China Merchants Bk Co H

Dear investors, analysts, good morning. CNB 2025 interim result announcement will now begin. I am Xia Yongfang, General Manager of the Office of the Board of Directors. CNB has announced its 2025 interim results last Friday evening. Today's event is being conducted in the form of a live online webcast. I would like to now introduce the on-site participants who are with us today. They are Mr. Wang Liang, President and CEO, Ms. Wang Ying, Executive Vice President, Mr. Peng Jiawen, Executive Vice President, CFO and Secretary of the Board of Directors, Mr. Lei Caihua, Executive Vice President, Mr. Zhou Tianhong, Chief Information Officer. We also have independent directors, Mr. Li Menggang, Mr. Liu Chao, Mr. Tian Hongxi, Mr. Li Chaoxian, Mr. Shi Yongdong, and Ms. Li Jian to join us online. On behalf of China Merchants Bank, I would like to extend a warm welcome to your participation and thank you for your long support, interest, and investment in CNB. Today's meeting involves two sessions. One, Mr. Wang Liang will introduce the bank. Interim results take around 25 minutes. The second session is a Q&A session. It takes around 19 minutes. The meeting will be provided with simultaneous interpretation from Chinese to English. Now, I will give the floor to Mr. Wang Liang on the bank's 2025 interim results. Dear investors and analysts, good morning. Welcome to CNB's 2025 interim results presentation. Today, I will introduce three key areas. First, 2025 interim performance overview. second, detailed operational information, and finally, a brief introduction of our business strategy for the second half of the year. For the first half of the year, the group continued our value creation bank strategy, adhered to the concept of dynamically balanced development of quality, profitability, and scale, and maintained operational indicators under steady progress with good momentum. This was primarily reflected in the following four aspects. First, we achieved steady progress with leading profitability in the industry. Despite challenges such as narrowing interest rates, interest spreads, and intensified competition, we responded proactively and ensured core profitability indicators showing steady and positive trends. Net operating income, RMB 169.9 billion, a year-on-year decrease of 1.73%. Net profit attributable to the bank's shareholder was RMB 74.9 billion, a year-on-year increase of 0.25%. ROAA and ROAE were 1.21% and 13.85% respectively, remaining at industry-leading level. NIN, net interest income was RMB 106.08 billion a year-on-year, increase of 1.57%. Affected by declining market asset yield, ongoing shift to more term deposit and other factors, the NIN was 1.88%, decreased by 12 bps a year-on-year. Non-interest income was RMB 63.8 billion, a year-on-year decrease of 6.77%, with a narrow rate of decline. Net fee and commission income reached RMB 37.6 billion, a year-on-year decrease of 1.89%. Notably, wealth management fee and commission income reversed the downward trend since 2022, up by 11.89% year-on-year. Affected by the changes of market interest rate, other net non-interest income was RMB 26.2 billion a year with a decrease of 12.97%. We enhanced management on cost and expense with cost-to-income ratio remaining stable at 30.11%. Second, we realized appropriate asset growth with significant decrease in funding cost. We respond actively to the challenge brought by insufficient credit demand, took various measures to maintain stable asset growth, and optimized the structure of asset allocation. Total asset amounted to RMB 12.66 trillion, an increase of 4.16%. We continue to foster steady loan growth. Total loans and advances amounted to RMB 7.12 trillion, up by 3.31%, accounting for 50%. 6.23% of total. Among them, general loans were 6.77 trillion yuan, up by 3.99%. In response to the trend of interest rate changes, we made rational allocation of investment assets. Total investment securities and other financial assets grew by 7.22% compared with the end of the previous year, and accounting for 31.39% of total assets, an increase of 0.89% from the end of the previous year. We continue to grow core deposits and further reduce liability costs. Total liabilities amounted to RMB 11.36 trillion, an increase of 4.05. Among the total deposits from customers were RMB 9.42 trillion, an increase of 3.58%. Average daily balance of core deposits was RMB 7.61 trillion, increased by 7.77% and accounted for 87.36% of the balance of deposits from customer. Demand deposits accounted for 49.72% of total deposits, a decrease of 0.62 percentage point. Annualized average cost rate of interest bearing liabilities were 1.35%, a yielding decrease of 37 bps. Among them, average cost rate of customer deposits was 1.26%, a yielding decrease of 34 bps. maintaining advantages in low funding costs. Thirdly, sustained sound revenue mix and leading capital strength. We continue to optimize business and revenue structure with the stable value contribution from retail business and steady share of non-interest income. Retail loans accounted for 51.68% of the total loans, a decrease of 1.23 percentage points. Net operating income from retail business accounted for 56.6% of the total, representing a year-year increase of 1.12 percentage points. Pre-tax profit from retail business accounted for 58%, a year-year increase of 1.42 percentage points. Net non-interest income accounted for 37.57% of total net operating income. Influenced by the annual cash dividend distribution, the capital adequacy ratio experienced a slight decline. Among them, C21CAR, C01CAR, and the CAR. Under the advanced measurement approach were 14, 17.07, and 18.56% respectively, decreased by 0.86, 0.41, and 0.49 percentage point as compared with the end of the previous year. The CUT1 CAR, Tier 1 CAR and the CAR under the weighted approach were 11.92%, 14.53% and 15.61% respectively, decreased by 0.51%, 0.1% and 0.12%. Fourth, we maintain stable asset quality and strong risk compensation capability. NPR balance was RMB 66.3 billion and increase of RMB 760 million. NPR ratio was 0.93%, a decrease of 0.02 percentage point. Annualized credit cost ratio was 0.67%, a year-on-year decrease of 0.1 percentage point. Allowance coverage ratio was 410.93%, a decrease of 1.05 percentage point. The loan loss reserve ratio was a slight decrease of 0.09 percentage point, both remaining a leading position in industry. The ratio of MPL to loans overdue for more than 60 days was 1.12. Analyzed MPL formation ratio was 0.98%, a year-on-year decrease of 0.04 percentage point. The above provides a brief overview of our performance in the first half of 2025. We will now turn to the company's operational information. In the first half of the year, the bank actively responded to the challenges of the low interest rate environment. We continue to optimize our business structure, consolidate our competitive edges, and forge new growth drivers, mainly reflected in the following five areas. First, we deepen client relationship and expanded client base. Our retail customer totaled 216 million, an increase of 2.86%. Among them, number of golden sunflower level and above customer totaled 5.63 million, an increase of 7.57%. Number of customer holding our WMP reached 61.07 million, an increase of 4.9%. Number of active credit card users totaled 69.63 million, an increase of 0.28%. Corporate customer totaled 3.36 million, representing an increase of 6.36%. Among them, number of newly acquired was 305.1 thousand, and SciTech Enterprise customers reached 169.7 thousand, an increase of 4.43%. Corporate customer for withholding transactions reached 1.33 million, a year-on-year increase of 12.12%. Second, we forged distinctive business features and achieved differentiated competitive edges. First of all, retail finance sector focused on customer need for deposit loans and payments, continued to enrich product supply and deepen customer management, further consolidating the systematic advantages of retail business. Retail AOM scale exceeded RMB 16 trillion, representing an increase of 7.39%. The increment for the first half of 2025 reached RMB 1.1 trillion, hitting a record high. Retail customer deposit balance was 4.25 trillion, an increase of 5.43%, accounting for 45.13% of total deposits from customer, an increase of 0.79%. In the context of weak credit demand from the residents, we took multiple measures to drive the growth of retail loans. Retail loan balance was RMB 3.68 trillion, an increase of 0.92%. We adhered to the stable and low-volatile operational strategy in credit card business. The credit card transaction value reached RMB 2.02 trillion, down by 8.54% young year, maintaining a leading position in the industry. Secondly, the corporate finance sector focused on key areas and continued to build distinctive financial advantages. The balance of the FBA to corporate customer was RMB 6.45 trillion, an increase of 395 billion yuan over the beginning of the year. In line with the direction of the country's industrial transformation upgrading, we adjust the structure of asset business to support the high-quality development of the real economy. The growth rates of loans in key areas such as technology, green industry, and manufacturing were significantly higher than the average growth rate of the company's lowest. We vigorously promote the characteristic and professional development of pension finance. Cumulative number of individual pension accounts opened by the bank exceeded 13 million, with a deposit balance ranking among the top in the market. Pension funds under custody amounted to RMB 1.41 trillion. We continue to upgrade the distinctive brand of intelligence and digital corporate finance. Number of customers using treasury management cloud service reached 709.2 thousand, an increase of 15%. Domestic trade finance business volume was RMB 792.6 billion, a yearly increase of 20.64%. Thirdly, investment banking and financial market sector continued to build its strength in segmented areas and its business competitiveness grew steadily. In terms of investment banking business, debt financing instruments with the back as the lead underwriter amounted to RMB 274.29 billion, maintaining market number one position in the underwriting scale of perpetual bonds and sidetrack innovation bonds. M&A financing business represented a year-on-year increase of 27%. with several major projects with market influence successfully executed. In terms of financial market business, the number of wholesale customers involved in client flow trading was 66.5 thousand, a year-on-year increase of 14%. The transaction volume of client flow trading of wholesale customers amounted to US$159.1 billion, a year-on-year increase of 25%. In terms of build business, we deepened the transformation to provide comprehensive services to build customers, Direct bill discounting business volume was RMB 1.39 trillion, a year-on-year increase of 4.86%, ranking second in the market. In terms of FI business, we expand the source of low-cost liabilities. The average daily balance of FI demand deposit was RMB 753 billion, accounting for 93% of the total, increased by 32%. The cost ratio of FI deposit was 1.06%, a decrease of 0.25%. Fourthly, the wealth management and asset management business accelerate development and further enhance professional capabilities. Wealth management business realized rapid growth. Retail WMP balance increased by 8.84%. Even though the volume of agency sales of non-money market mutual funds decreased by 7.84% young yet, but we see more allocation towards equity-related products. The sales volume of agency distribution of trust beams and the insurance premium increased by 175.24% and 32.77% respectively. The number of customers who conduct asset allocation under the tree system reached 11.3 million, an increase of 9.17%. The average daily balance of corporate WMP was RMB $459.05 billion, an increase of 14.8%. of asset management business amounted to RMB 4.45 trillion, remaining stable. The balance of asset under custody was RMB 24.14 trillion, an increase of 5.96%. Fifthly, we implemented regional development strategy and enhanced development capabilities in key regions. We focused on national strategies of coordinating regional development, followed the trend of industrial cluster development, and promoted the branches located in the Yangtze River and other regions to further develop. Customer base AUM from retail customer, core deposits and other indicators all showed higher growth rate than those of the average level of domestic branches as compared with the end of the previous year. Their contribution within the bank was continuously increasing and the core deposits and the balance of loans of the company 16 branches in key regions as a percentage of all branches increased by 0.43 and 0.22 percentage point respectively. Third, we enhance development and productivity of global and integrated operation. For overseas business, we seize opportunities, maintain stable and sound operation, and improve the level of internationalization in institutions, businesses, talents, and management. The total assets of overseas institutions increased by 6.56%. net operating income rose by 23.72% year-on-year. Among them, institutions in Hong Kong see the opportunities of the continuous recovery of the Hong Kong capital market achieve significant growth in business scale and value contribution. Their total assets increased by 9.49% and net operating income grew by 25.28% year-on-year. The AUM from retail customers The AUM from retail customer of CNB Wing Long Bank rose by 16.51% and CNB International ranked number one in Hong Kong by the number of IPO underwriting in the first half. Cross-border business accelerated to develop corporate customer in respect of international BOP reached 78.6 thousand and a volume amounted to US dollar 222.63 billion. We improved comprehensive layout enhanced development quality and efficiency of subsidiaries and JVs, and provided comprehensive services to clients. Total assets of major subsidiaries reached RMB $932.09 billion, up by 9%, and their net operating income accounted for 12.54% of the group's total net operating income, up by 2.92 percentage points year-on-year. Total assets of CNB Financial Leasing reached RMB $322. up by 6.19%. Balance of WMP of CNB Wealth Management with RMB 2.46 trillion decreased by 0.4%, remaining number one in the industry. The scale of mutual funds under management of China Merchant Fund amounted to RMB $896.6 billion, an increase of 1.93%. The scale of entrusted management of insurance funds of Cigna and CMAM was RMB $214 billion, an increase of 12.85%. We've also approved to prepare for the establishment of CMB Financial Asset Investment Company, marking a new breakthrough in our integrated business layout. Fourth, we accelerate digital and intelligence transformation and strengthen technology advantages. We innovate technology at the foundation level and strengthen model performance and computing efficiency to establish easy-to-use and fast-integrating enterprise-level AI middle office. We implement large-scale AI models across 184 scenarios in retail, corporate risk control, operations, and other areas, effectively improve business efficiency and service. Customer service moving towards the digital and intelligent stage, We leverage large model to enhance the intelligence service level of the intelligent wealth assistant Xiao Zhao, initially establishing the corporate intelligence assistant AI Xiao Zhao to assist customers in handling complicated operations of the corporate financial products. Accelerating towards intelligent internal operations and management by implementing an AI-first strategy, we fully advance AI application and introduce systems across multiple areas, including retail, corporate risk and compliance, operation, and IT development, saving a total of 4.75 million working hours for the bank's management. Fifth, we enhance comprehensive risk management and maintain stable asset quality. We promoted comprehensive risk management closely monitor market changes, step up efforts to control risks in key sectors, enhance internal control and compliance management level, firmly maintaining focused on risk and compliance management system and uphold the bottom line of risk management. Corporate loan NPR ratio was 0.93% down 0.13 percentage point as compared with the end of the previous year. Property industry NPR was 4.74% down 0.2 PPTs. Manufacturing industry NPR ratio was 0.44%, down 0.05 percentage point. Retail loan NPR ratio was 1.03%, up 0.07 percentage point as compared with the end of the previous year. Mortgage NPR ratio was 0.46%, down 0.02 percentage point. Credit card NPR ratio was 1.75%, same percentage point. as that at the end of the previous year, microfinance and consumer NPR ratio was 0.95 and 1.41%, respectively up 0.16 and 0.37 percentage point as compared with the end of the previous year, maintaining relatively excellent level in the industry. Finally, I will give a brief introduction to the business strategy for the second half of 2025. Looking ahead to the second half, the external environment remains complicated with both challenges and opportunities for the banking industry. On one hand, the banking industry continues to face the challenges of low interest rates, low interest rates, low fee rates, and intensified homogeneous competition, and its overall operations are still under pressure. On the other hand, China's economy continues to maintain a momentum of recovery, providing a sound operating environment for the banking industry. In the second half, The group will further advance its value creation bank strategy, adhere to a coordinated development of quality, profitability, and scale, accelerate the transformation towards internationalization, comprehensive operation, differentiation, and digital and intelligence development, steadfastly pursue a growth-driven development model of strict management and upholding fundamental principles while breaking new ground. Thus, we will consolidate business foundation and enhance refined management practice. We'll continue to grow and optimize our customer base. We will also strengthen asset and liability management and enhance the effort to obtain high-quality liability and asset origination so as to maintain our main advantage, promote the restorative growth of non-interest income. We will also enhance cost management, establish and improve input-output evaluation system, optimize resource allocation, and continue to promote cost reduction and efficiency enhancement. Second, we pursue differentiated development to expand core competitive advantages. We will secure the dominant position of retail finance, consolidate and enhance the systematic strength of our retail finance business, and leverage the recovery of the capital market. we will seize opportunities to accelerate the transformation and upgrading of our wealth management business, strengthen core capabilities, addressing weaknesses. At the same time, we will build up our market share in key regions, key areas, and key business, cultivate new advantages in niche segments using targeted breakthroughs to drive overall competitiveness. Third, we will enhance global and integrated operation capabilities. On one hand, we will continue to improve the quality and efficiency of overseas institutions, particularly those in Hong Kong, while increasing the share of overseas cross-border and FX business. On the other hand, we will capitalize on our full spectrum of financial licenses and broad business presence to strengthen collaboration, integrate resources, and enhance both comprehensive customer service capability and income diversification. Both will foster innovation-driven growth and accelerate to construct digital and intelligent CMV. We will seize the opportunity brought by AI development, strengthen technology infrastructure, and lay a solid foundation for innovation in the AI era. We will build leading knowledge and data capabilities to establish clear advantages. and to shape an AI-driven innovation ecosystem and continue our exploration in the human plus digital intelligence model. Fifth, uphold disciplines and strengthen comprehensive risk management. We will adhere to a prudent and sound risk culture, enhance risk assessment, and continue to prevent and resolve risk in key areas. We will step up efforts in the collection and disposal of NP assets to ensure asset quality remains stable, and we will maintain strict control over credit, market, liquidity, and operational risks while reinforce anti-money laundering and compliance management, thereby providing a solid support for sustainable development. The above mentioned is our strategy for the next half. Thank you, President Wang. For the next session, we will enter into the Q&A session. Please follow the instruction given by the operator and please state your name and the

institution you represent before you raise the question now we will enter into the q a session please raise your hands on your iphone on your phone or you press raise a question on your pc and since time is quite limited please only raise one question for each institution and also state your institution that you represent yourself before asking questions now the first question the first question will coming from from city securities miss xiao feifei thank you for giving me this opportunity The chief researcher in city securities. Currently, I think that congratulations to CNB's first half results, especially you have made a positive profit growth in the first half and brought us much confidence in the banks operation. So my question is for Mr. Wang, Mr. Wang Liang. We're seeing now there are some positive trends in the market like the warming capital markets. And my question is whether CNB can continue to have this positive wealth trend in the second half. Thank you for your question. And after we released our results last Friday, many investors and there are many analysts are writing articles about our performance in the first half. and also have given us judgment and also confirmation and also suggestions for our operation. I think we truly accept all the advices and suggestions and also absorb these kind of suggestions to our operation. And just now you said that in the first half, we have recorded a positive whether we can continue this trend in the second half. I think from my point of view, I think in the first quarter, we are facing very big pressure because from the first January, we were facing LPR repricing, which means that there will be a higher pressure on our name contraction and which also have a big pressure on our total operating income. In the second quarter, we think that the second quarter's performance is better than the first quarter. And we think in third quarter and the second half, we believe that we will be able to have made steady progress and trending towards a better situation in the first second half. And in the second half, I think we will continue to implement our strategy and also requirements from the board, especially under this environment. especially with a contracting name and also the lowering of the interest rate environment. We will continue to balance our business development about different business lines and also better manage cost control and also to concentrate our resources in major areas and to improve our wealth and other fee-based income and also better manage the risk and also As a quality, with all these measures taken, we have the confidence to continue to make steady progress in the second half and to reach our budget goal, which was made at the beginning of the year. Thank you. Second question, please. The second question is from Mr. Zhang Shuai from CIC. Thank you for giving me this opportunity. My question is for Reto Banking. I think that it's quite a bottom period for retail banking. I think there is less talk about retail restructuring, and we are seeing higher risk in terms of retail side. So the question is, is retail continue to be a major strategy of the bank, and how will you carry out that retail strategy? And when we look at the retail operation, I think that you have quite a stable retail assets and now we're seeing improving wealth management. So looking forward, how can you expand your advantage in retail banking? What are the specific measures that you would like to take? Thank you. This question is for Mr. Wang Ying. Ms. Wang Ying. Thank you for your question. I think there are some difficulties and challenges facing the development of retail banking, but we do have some development in recent years, especially we have higher growth on customer and also on the AOM side. And first half, we have reported a record high AOM growth. And also we are seeing higher growth on the wealth management fee income as well. And there are three major aspects areas that we have been working on in the following years. The first one is that we are focusing on major areas like the deposit and also settlement and clearing. We are relaying more emphasis on settlement and clearing, including credit card and also debit card and try to be the prime bank of our customer and to innovate our settlement and clearing business and to build an ecosystem for our settlement environment and to make it easier and also more convenient for customers to use the cards of BNB. We think that settlement and clearing is the most basic banking service that we can provide for our customer. So providing a more convenient banking account and also related services account to the customer is our top priority in the last few years. Secondly, we use one and a half year to kind of to build up and also to upgrade our people plus AI and technology service model and to optimize our team building and also to empower our team with technology so we think that new productivity is very important to service this new environment and our advantage for us is to reorganize our resources for retail banking to meet up the new requirements in a new environment. So we call it that people plus technology. So this strategy is not only a goal that lay behind us, but it's rather something that we are implementing already. And we have already shifted to the new people plus manual power plus strategy. technology model so the results have been shown in our operating income in our profit walls as well so in the future we think we will benefit more from this kind of a strategy upgrading and second and thirdly is that apply ai into retail banking i think it's the best scenario that ai can be applied and we focus on AI assistant, namely AI Xiao Zhao for our retail banking, and we have achieved quite positive results. And our assistants are servicing more than 20 million customers, and also AI assistants are servicing all of our retail relationship managers and the meeting back office employees, and also help us to improve efficiency. And we're also going to optimize our business structure and also embed AI assistant, embed these kind of AI colleagues into our whole system. And our employees will help to nurture and also these kind of AI assistant, which means that business will be led by our relationship manager, will be led by the people, and then will be assisted by the AI assistant. I think for retail banking, very important are three pillars. The first one is technology. Technology is the most important thing for the advancement of the retail banking. And CNB's technology is very highly integrated with our business, and our technology fully understands the business so that we can provide a series of innovations including all in one card, all in one net, which have led the industry in the past. Secondly, PILA is a team. our team is very important it doesn't mean only the team from regional banking but also team from our other business unit it's like mr wong said that in china merchandise if everyone talks about retail everyone does the retail business and it's kind of a common goal for the cnb cnb And thirdly, it's our philosophy to creating value of our customer. It's not only some slogan on the wall, rather, it's embedded in everyone's mind and everyone's choices and also implement this philosophy in our daily, day-to-day practice. So we think that the enterprise can win at the end, that is the enterprise can implement a philosophy. And fourthly, I think determination to implement this retail strategy is very important. And I think there are many, always some questioning from the outside world, including third-party payment and also fee rate cuts, which also questioning our capability in wealth management. Currently, we are seeing degrading of the consumption and also there are many challenges for our credit card businesses as well as settlement businesses. I'm facing all the challenges while our digital banking continues to grow. From quarter to quarter, yes, we do have challenges including interest income, including fee-based income, and also payment-related income, but we didn't give up any hope or give up any business. Rather, we seize opportunities in good times and also to consolidate our business foundation in bad times. So I think no matter all kinds of customer, all class of customer and also all kinds of business, including wealth management, private banking, basic banking, we are very firm now and also stick to our strategy and also look back at what we have done right and what we have done wrong. I do hope that analysts and also shareholders will more focus on the foundation of CMB, whether we can control the risk, whether we are still market-oriented, whether we continue to be innovative, or we continue to develop technology. These are more important rather than Q2Q results. Thank you. Thank you.

Next investor, please.

Next investor is from Catherine Lay from JP Morgan. Thank you for giving me this opportunity. My question is about foreign trend and recently about the pricing of the deposit and also loan and also the launch of the immigration policy. So how it will help with the vaccine? And firstly, from deposit side, my question is about the daily average demand deposit. whether it's affected by the capital market and whether do you have a higher demand-deposit proportion and do you have further room to reduce your cost of funding? And looking into our future, if continue, we have symmetric recuts. So how are you look forward to a stabilization of the NIN? Thank you. And the question is for Mr. Peng. Thank you. I think after we release the semi-annual report, I think Ning is quite a focus of all the investors. And I also saw some of your reports. I know you understand the current interest rate environment but also you i think there is some hope that you hope we can reduce the construction level of our name so today i would like to share some of our views on my views on me so uh three major aspects the first one is that in absolute amount we are leading the industry in terms of mean absolute level and secondly we face pressure and thirdly i think that uh it's controllable in construction Firstly, in absolute amount, our NIM is 1.88%. And from average banking industry level is around 1.42%. So we are 46 bps higher than the industry average level. And as far as we know that we are the best one in the industry. So this is absolute leading in NIM number. And secondly, but still we are facing pressure on NIM side because it's related to our own business features definitely we have some common pressure with the industry but we also do have some uh specific and our own distinct things decreases like the common things are like that the ssu they're all coming down and the level of the decrease on society is higher on the decrease on the cost side but cmp has something different than other other other other banks like the first one in terms of the deposit cost there will be less room for CNB to reduce the deposit costs on higher pressure. It's quite easy to understand because our deposit cost is already very low. It's 1.26%. It's far lower than our peers. So against this background, I think that the room for us to further go down will be less than our peers and also will have the highest demand deposit proportion. which means that room for us to continue to raise, cut down the deposit cost is less. So now the demand deposit rate is 0.05%. which means there will be only 5 bps down if it goes to zero. And secondly, for a very long time, we have a very strict control on high-cost deposit. We have taken different measures to make sure that we have a lower proportion of the high-cost deposit, so the room for us to further lower down the deposit cost will be lower than the peers. And also, from the loan perspective, as we can see, mortgage loan last year, And especially this year, we are seeing repricing of the mortgage loan. And the back book of the mortgage loan has quite a big impact on us because we have one of the highest proportion of mortgage loan. And this is also something that differ from other banks. And also from the asset structure, and which makes us facing more pressure on that because we have a higher proportion on retail assets over 50 percent and I said retail assets especially have a higher yield especially like credit cards but if we're facing less growth on retail side definitely will have some negative impact on our asset structure which leads to lower yield like the credit card It's down by $23 billion compared to the end of last year. And this is mainly because there's less demand on that. And this is the same situation with the industry. That is why these are specific reasons for CMB. That is why we are facing more pressure on the lean side. These are the areas that we need to further analyze how we can conquer the challenges from the external environment to continue to maintain a sound steam level. And thirdly, my judgment for future, I think that the future will be under control. Overly speaking, I think that even though facing pressure, but we do have some beneficial environment, like the one thing is where we think the external environment there are more policies has been carried out to stimulate the consumption, which definitely will be beneficial to the development of our retail loan and also credit card loan, like PDOC focusing more on the new level of the banking industry. And as you can see, there's a close relationship between when they are cutting semesters rate cut on both asset side and also liability side. So this will also help to relieve the burden on the moon side. And thirdly, is the involution policy is also applicable to the banking industry, which will curb or deal with the irrational competition among the banking industry. These are more favorable to the banks operation. And from CNB ourselves, we're also taking measures like we're stepping up to absorb more high quality demand deposit and also high quality low cost deposit as well. Just now you also mentioned the proportion of a demand deposit ratio, whether it will be affected by the cancel market. And I think currently when we look at the deposit, there's a kind of a quasi bull market. There's a bull market in the capital market. It definitely has diverged some of the deposits to other wealth management related products. But I think at the same time, we have a broader definition about the deposit and the deposit from non-financial institutions, including our deposits relating to custodian business and deposits relating to capital market, like the deposits coming from our financial institutions counterparties. are growing like 33% higher than before. It means that even though there will be a divergence from the deposits, but the funding is still there. It means that the funding deposits from customers are going to the capital market, but then you return back from the financial institutions So, internally, we have a broader definition about deposits, including customer deposits, including the financial institutions. Now, the deposit cost for our FI is about 1.09%, and demand deposit ratio is around 97%. So, it's also a high-quality deposit. So, no matter what the nature of the deposit is, as long as the the cost is low then that would be also be a very good funding source and certainly i think from the asset side we will also make efforts in terms of as our generation including corporate and also including digital banking especially the retail banking as our focus like credit card like the micro and consumption loan and also mortgage loan we are making efforts on all these fronts try to originate more loans in this area. And also, at the same time, for risk pricing capability, this is further to be improved. This is also a very important kind of difficulty that we are facing. And fourthly, I think very important how we can better manage the asset and liability management, especially for the market asset allocation. So to buy these measures so as to improve our new level. and i think overly speaking i think is leading around 46 higher than the market in the industry level we hope that the level of the construction will be quite the same of the large size enterprises uh we think it's already a harder result and by All the measures, as I mentioned just now, we do hope that we can maintain some thing, but from sequentially looking at, we think that we're still facing same level, facing pressure, downward pressure, but in year-on-year basis, we think that the construction level will be smaller than before.

Next question is from China Securities, Mr. Mark Kunpong. Thank you for giving me this opportunity. Good morning, senior management. Following the past question, talking about the anti-evolution policy, so recently investors are focusing more on anti-evolution, and they will compare it with the 2017 supply-side reform. I would like to understand the difference and similarities between the two. I would like to understand the view from the CNB senior management. For the last time, supply-side reform, it indeed contributes to the bank's performance as well as NIMS. So I would also like to understand further about that after the anti-immolution period, what changes will be happening towards our NIMS? and our development. Could you provide further outlook on our asset quality indicators, such as MPR ratio and etc.? Thank you for your question. According to the central's arrangement, in different industries, there are many arrangements relevant with the anti-evolution policy. Many enterprises, they have They see this order in the market due to price competition. This is not good to the sustainable development of the market. How to reverse this vicious competition and bring back healthy competition to the market? This is what the market and also our regulators have been doing. So in my opinion, Whether this time, the anti-evolution arrangement, compare it with the 2017 supply-side reform, there are some similarities, but there are also some difficulties. First of all, in terms of the industry level, the industries causing overcapacity is different. For instance, the new three industries, there are some phenomenons rather than two over capacity, and these have bring the fiat competition in the market. And to the enterprise level, for the past time, there are some zombie enterprises, and for some provincial level, there are some enterprises that are from low end. These are the past round of supply-side reforms major market player, but for this time, the major market players in this round of anti-revolution are innovative enterprises that are from the private sector. This is quite different from the last time. So for the methodology taken this time, it's also different from that of the year 2017. I believe that this time we could be taking various measures to bring orderly market regulation back to the industries. And for the banks, we believe these can also bring healthy environment to the banking industry to better control as a quality. And for the banking industry itself, we have been also conducting anti-evolution arrangement within our own industry. On one hand, we see some over competition among our banking peers. For instance, loan pricing, bond investment, the fee rates. Well, for some business cases, people will sacrifice prices to compete for winning the business. So this will bring the uptake in the risk level. So for CNB's perspective, we will support our regulators and other government bodies to promote the anti-evolution arrangement and act according to the current requirement and to prevent and to provide the sustainable development of the industry back within the banking industry and to realize the sustainable development within the commercial principle. We will embed this within our mind. And I think it is good to the bank itself to stabilize its loan and deposit pricing and et cetera. And it can also improve our asset quality. And these can all contribute to our future asset quality and our cost management. I believe that under such macroeconomic situation, and also the guidance of the banking industry to better support the real economy, combining all these factors together, we believe this guidance provided from the policy itself, the bank should seize the opportunity and strengthen self-discipline and maintain good risk management and stabilize our asset quality as well as the name to realize a sustainable and healthy development. Thank you. Thank you, President Wang. We will have the next question. The next question is from Xu Ran from Morgan Stanley. Thank you, senior management. I have a question regarding corporate finance. I understand retail has been China Merchant Bank's characteristic, but I would like to also learn something about corporate finance. I understand that you have been managing good risk control in the corporate business. How do you see to develop in a differentiated way in the corporate business? We see a recovery in the capital market. What kind of opportunity will it bring to the corporate banking business? And under the backdrop of anti-evolution, will there be more opportunities coming from M&A and restructuring? will there be any new opportunities and also long business for CNB? Thank you. Thank you for your question. Mr. Lei, who has just been back to the head office to in charge of corporate finance business. Thank you for CNB's wholesale business. We have always stick to the differentiated development methodology and there are several features. Compared to our peers, we have already established quite qualified customer base compared with our peers. Our aggregate corporate customer was 3.36 million. We have high level of site tech enterprises, which takes around 20% of our total customers, especially in manufacturing top players. we have already covered 80% of our total. And for the SME top players, we have covered over 30% of these type of enterprises. For listed companies or those capital market-related enterprises, we have already covered over 86% of them, especially for those PE-invested related enterprises, there are around 190,000. Our coverage has already surpassed 59%. So with such good quality and large customer base, this is one of our greatest feature. Second part is we have a unique FPA perspective. We provide comprehensive financing to our clients. This is what we have been doing for the past 15 years. It is a unique perspective of operation to provide various financing channel for our clients. And on the second hand, we could create win-win situation to our partners, relying on comprehensive service Among our total financing, this is 6.42 trillion, and among them, non-traditional financing accounting for 41.4%. And third is that what we rely on technology to provide transaction banking business to our clients. We have maintained a leading position. We have provided 8,800 groups to provide 380,000 enterprises below them to provide account service for them. We realize a year-on-year growth of 30%. And we have also provided the Trashman Management Cloud Service, our flagship solution to our client, which we have realized over 20% growth year-on-year. Our custody service, a trillion dollars. Trillion-level business maintain top three player in the market. Our supply, supply finance, supply chain finance business also maintain top in the market. The fourth is that we have enhanced our advantages in cross-border business and provide services to enterprises going global. For loans granted to non-residents, which for the first half has surpassed 200 billion, a year-on-year increase of 20%. For FX business, a year-on-year increase of 36% have been secured. For enterprises who have international business demand, we have connected them to over 100 representative banks to provide further services to them. And for the fifth perspective, we have provided investment banking and commercial banking services, integrated service to our clients. We have this capability to establish the friend circle, to build up an ecosystem to provide services to these clients. And third, we have the product matrix to provide investment banking and the commercial banking business to these type of clients. For instance, in the bond underwriting business, we have always secured a top three position in the market. We, in terms of the Scitex bond, our underwriting scale has ranked number one in the market. For the M&A business, we have maintained a 27% year-on-year growth in the first half of the year. For the listed companies' clients, they have been the targeted group, the prioritized group we serve in the investment banking and commercial banking integrated service. We have a We have a special unit caterer that measures the accounts that we covered for those we raise funds for pre-IPO clients. We have maintained a leading position in this area. For the first half of the year, in A-share listed companies, their fundraising accounts we have covered for nearly 50% of these businesses. So I use the above three perspectives to describe our features of CNB's corporate finance business. Of course, we are faced with competition and challenges such as anti-evolution environment, the fierce price competition in loan pricing and deposit pricing. I have to admit these challenges exist. For a long run, CNB always make a balance between quantity and quality and obtain the principle to develop business under a controlled risk level. Our corporate business MPL formation ratio was lower than 0.2% for the first half. So for the next step in corporate asset origination, becomes one of our top priority in our business. We will enhance our capabilities in this field, and we will focus on the following four aspects. The first one is Scitech enterprises, including the upgrading of traditional enterprises, the new equipment enterprises, and these opportunities brought by the two types of clients. And second is the integrating and M&A opportunities arising from the capital market. We have also seen accelerated pace in the market. We have been quite active in providing such kind of services to the clients. And third is that to provide supply chain finance services to the clients. And the fourth, how to better integrate the transformation of digital infrastructure to provide better services in inclusive finance sector. The region that we grant inclusive finance loans are mostly concentrated in the Yangtze River Delta, Pearl River Delta, and also the Bohai Rim. The three regions account for 80% of the loan increments. The industries are mostly on manufacturing, leasing and commercial service and also electricity, heating and gas and water industry, water generation industry. The full direction as stipulated by President Wang that will serve in the future direction of our development and will contribute better to our return that we aim to bring to the shareholders and investors of the bank. We will have the next question. The next question is from Zhang Zhujia from Citi. Thank you for giving me this opportunity. I have a question regarding retail. We see from many banks that the retail asset actually worsened in its asset quality since quarter two, and when can you see the peak of the MPL performance of asset in the retail sector? So after we see some interest subsidy policy introduced for the retail loan, will you adjust your KPI to encourage the consumer lower? Do you see any improvement in the demand? How do you prevent the fund to low, to flow to the arbitrage, and how? for instance, in the equity market or early repayment of mortgage, how to control the risk in this type of asset. So for the whole industry, we do see challenges in the risk from retail assets, which are reflected by many areas. So influenced by the slow economic growth and the downward trend in the property market and also the declining income of the residents the retail credit assets are also influenced by these factors which is following the same trend with the environment we also see some uptick risk in our retail sector on the one hand this is Because of the external environment, on the other hand, it is because of our own risk control. We tend to be more prudent in terms of the retail asset quality, even though our risk indicators are seeing some uptick, for instance, the NPR ratio, the special connection loan ratio, but for the absolute level, we're still maintaining in quite good compared with our peers. To answer your question regarding the retail credit risks was our view on the future development trend. We divide the retail credit into two parts within the bank. One part is retail credit. On the other hand, it's retail asset with credit card. In our opinion, the trend, we don't see any turning point From our perspective, for the credit card customers, the risks are in a more bottom level. And for us, we can see it as an early warning indicator. We have conducted an analysis for the credit card business. The NPR ratio has shown its increasing trend since 2019, along with the pandemic there are significant increase along across the market. And from then till now, it has been six years. Only in the year 2021, we have seen some improvements. But for the rest of the years, the credit card business across the market, the MPR ratio is always in a downward trend without seeing any turning point. So you can see from the credit card business to the whole business of retail, we should say that the risk is still in the process of exposing the pricing, the decreasing pricing of the mortgages and some other influencing factors. These risk factors are combining with each other. For example, This is the bank's overview, the bank's view over the market. How do we deal with the relationship between development and risk? We need to maintain a proactive attitude. For retail credit business plus credit card business, It accounts for over 50% of the bank's loan. It's a cornerstone of our business. We need to enhance our capability and explore more potential to grow, to satisfy the need of customers' demand, and to promote the high-quality development of credit business of retail. But on the other hand, we need to be highly cautious to balance the quality, profitability, and skills development. This is our priority. and the quality has been the first and foremost prioritized that we pay special attention to. The bank's credit card MPL ratio in 2019 and in 2020 all showed increased trend, but in the year 2021, we take early measures of low volatile and steady philosophy So even though there are some upticks in the credit card business asset quality in the whole banking industry, but for CNB, our NPR ratio and NPR formation ratio still remain stable and maintain the best in asset quality in the industry. So for retail credit business, as one of the players in the market, we cannot go against the trend of the market. We see some increase in the risk in the retail asset business, and there are still some trends of continue to increase. But overall, the asset quality is stable. Where does our competence come from? First of all, our risk culture is prudent and stable. We have good customer, we have good collateral, and we have 90% of our clients coming from these good businesses. And for those retail business with collateral, there are over 80% of them. And we see very good safe cushion for these business. And third, we have the confidence because in the short or in the mid to short run, we have paid special attention to the risks, but we see that the China's economy is going in a good momentum. It is recovering. And since this year, the central government has launched several policies, such as interest subsidies and other policies. So I think that the recovery of the economy and the positive momentum will continue to contribute to our retail credit business. In the future, we believe that the environment for the bank to operate retail business will be improved, and the bank will be transformed from pure price competition to the competition that takes service as the center, that takes technology capability as the center. So, in safeguarding our bottom line of risk, we will make sure that our asset quality to maintain at the top level of our peers, we will continue to position us, the retail finance's dominant role, and to guarantee their role as a cornerstone to the contribution of our loan in the overall arrangement. Thank you.

Next question is from . Thank you for giving me this opportunity. I'm from . My question is for fee-based income. Just now we noticed that in the first half, we are seeing less decline on the fee-based income in the first half of CMD and how do we look forward in the second half? And secondly, I think that there is a drag from the payment related fee-based income. So whether it's because you are controlling, you are controlling the risk and whether it is because of more fierce competition from the third party payment parties. And another thing is that for credit card business, we have seen that regulators have lowered down the credit card loan pricing. So how would CMB adjust your credit card business and when it will be better? So for fee-based income will be answered by Mr. Peng and also for credit card business will be answered by Ms. Wang. Thank you for your question. As for fee-based income, I think fee-based income is a very important component of the of the non-interest income. Non-interest income, including fee-based income and also other non-interest income. So I will share my views on these two parts. For fee-based income, the highlight of this, the first half, is the wealth-measured fee income for three years, the first time to have a positive growth around 12%, so over 11%. So this is the biggest highlight of the first half, including agency sales of the wealth management, agency sales of trust products, agency sales of the mutual funds are all growing, but for the agency sales of the insurance, we have seen growing amount, volume, but the fee-based income is coming down. This is mainly because of the mix, the structure of our insurance is changing. Many of them are coming from commercial retirement. The fee coming from this kind of insurance will be realized year by year rather than it's not a one-time income. So I just want to assure you to have confidence in the future growth on our insurance program. insurance fee income, and also we are seeing quite some momentum in the custodian business contributing to the total growth of the fee-based income. But also, we are facing pressure on fee-based income. The biggest pressure is from our credit card. I think it's highly related to the transaction of the credit cards. And first off, transaction volume has reached 2 trillion. Compared last year, in a year, it's a decrease of 8%. but our market share of the transaction value is increasing by 0.3 percentage point. So it's mainly affected by the weak consumption environment. So it's highly related to that. And at the same time, our credit card fee income has down by 16%. But the customers are, when the transactions are growing, it means that per transaction ticket is coming down, which is the main reason of the decrease in total transaction value, and also the main reason behind the decline of the credit card fee income. And credit card fee income is quite a very important component of our total fee income, so that is why the impact will be bigger. And also another drug for our total net interest income is other net interest income. It's negative growth around 12%. This is mainly affected by the financial markets because this year's interest rate trend is different from last year. Last year was a bull market for the debt market. In the first quarter this year, we are seeing a re-bouncing of the interest rate. And second quarter, the short-term interest rate are also higher than last year, even though there is some decline on the long-term interest rate. but these all have negative impact on our other non-interest income. So these are the two drag for the first half. When we look at into the second half, we are confident And as Mr. Wang said, to achieve a steady progress on the fee-based income. We are confident on that. And for other net non-interest income, I cannot assure you because it's highly related to the market interest rate, especially we are seeing rebalancing of the interest rate very recently. So it's a little bit hard to judge now. So I will pass on to Ms. Wang Ying. And for your second question about credit card, this is, I mean, just now the, recently the regulator has kind of canceled the ceiling on the credit card loan pricing. This is very new regulation. And we think that the overall pricing for credit card loan will be stable, mainly based on the two reasons. The first one is that our credit card loans are mainly coming from installment payment. And over 20 years' involvement, banks have already have quite a mature risk pricing business model for installment business. And regulator has also a kind of a mature framework regulating installment, including how banks in demonstrate their pricing to consumers and also I think for customers already have differentiated risk pricing but this time the cancellation of the of the feeling or regulation of credit pricing doesn't have impact on the installment payment pricing and also for the revolve pricing revolve loan pricing and also for uh for the installment pricing the regulator's guidance is that the price should cover the risk so should namely to have the risk pricing model and banks can have depreciated pricing to improve their market competitiveness. BNB has always been implementing market regulation and we have scientific risk pricing mechanism and also risk and pricing management internally. So we think that the overall credit card pricing will be stable. And just now, Mr. Peng says that the fee we have seen some decline on the fee-based income. One of the drag is coming from the credit card business. Even though we are seeing an increase of 43% point increase in our market share, but due to the decline in the total transaction value, we are seeing a decline on our fee-based income related to credit card. I think credit cards is also a focus of the market. I would like to share some of my views on the industry. I think the credit card industry is kind of shifting from a high-growth environment to a high-quality growth. It's facing more risks, and also it's seeing consumption degrading, and it's kind of a shifting period. I think it will be quite long-lasting. Some of the credit card centers already cannot grow at a normal speed, and some are facing very big risk pressure. So it's quite a The feature of the transformation period is that some will be fixed up by the market. But from our view, we think that we are confident in the whole development of the credit card industry because the government is also launching positive measures to stimulate consumption and credit card is stuck in a small amount transaction and it's also both can be a transaction vehicle as well as a vehicle for loans. So it's different from other simple retail loans. And also it could be the line of the credit card line could be revolved and means that the card users can use the card as a settlement vehicle and at the same time to get some credit from the line. And we have a dynamic risk model for credit card and also it's quite a good area to analyze the risk of the retail loans. So we think that credit card will continue to play a pivotal role in a consumption, all consumption industry. And for CMB in this credit card business, it's also a important vehicle that we can service our 200 million retail customer. And it also contributes a lot to our total SSI, mutual SSI, and to our spiritual operating income. And credit card and debit card are both servicing the customer and providing the transaction and settlement and clearing services for our customer. and attracting young people and to help CNB to be the first choice for young people can be one of the reasons that a customer trusts us. So I think that credit purposes is very important, not only in the past. Also in the future, we will highly emphasize on the credit purposes and also the higher requirement of the development of credit purposes. Next, please. Next question is from , Mr. Zhu Chenxi. thank you for the management and thank you for giving me this opportunity i'm from kota I have a question for the internationalization operation of China. So it's the first year of CNB's launch, your international business strategy. So over half a year, what is your kind of feelings from these kinds of international operation strategy? And do you have something to share with us? Thank you for the question. In order to respond to the low interest rate, We have launched a strategy, namely the first one is to develop, have a faster development in terms of international operation. I think it's following the external trends, namely many Chinese enterprises are going abroad or accelerating their pace to go abroad. So it needs Chinese financial institutions to provide their related services. And secondly, China has become the second largest economy in the world and has been a very integral part of the world's economy. And it's already related to many countries and regions. So CNB's business should also be involved or developed in many areas and regions. And also with our internationalization of RMB and the One Belt and One Road strategy, I think it's the biggest trend in an external environment, so we are following that trend. And secondly, I think in the Chinese market, almost all of the Chinese banking industries are focusing on the Chinese markets and Chinese assets. So when we are facing interest rate coming down, we are both facing lean contraction. So it's kind of a bottleneck for all the banking industries, how we can conquer this bottleneck. I think international operation is a very important key to cure this problem. and also help the whole country to build up a strong financial system in the world. All major economies in the world, the financial institutions there are all operational, are international and global financial institutions. It will be the same case for Chinese banking industry's future. So that is why this is some active move that we need to take. And for CNB, even though we have achieved sound and stable results, still you can see our business are focusing on the Chinese market, how we can learn from other international financial institutions, and how we can follow the trend of the Chinese enterprises to global, and how we can follow the trend of the national strategy, it's important for us to have a international operation. In Hong Kong, we have the CNB International, and also we have CNB Wenlong Bank, and the international financial markets. We have other overseas branches. We want to elaborate on our overseas presence to improve our capability to service Chinese enterprises going abroad. And secondly, I think with a deeper cooperation with the global financial institutions. It will also help us to improve our own management and service capability and also learn from other first class by the global financial institutions experience to help us to improve our management capability and to improve our service and to nurture our capability to to build up our own international team. So it's not only an internationalization of the presence or distribution channel you have, but also it's an internationalization of your management level, and it's also internationalization of your team. So by doing so, we can better help to service the clients. and help us to respond to the low interest rate environment and to have a long-term sustainable development. So in the first half, Yeah, it's the strategy we have launched at the beginning of the year. But for the past two years, we have already been making efforts in these regards and improved the capability of our overseas branches. And you can see from the asset growth and also from the profitability and also contribution to the bank from the overseas branches, I think they have achieved some results, but I don't think it will be a short run. it might take a longer term, like three to five years to really have the capability to have a global operation. And I do believe there will be a new driving force in the future. Thank you. Next question, please. Next question is from UBS. Thank you for giving me this opportunity. I'm Helen from UBS. My question is about the capital management. As we have seen quite a rapid growth of RWA in the second quarter. In the second quarter, a big decline on the core car ratio, and RWA growth rate is higher than 8%. So the decline on the car ratio, I think, may be related to the expansion of more asset books. And I think it's related because you have higher allocation to corporate banking, but the corporate banking business usually have a lower yield compared to retail. So how do you look forward to your car ratio and whether the car ratio will continue to decline? Thank you. This question will be answered by Mr. Peng. Thank you for your question. For the car ratio in the first half, the matter is that the advanced approach or standard approach or our car ratio are all declining compared to the end of last year. I think it's related to the dividend payout ratio. If we exclude the factor from the dividend payout, our car ratio under the weighted approach including of the total capital ratio under the weighted approach are all increasing compared to the end of last year. Under the advanced approach, it's declining compared to the end of last year. So you can see that, firstly, the biggest impact on the car ratio is dividend, excluding the dividend. there is a phenomenon that the RWA growth rate is also fast. This is also the second reason why we have seen a decline on the market ratio. And the main reason behind the faster growth of RWA, the first one was that in the first half, especially when we are seeing weaker demand on the retail side, we have more growth on the corporate loans. So the RWA growth on corporate side is faster. And secondly, in June that we have also optimized our rating for model for corporate. So it means that we have a higher proportion on the risk side. So that is why you are seeing higher RWA growth rate on corporate side. And thirdly, And for bond investment, this is the same situation that we have allocated more resources to bond investment. So market risk-related RWA is growing faster. But since we have capital strength, so we have some periodic risk. operations then we for some flow assets like the bill discounting assets and also the uh lc discounting some of the temporary flow assets we are also adding up them but it's a temporary reason for the first half. So because we have the capital expense, we have the capability to do some periodic operations to help to grow the overall profit. In the long run, I think our strategy is the same. I'm a safe firm to retail and to stick to the RELOC goal and to strengthen our capital investment. I think that for the whole year, RWA growth rate will be in line with our goal, like 9%. So this is quite the same like in the past, that annual growth rate of RWA level will be stable. And for profit, for the whole year, it's hard to predict, and also because they will be affected by many So I think excluding all the dividend payout ratios and also excluding the payout ratio for the peripheral bonds and also for the perpetual bonds, we hope that we can continue to maintain a sound and stable card level. Thank you.

Next question is from Goldman Sachs. Thank you, senior management. I'm Wang Zihang. I would like to learn from the senior management and the insufficient credit demand from the society. What's your view on the demand side of the industry, on the corporate side? And what industries are having weaker demand than others? What is your guideline of the corporate credit granting? And what is the major growth point in the major industries? This question will be taken by Mr. Lei. I should say that since the beginning of this year, the macroeconomic condition under this backdrop, corporate loan has become the major growth driver of all loans for the first half of CMBs. Corporate loan growth on a year-on-year basis, the growth rate was 7.8%. 9% on the group base is 8.04%. It fits the trend of the market, actually, as we feel, as what we sense about the demand side of the market in terms of its characteristic. There are several layers. The first layer is that from CMB's growth itself, manufacturing has a larger demand than other industries, especially those relevant with new technology input and new generation capacities building, including manufacturing of infrastructure and the green area, while relatively speaking for the property and those industry with overcapacity, their demand are relatively weaker. So government-related companies, their demand are also stronger than others. So from other perspectives, our manufacturing, our leasing, and the commercial service industry, the electricity, heating, power, and water production industry, these are the three major industries with larger demand. Just now, I have also mentioned about the M&A and restructuring business opportunities. These will become Also, the industries with stronger demand for the next step. This is also our strategy for the next step's corporate asset origination. We will enhance our capability and further accelerate the growth rate of our general loans. Our target for the first half, we have realized an 8% growth. And for the next step, we aim to secure a growth rate of over 10%. Thank you, President, Executive Vice President, Mr. Lei. Next question is from Yingfeng Capital. Mr. Duan.

Dear Senior Management, can you hear me?

I can hear you very clearly.

I can see you in the camera.

下面再请接入下一个提问者。

We will have the next question. We will have Mr. Ma from the Changjiang Security to raise his question. Thank you, senior management. I am Ma Xiangyun from Changjiang Security. I have a question relevant to a heatedly discussed topic of the deposit migration discussed in the capital markets. I would like to understand CNB's view on this phenomena. So for this round of residence asset allocation behavior and structure, what changes do you see? And compared with the last round of cycle of wealth management development from 2019 to 2021, what's the changes for CNB's wealth management business arrangement strategy and your tactic? What is your outlook towards its income growth and also the market competition landscape of the wealth management business? But this question will be taken by Ms. Wang. Since this year, the retail clients' risk preference are experiencing some changes, but prudence, steady is always the major tool. So under such backdrop, people are having stronger preference on equity products, equity assets. So combining with the recovery of the capital market and the low interest rate environment, we see some improvement in customers' risk preference, but we expect to observe further combining with the external environment. And under such changes, our wealth management strategies are as follows. So as a wealth manager, we will do two things. One is to grasp the major market trend and the second is to meet customer's demand. So comparatively speaking, from the 2019 to 2021 round of market cycle, the current market environment is something we need to focus on low interest rate environment It's a future phenomenon. It's a future trend we will be experiencing for a long time. We continue to see the lower rate in the market. We are seeing more true as a yield conveying to our customers. For CNB's client, we wish that Our clients can enjoy comprehensive service within T&B in a long, sustainable, healthy, and sound manner. We are also driving ourselves to make efforts in this direction. It is a great test for us. It is testing us for our capability to provide professional services to our clients, and we will strive to achieve our goal in the five following aspects. First, we will seek compliance. to provide asset allocation services to our clients under the three asset allocation system. We will see through our client's demand and provide asset allocation suggestion to our clients during which every round of service we provide to our clients are very professional, but for us inspect their assets and provide balanced service and suggestions to our clients are very important during the process. And the second is to better innovate products and provide it to our clients. For CMD, our wealth management platform is a comprehensive supermarket. We have quality selected products. We have customized products. they have demand in active, in passive funds, in tools, in market, market to market, and et cetera. We need to provide different allocations to our clients across their life cycle and to provide very accurate product supply to our clients in a very diversified manner. For instance, you know about the five-star election brand, you know, you're quite familiar with, and also you have the long profit soft products that fit into the category of our product supply. We believe that customers are having stronger demand in asset allocation. We need to enrich our allocation product line and to ensure that we can have very strong resources in the backwards for our clients to make further selection. For instance, we have been enhancing our product supply in the cross-border sector, for instance, the QV, QV, and etc. In existing volume and increment of the cross-border products, we all see many growth in this field. The pre-fixed field yield of the insurance products the market interest rates tend to be lower and lower. It is also asking the market players to be back to origin and provide the genuine guarantee type of insurance policies to our clients. We need to see and further dig into the demands of our clients so as to better provide to better provide products to our clients accordingly and to solve the problem of why customers should choose insurance policies. The fifth aspect is to better embed AI into our products. It is a very professional scenario. In wealth management business, we have already embedded AI technology in internal management and customer service. On the customer's end, the AI Xiao Zhao has already provided service to 20 million clients monthly. Combining the latest technology, the AI Xiao Zhao is continuing to emerge and to iterate. Combining with different job requirements in different positions, we have embedded AI Xiao Zhu to help our relationship managers and other colleagues to enhance our efficiency in different business lines. So generally speaking, through huge pressures and the blooming capital market for the past several years, we have seen some silver lining. So for our perspective, we believe the fee income of wealth management business will recover gradually. Along with the growing of our AUM and the growing of our customer base, these have all formed solid support for the future growth of the fee income of wealth management business. We have also improved the structure of our wealth management fee income. We will continue to increase the ratio of the consultation fee and for the structure of our product mix. We have seen more potential arising from the changes of customers' risk preference. If we continue to see more recovery of the capital market, we will see higher ratio of allocation from our customer into the equity-related products. Thank you. Thank you, Ms. Wang Ying. We will have the next question. We will have the question from Mr. Duan from Yingfeng Capital.

Yes, in your management.

I can hear you. Please state your question. Oh, sorry, due to the signal failure. Please allow me to turn off the camera. Thank you. Congratulate on the positive increase of your profitability of the interim report. I have a question. how do CMV balance the interest for short-term and long-term? And under such backdrop, people are asking for temporary and also long-run return. How do you seek a balance between them? Thank you for your question. I think you're asking about how to balance the short-run and long-run in terms of the benefit. For a bank's operation, it is highly relevant to every aspect, micro and macro, short and long run, quality and quantity, speed and the growth rate, these are all correlated with each other and influencing every other aspect. So about your question regarding the short run and long run, how do we benefit? I have recall a saying that if you don't have concern for the short run, you will have in the long run. So for us, for CNB, to deal with the relationship between the short run interest and long run interest is the key to our sustainable development and is the goal of our senior management in doing our task. 20 years ago, during the days when President Ma was managing the bank, he has a saying that if you don't do retail business, you won't have a living in the future. If you don't do corporate business, you won't live at the time. I think it is very accurately describing the relationship between retail and corporate and also very flexibly describing the relationship between short run and long run. So for the senior management, we believe It is a question we have to deal with about how do we deal with the current performance and how do we maintain a sustainable development in the future. I think operating a bank is like running a marathon. We are not doing a 100-meter sprint. Doing a 100-meter sprint is not sustainable. We need to maintain a long-term perspective to operate a bank. We operate risk. and risk is quite invisible. It is lagging behind and it is contagious. So we can not only look at the current performance, the current financial indicators, but neglect the risk in the future. The bank also has a task to support the real economy, to support every household to support people's livelihood. So we need to walk steady, walk far, and to provide better service to our clients based on confidence and based on our credit. We need to win the recognition of the market of our client so as to better develop. So for CNB senior management, as we deal with this relationship, we need to lay solid foundation and look far into the future development. In laying solid foundation, we need to strengthen our full foundation, our customer base, our talent base, our management base, and our business base. Only with solid foundation can we walk far. At the same time, how do we walk far? How do we look further ahead? We need to strengthen our capability to make sure that we have a clear development to do the right thing and not to do something that we think it is unnecessary. So this is how we balance the current development and future development to lay solid foundation and look far ahead and walk far ahead. And how do we maintain our characteristics and features? So I think the current characteristic should turn into our future sustainable capabilities. In my perspective, we need to build up the comprehensive development among the four major sectors, the retail, the corporate, the investment banking, and financial markets, and also the extensive wealth management. It is very hard to achieve this goal. But only with a comprehensive development attitude could support our comprehensive development in the future. And also, we support the full initiatives, the internationalization, differentiation, the digital, and the comprehensive cooperation to cope with the low interest rate, low interest rate, and the low profitability environment. This is also what we could do to support our future development. and the need for our future development. We also need to realize the regional development strategies, such as the Greater Bay Area, the Yangtze River Delta, and the Bohai Rim Area. These key regions are the regions with quite good economic growth, and where the future potential lies, we need to focus on these regions to support our development. In the differentiated and characteristic development, we need to maintain our own strengths. and forge our distinctive. As we don't have future concern, we will have some concerns for the current phase. We need to stand in the future to look at our current environment. We will see what we have been doing in a correct way and to avoid making mistakes. We need to looking into the future and stand on our foot, foot point and to develop further, stand firmly and seek future development to deal with the relationship between current development and future development and maintain our distinctive competitive edges. So this is my ideas, my views on the question you asked.

To guarantee the rights of all of our shareholders, We have collected many questions from our investors beforehand, and some have already been answered just now. And there are some specific ones we will read out from individuals. Recently, the bond market has been seeing some turbulence and volatilities. So how CNBs? management see the future trend of the bond interest rate and what is your investment strategy of your financial market business? Thank you. For the financial markets trend, just now when I talk about the income side, I have already touched on upon that. In the first half, we can see there is quite a Big volatility in a bond market, like the 10-year treasury bond, the band of the volatile band is around 30 bps. So it means that will be harder for the investment of the bank, especially compared to last year, there was a one-way bull market. But this year it's quite different. Volatility has always been there from first quarter till now. which plays higher requirement on a bank's investment strategy and very recently we're seeing a rebounding for the 10-year treasury bond again reaching around 1.8 percent for some newly issued bond is even higher than 1.8 percent in my view i think that why the interest rate has rebound. There are several reasons. The first one is related to the capital market. And capital market is very active, which definitely has lead to a rebound in the interest rate in the bond market. And secondly, about the involution policy, since the attitude of the policy side towards involution, that is why market rate has also risen. And thirdly, I think it might be related to the value-added tax on bond investment or banks' investment into bonds. There will be a recovery of the value-added tax this also had some impact on that. So, which altogether led to a rise of the bond yield in the market. But in the long run, I think, the interest rate of the bond market will be trending down because the PBOC has counter-cyclical measures and also has adopted a loose monetary policy. So in the short run, there will be volatilities. And the market expectation is that the 10-year bond will moving from around 1.7 to 1.9%. So our strategy are as follows. The first one is from the asset allocation perspective, we need to have the appropriate proportion of investment. 30% currently, I think it's an appropriate level. It has risen a little bit, but it's an appropriate level for us. And secondly, under this asset allocation strategy, we need to buy more when the price is low and the yield is high. And thirdly, to take the opportunities from the volatilities and have more trading gains so it depends on our capability of investment and fourthly maintain a proper duration because interest rate risk management is also a very important of risk management so duration management should also be proper And we think that the duration is proper and it should not be lengthened. So this is the duration management. And fifthly, to manage the derivatives to offset the risk. So these are the major risk management measures that we have by all round and also professional investment strategy to help us to maintain absolute yield on our bond investment and to have more trading goals. Thank you. Next question. Next question is from Mr. Chen Shaoxing from Xinye Securities. Thank you. I'm Mr. Chen Shaoxing from Xinye Securities. My question is about ROE. CNB has high ROE and high dividend ratio. I think this is why many investors invest in CNB. But CNB is now having a more faster decline on ROE. By the end of June, it's 13.85%. So if at this speed of decline, where the CNV's ROE will decline below 13%. And if CNV can maintain such a low of growth rate on SSI, in the next few years, maybe the ROE will decline to around 10%. So in absolute amount, this will be quite a rapid decline. And I remember Benjamin has mentioned before that, For ROE, it's hard to maintain a higher than 15% ROE, but to maintain a relative ROE advantage compared to large size in the crisis, I think the management were very confident. My question is that except from this comparative competitiveness, what is your expectation for the ROE level in the next three to five years? Thank you. Thank you for your question. The MBSRU has been over 15% in the past at a relatively very high level. Last year was around 14.85%. In the first half, it continued to decline by 1.59 percentage point. Now it's around 13.85%. I know this is a concern for many investors. So the highest level, is dependent on profit growth as well as the growth for equity and also for dividend ratio. These are highly related on that. In the past two years, we are seeing a slowing growth on profit side. So this is the reason behind the ROE decrease. And we understand your concern. So from our internally, we think that We have set up an internal management mechanism which is guided by our ROE-centered management system. It means to guide all business to contribute more to ROE to make sure that we have a leading ROE among Chinese banks. Now it's 13.85%. The average level, RE level is around 9%. So we are around 4% higher than the industry level. We need to maintain our higher than average RE level. And secondly, we need to also satisfy investors' demand. you need to have a proper return on investment. If it's too low ROE, it means that you don't need to invest in your bank because the opportunity cost is high. So we need to make sure that among the listed companies, we deliver a proper and reasonable return to shareholders and to be a company that is worthwhile for investing in. So against this, among these objectives, our RE level, how to balance among the RE level and how to balance the profit growth and also equity growth as well as dividend payout. We want to... Our goal is to maintain a relatively high hourly level and to be responsible for our investor and to have a proper investment return to our shareholder. This is one goal of our management. and with our efforts we think that we will continue to have our leading comparative advantage and secondly your question about what is our expectation to the next three to five years i think it depends on our profitability whether we will have a recovery on our profitability. And some investors are asking about whether we can increase the dividend payout ratio. So if you have a higher dividend payout, it means that you can reduce or decelerate the equity growth level. From management's point of view, we think we will take into consideration of capital and business strength, business development, and external environment, as well as regulatory policies and investors' suggestions. We will have a comprehensive judgment on that. Thank you. Due to time constraint... Thank you, Mr. Wang. Due to time constraint, our 2025...