China Merchants Bank Co., Ltd.

China Merchants Bank 2025 third quarter result announcement will now begin. I am Xia Yongfang, General Manager of the Office of the Board of Directors of CNB. We have announced our third quarter result in this Wednesday, and this conference will be conducted via audio webcast. And now allow me to introduce the attendee first. And they are Mr. Peng Jiawen, EVP CFO and Secretary of the Board of Director. and general managers from the asset and liability management department, financial accounting department, corporate finance HQ, retail finance HQ, and relevant departments. And at the same time, we have also invited independent directors Li Menggang, Liu Qiao, Tian Hongqi, Li Chaoxian, and Ms. Li Jian to attend the meeting online. On behalf of China Merchants Bank, I would like to extend one welcome to your participation and thank you for your long support and investment in CNB. There are two sessions in today's meeting. First, the introduction given by Mr. Peng Jiawen on the performance of our third quarter results takes around 15 minutes. And the second session is the Q&A session, takes around one hour and 15 minutes. There will be simultaneously interpretation from Chinese to English for this conference. Now I would like to give the floor to Mr. Peng. Dear investors, analysts, good morning. This Wednesday, we announced our third quarter results. And I am happy that together with the general managers of relevant departments in the head office, I can communicate with you. First of all, I would like to thank you for your attention and support. And I would like to briefly introduce our operational performance for the first three quarters. According to standard practice, the below mentioned statistics are under the IFRS Calibri, also the H-Share Announcement Calibri. Since this year faced with complicated environment, we stick to our strategic target of building a value creation bank and stick to a dynamically balanced development philosophy of quality, profitability, and scale. And our general development, has extended to be development in a good momentum and there are five features of our operation. Firstly, our core profit indicators remain stable and trending towards good trajectory, ROAA and ROAE and CAR maintained at a high level. The group's net operating income was 251.28 billion yuan, a yearly decrease of 0.52%, with the decrease narrowed by 1.21 percentage point compared with the first half. Net profit attributable to the bank's shareholder was 113.7 billion yuan, an increase of 0.52%, up by 0.27% compared with the first half. ROAA and ROAE were 1.22% and 13.96%, up by 0.01% and 0.11% compared with the first half. We continue to strengthen cost management. Our cost-to-income ratio was 29.86%, maintained at the appropriate level. We maintained sufficient and high capital level. And under the advanced approach, our CET1CAR was 13.93%, T1CAR 16.25% capital ratio. Total capital ratio 17.59% down by 0.93, 1.23, and 1.46 percentage point compared with last year end. We also strengthened asset liability management and secure both increase in low end and deposit scale. We cope with multiple challenges. and promote the growth of our low-cost core deposit. We maintained optimized liability structure. As of the end of September, our total asset was 12.64 trillion yuan up by 4.05 compared with last year end. Total loan 7.14 trillion yuan, up by 3.6%, compared with last year end. Retail loan 3.7 trillion yuan, up by 1.43%, and accounted for 51.8% of the total. Corporate loan 3.15 trillion yuan, up by 10.01%, compared with last year end. Financial investment balance totaled 4.03 trillion yuan, up by 10.52%. Our total liability was 11.37 trillion yuan, up by 4.12%, compared with last year end. Total customer deposits, 9.52 trillion yuan, up by 4.64%, accounting for 83.73% of the total liability. The average daily balance of demand deposit accounted for 49.45% maintained at high level. Thirdly, our NII maintained steady growth and our NIMS decrease narrowed. We continue to strengthen our low cost funding advantages influenced by LPR cut and other influence. Along with insufficient effective credit demand, especially in the retail loan, we have pressure in our loan yield of the interest earning assets. For that, we continue to optimize our structure and strengthen liability cost control to drive the improvement of our liability cost and offset the pressure brought by the narrower spread. For the first three quarters, our interest-bearing liability cost ratio was 1.31% down by 38 pips, among which customer deposits average cost ratio 1.22% down by 8%. 36 pips year on year. Driven by the above mentioned factors, our NII was 160.04 billion yuan, up by 1.74%. For the first three quarters, our NIM was 1.87%, down by 12 pips year on year. The decrease was narrowed. The decrease was narrowed year-on-year. Fourth, our wealth management business has shown good growth momentum, and our net fee and commission income record positive year-on-year growth for the first time in three years. Since this year, we see recovery in the capital market, and the bank sees opportunity to achieve good growth in the wealth management business. Our retail clients totaled $220 million, up by 4.76%, while the sunflower and above client, $5.78 million, up by 10.42%. Our retail AUM was 16.6 trillion yuan, up by 1.67 trillion yuan compared with the end of last year, a growth rate of 11%. For the first three quarters, our wealth management fee and commission income was 20.67 billion yuan, up by 18%. a faster growth than the first half. Agency sales of wealth management product, mutual fund, trust scheme grew by 18, 38 and 46% year on year. Our agency sales of insurance policy was decreased by 7.05% and driving by the above factors, the group's net non-interest income has decreased, narrowed, and for the first three quarters, the net non-interest income was 91.24% and accounting for 36% of the total net operating income, among which net fee and commission income was 56.2 billion yuan, yielding an increase of 0.9%, first positive growth since the year 2022. Fifth, we maintain stable asset quality. Our NPL has maintained an increase in its balance and decrease in its ratio and the NPL balance was 67.4 billion yuan and the NPL ratio was 0.94% down by 0.01 percentage points. Our new formation of NPL was 48 billion yuan, annualized NPL formation ratio was 0.96% down by 0.06 percentage point. The company closely monitored the change of the external environment and enhanced our risk management capability to prevent risk in key areas. Under the bank's calibre, the NPL in our property and manufacturing sector were 4.24% and 0.45% down by 0.5% and 0.05%. MPL in retail loan ratio was 1.05%. The risk was under control. The group continued to stick to its prudent and stable provision policy. Our annualized credit cost was 0.67% by 0.02%. Our allowance coverage ratio was 405.93% down by 6.05 percentage point. Loan loss provision ratio 3.84% down by 0.08 percentage point and maintained at a leading position in the industry. The above are our characteristics of our operation for the first three quarters. Since this year, China's economy maintained stable and our high quality development has made good results, but there are still risks ahead and many uncertainties were still lying in the external environment. This month, we see the fourth plenary session of the 20th CPCCC approve the 15th five-year plan, mapping out the new blueprint of the next five years China's development, also providing good opportunities for the Chinese banks. We will continue to promote our transformation into international comprehensive and differentiated and intelligent development and provide better value for our customer, employees, shareholders, partners, and the society. Thank you. For the next part, we will enter into the Q&A session. Please follow the instruction given by the operator. Please state your name and the agency you represent before you raise the question. Now we'll enter into the Q&A session. For the mobile end, please press the More button to raise your hand. For the PC end, please press the Participant button. As we have many participants today, please limit your question to one only every time you raise the question. Please open your microphones when you raise the question. Now we'll have the first question. The first question is from CICC. Thank you for giving me this opportunity. I have a question for Mr. Peng about your short-term demand and long-term development strategy and the current environment is not favorable for CNB. We don't see sufficient demand from the retail loan and we see a some challenges ahead and which will influence CNB's business. We see some of your banking peers, they're trying to make up the lowering pricing by increasing quantity or lower their risk appetite to realize a short-term financial target. And what is your view towards this phenomenon and how do you strike a balance I know that the external environment and the capital environment has posed a high requirement on CNB. And what do you think that CNB can use in terms of your new model, your business strategies to strike a balance between short-term demand and long-term strategy development to realize an offset? Thank you. Thank you for your question. Well, according to current situation, we need to hold an attitude that is objective enough. The macro economy is stable in a steady progress, high quality development, momentum is still there. For the first three quarter from the macro economy, statistics, the environment withstand the pressure and make steady progress. But objectively, we still see some challenges ahead. The bank's operation, of course, requires our attention. For instance, you have mentioned that the demand from the retail loan and the fee card, these are all challenges posed to CMB in terms of our operation. But generally speaking, CMB have withstand those pressure. For the first three quarters, our performance has shown that we have met our expectation and we have realized a good growth momentum. I would like to briefly introduce my view. Beyond the five characteristics I mentioned above, there are some other highlights within our performance. I think to some extent that could answer your question as well. Through our hard work in this field, we have realized a good development. and maintain good momentum. These are the aspects I would like to mention. Besides on the revenue and our profit, even though they're under pressure, I won't mention too much about it, but I would like to emphasize that behind our financial indicators, there are some situations that I would like to seize your attention. One is that our customer base growth should show good momentum. No matter our corporate client or our retail client, we see growth. the client growth as our base of development. And if you take a look at our detailed figure of customer growth, our mid to high level clients has secured a growth of over 11% in terms of customer number. Within it, Some high value client number, value client number, these growth type are showing good momentum. The CNB's wealth management business have also picked up and realized a double digit growth in terms of its income. the wealth management income has realized a year-on-year growth of over 18%. If you take a look at extensive wealth management business, our income has secured a growth rate of over 11%. Our AUM went surpassing 16 trillion yuan level by the end of September. We have already secured a retail AUM of over 16.6 trillion yuan, an increment for the first nine months of 1.67 trillion, which is quite impressive. influenced by the external environment. We see the recovery of the capital market and this has also bring us opportunity. We see these opportunities relying on our good customer base, relying on our capability and this is what we will continue to nurture. And I also see some other highlights. I want to especially mention that our subsidiary are also showing good growth momentum these years. By the end of September, the total assets of our subsidiary companies were 900 billion, surpassing 900 billion. a growth rate of 8% representing compared with the end of last year. And the net profit growth has surpassed 16%. We see the current opportunity and they have emerged into CNB's overall development. Besides the highlights in our subsidiary, I think we are also developing in our international business The total asset of our overseas institutions has surpassed 10% in terms of its total assets. We seized opportunities arising from the Hong Kong market and our Hong Kong subsidiaries grew 10% in terms of its total assets and 27% in terms of its profit and income. And our cross-border business, the International BOP, has surpassed 90,000 customers. In terms of FX business, we maintained good momentum of growth, a growth rate of 15% for a business on behalf of customer. So from the two highlights, subsidiary and our cross border business, this is two of our four major development. We have also captured some highlights from it. And of course, we maintain a good foundation of our asset quality. This is the base of our development. Without a good asset quality, we cannot secure what is building above the asset quality, that is our performance, our customer base, and et cetera. So through this year's effort, I think that can reflect what we have achieved And to coping these pressures, I think we still have some measures that are going to take in response to the insufficient effective credit demand of retail loan. We still regard the retail loan as the cornerstone of our business today. And I think we cannot, we will not change in maintaining relevant market share and our market position in the retail loan business. So in this year, we have also made some efforts in developing corporate loan under insufficient credit demand from retail side. And our asset growth in the corporate loan grew by 10%. And these loan growths are in line with the government's guidance. And later on, I will ask our relevant colleagues to introduce the detailed situation. We will also maintain a good management of asset allocation and maintain a stable momentum of our NIM. Targeted at current risk situation, we will maintain good management risk management capability. You have also mentioned some long-term strategy, no matter on the beginning of the year or the interim report or our daily communication with our investors and analysts, we have also mentioned about what we are considering about the future development. We have got our layout for the future development combined with the recently announced the 15th five-year plan, CNB have also mapping out our own 15th five-year plan. So generally, we will stick to our plan of value creation bank, building a value creation bank. And for some certain direction, We will continue to focus on the modern industries to enlarge our efforts in the opening up and et cetera. These opportunities arising from some window opportunities, we will seize this opportunities. We will combine the strategic focus of our own 15 five-year plan with the nationals 15 five-year plan. Of course, I would like to mention again that developing retail business will still be our focus. And the third is that the transformation of the full development will continue to be our focus. The international development, the comprehensive development, the distinguished development and the intelligent development. We will speed up these transformation. These will be implemented. thoroughly into our own 15 five-year plan. Besides our efforts in the business development, we are still paying special attention to our daily management, including a new management as a quality management, financial management, expense management, All cost management, these are all we will continue to pay attention to. And also including risk management, we will guard our bottom line to secure our bottom line of risk management. So generally, for current pressure, we are calm and we have made early preparation. These will be all reflected in CNB's own 15 five-year plan. Thank you.

The second question, please. The second question is from Ms. Yuan Zifang from China.

Thank you very much for giving me this opportunity and congratulations for your results for the third quarter. I'm from PICC and I think that you have a positive profit growth in the third quarter. And also you have maintained sound as a quality. My question is for Mr. Peng for Ning, just now you mentioned about a weak demand in a retail side. So my question would be what kind of impact with a weak demand on for your asset structure, what will be the impact on your Ning? So how long do you think that the Ning will continue to decline and whether the declining period for CNP will be longer than that for the state owned banks? Thank you for the question. I think Ning is a concern for all the investors. And during the interim results conference, I share with you my judgment on NIM, namely we will continue to maintain a leading NIM level, absolute NIM level, but for the marginal change, we are under pressure. But I think the decline will be under control. These are three judgments I made during the interim results conference. And NIM is still affected by the structure of our asset and liability and also our active management, which is why we have maintained a sound NIM in the past. Nowadays, we are seeing that our retail loans are still under pressure, which is 51% of our total loan portfolio in the past. It's kind of the backbone of our portfolio. long book and it's also the main reason why we can maintain a leading name so as for currently retail loan are facing pressure in loan growth but i still it has made quite big contribution to the names And at the same time, we need to see that if there is a slowdown for retail loan growth, definitely that will have some marginal negative impact on the NIM. That is why I say the NIM's marginal change will be under pressure. I think there are many reasons behind the pressure change. But of course, we will continue to maintain a leading absolute name level, but for the marginal change, we'll be under pressure, which is affected by the following factors. The first one is a slowdown of retail loan growth, especially for credit card loan growth. And also for consumption loan growth, micro loan growth, all growth rates are slowing down. This has made some challenge to the asset structure. And as for compared to the peers, we have a higher proportion of loan retail loan. So that is why we're facing higher pressure than peers. Second factor is that from the liability cost, just I mentioned our liability cost is around 1.02% down by 36 pips, which means that since we have maintained the lowest level of liability cost among peers, and at the same time, we continue to reduce that by quite a big amount, which means that in the future, the further room for us to further lower down, the deposit cost will be smaller. Because if you look at the demand deposit ratio, it's around 0.05%. So it's a little room to go. More room are coming from the term deposit. but we have an even higher demand deposit ratio, which is why we can benefit less compared to peers in the future from the lower down of the deposit cost. And third judgment is that we think that the future trend will be under control, which means that we have our judgment on how deep that the name will go down. We have our own analysis, and also we have done analysis strategy considerations about how we can counter with the name decline so firstly i think we'll continue to focus on retail loans this year even though retail loans growth rate is slowing down it's around 1.34 percent but this number is a slow number but compared to the overall banking industry we're still higher than the average level which means we are increasing our market share and The point I would like to point is that the slowdown of the retail loan is mainly affected by the macro situation. At the same time, we didn't want to lower down our risk criteria. That is why we have a slower growth rate, but our market share is continuing to increase, which means that retail loan is still a focus of our business today. And we are stepping up our efforts and also putting more resources into our retail business. We have made adjustments to our retail business unit and also credit card unit. We are confident that we can continue to improve our market share. And just now, Mr. Zhang from CICC also mentioned about whether we will choose to lower down the risk criteria. I think lower down the risk criteria will not be our choice. The other words to say that is that to make up the shortfall of the shortfall of the loan growth by compromising risk. This is something we're not risk we will not choose to do. Some say that we need to, if the price comes down, we need to grow more loans. This means that to grow more amount, to make up the shortfall coming from the pricing coming down, but we will not choose to lower down the risk appetite or sacrifice risk in order to gain amount growth. And I think in the future that the risk from retail side will be stabilized. And as long as the government is trying to lay out many procedures to stimulate demand, then I think at the end of the day that retail loan will grow again. And also we'll have active measures such as for corporate loans, we have our own strategy for how we grow our corporate loan. And we have reconsidered that, including for big, mid-sized and small size enterprises and the major areas that we would like to focus on. So we think there's a big room to go. And also from liability side, we will continue to maintain a sound liability structure, such as the demand deposit proportion you mentioned, And this year we are seeing that the demand deposit ratio is changing or is trending good towards a better direction. This will be also beneficial to our cost control. And thirdly is the asset and liability portfolio management that will also help with the NIM side to improve the structure so as to improve the NIM level. So overly speaking, I think for the future trend of the NIM we are confident that hopefully that the neem can reach the bottom and begin to stabilize Just now for your question, I would like to share one of my two personal views. I think very important for banking industry today. The first one is that we need to take a perspective from customer. Just as I said, the customer is the foundation of all business as long as we have the customer in place. no matter how product changes, because product changes according to the external environment, such as if there's a less demand for assets, such as you will face the slower growth of retail, but at the same time, your AOM and your wealth management products can continue to grow. So these also will help with the income for the bank. So taking the perspective from the customer to will be very important for banking operation rather than purely focusing on one or two products. Secondly, I think very important is balanced and diversified operation. a bank's operation and development cannot too focus on one aspect. It should be very balanced and also diversified structure, such as if there's a slowdown of retail loan, then if we can do better in corporate loan, or if we can do better for the asset allocation for retail customer, if they didn't choose to place the demand deposit, or when the if when the market is not performing well, you can provide more deposit with customer. Or when the customer doesn't have demand for loan, but they still have demand for wealth management, which means that customer's demand will be very multifaceted. So if you can provide a balanced product, some multi-level products for the customer, you will have a very balanced and also diversified business structure, no matter how customer's demand changes or how the product. they choose changes, then this balanced and also more diversified structure will help you to maintain a more stable income. Thank you. Second question, please.