China Merchants Bank Co., Ltd.

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.

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