growth point of retail business. Now you have a very competitive environment, market environment. Where is your competitive edge, your competitive point to support your strength? And now the shrinking loan yield, is quite significant. Will it influence your service delivered to your client? We attach great importance to the customer base growth. For the past two years, our retail customer base continued to optimize in its total number and structure. For corporate customers, we