China Merchants Bank Co., Ltd.

Analysts, friends from the media, good morning. CNB 2025 Annual Result Announcement will now begin. I am Head of the Office of the Board of Director of China Merchants Bank, Xiaoyang Fang. We have released the 2025 Annual Result last Friday. And this conference will be carried out both offline and online webcasting Now, please allow me to introduce the attendee of today's on-site meeting. Sitting on the podium, they are Mr. Miao Jianmin, Chairman, Mr. Wang Liang, President, Mr. Peng Jiawen, Executive Vice President, CFO, and Secretary of the Board of Directors, Mr. Xu Mingjie, Executive Vice President and SHIBRIS co-officer, Mr. Zhou Tianhong, Chief Information Officer. Joining on-site and online, we also have non-executive director, Mr. Zhu Liwei, independent director, Mr. Tianhong Qi, Mr. Li Chaoxian, Ms. Li Li, Mr. Huang Yushan, and Mr. Lu Liping, and also relevant head of departments of CNB. On behalf of CNB, I would like to extend a warm welcome to your participation. and thank you for your long attention, support, and investment in CNB. Today's meeting will have two sessions. One, we will invite Mr. Miao and Mr. Wang to introduce the bank's 2025 result, which takes around 30 minutes. And the second part is the Q&A session, which takes around 1 hour and 30 minutes. The meeting will be provided with Chinese to English simultaneous interpretation. Now we will have the floor to Chairman Miao and President Wang on CNB's 2025 performance. Dear investors, analysts, friends from the media, good morning. Welcome to CNB's 2025 annual result announcement. Today's result announcement will be introducing contents of three parts. First, I will introduce the group's 2025 annual results, and then I'll give the floor to President Wang to introduce the operational information, and then I will briefly introduce our outlook and strategy for the year 2026. In 2025, we seek to quality, efficiency, and scales coordinated development and strive to build a world-class value creation bank and speed up our transformation towards the full initiative development and promote high-quality development. Maintain good operation amid stability and strong resilience and innovation vitality, which was reflected in five parts. First, we remain steady in terms of our operation and we cope with the downward trend of the interest rate, insufficient demand, and growth pressure, our revenue and profit realize both a dual growth. ROAA and ROAE maintain leading in the industry. Net operating income, $337.2 billion, up by 0.05%. Net profit attributable to the bank's shareholder, 150.2 billion yuan, up by 1.21%. ROAA, 1.19%, ROAE, 13.44%, down by 0.09 ppt and 1.05 ppt year-on-year. Net interest income, 215.6 billion yuan, up by 2.04%. NIM was established. 1.87%, down by 11 bips year-on-year, with a narrower reduction and maintain a leading level in the industry. Influenced by the fluctuation in the bond market, non-interested net income, 121.7 billion yuan, down by 3.31% year-on-year, among which net fee and commission income increased by 4.39% year-on-year, which is recording the first With positive growth since the year 2020-22, we seek to refine management and continue to promote reduction in cost and maintain a cost-to-income ratio of 32.01%. Secondly, we maintain growth in asset and liability and maintain our advantages in low funding costs. Assets exceeding 13 trillion yuan, total loans and advances 7.26 trillion yuan, up by 5.37%. General loans 6.94 trillion yuan, up by 6.57%. Total liability 11.79 trillion yuan, up by 7.98%. Total customer deposit 9.84 trillion yuan, up by 8.13%. Demand deposits' daily average balance account for 49.4% remain at a high level. Interest-bearing liabilities average cost ratio 1.26%, down by 38 bps year-on-year. And we maintain our advantages in low funding costs. Thirdly, we consolidate our structural advantages and have strong capital strength. Non-interest income accounts for 36.08% maintained leading in the industry. Net fee and commission income accounts for 61.85% of the total non-interest income. Retail finance makes over half of the contribution. It's net operating income and pre-tax profit accounts for 56 and 50% of the total. And We also maintain quite good level of CAR. Under the advanced measurement approach, core Tier 1 CAR, Tier 1 CAR and CAR were 14.16%, 16.51%, and 18.27% down by 0.7, 0.97, and 0.81 percentage point compared with the end of last year. Under the weighted approach, the core Tier 1 CAR Tier 1 CAR and CAR were 11.92%, 13.9%, and 15%, down by 0.51%, 0.73%, and 0.73% compared with the end of last year. All levels of CAR's decrease was mainly influenced by the interim dividend payout and the reduction of OCI. Fourth, asset quality remains stable and risk compensation capability remains to be robust. NPR balance 68.2 billion up by 2.6 billion yuan. NPR ratio 0.94% down by 0.01 percentage point. Credit cost 0.6% down by 0.05 percentage point. Allowance coverage ratio 391.79% down by 20.19 percentage point. Loan loss reserve, 3.68%, down by 0.24 percentage point, maintaining a high level of risk compensation capability. Fifthly, we strive to build a digital and intelligent CMB and actively practice CSG philosophy. We focus on AI, increased IT input, and talent reserve. In 2025, our IT input was $12.9 billion, accounting for $4.6 Through 1% of the bank's net operating income, R&D personnel exceeded 11,000 people, accounting for over 9% of our total employee. We have an open mindset and embrace cutting-edge technology, rollout, and implement application and strive to build up our AI systematic advantage. We construct a leading intelligent computing infrastructure. Model performance and computation efficiency continue to increase. Our core computing rate, our token cost, has reached an industry-leading level. Our average token throughput has increased by 10.1 times compared with that of 2024. Our bank-wise large model developers exceed 10,000 people, and we continue to introduce a cutting-edge model. Implement domain-specific model as many as 183. Our average iteration cycle significantly shortened as well. We deeply implement this technology into our business ecosystem and implement over 800 applications and realize both tech and business value. We build our intelligent eras, organizations and teams and construct talent pipeline that are cross-functional. We promote deep integration of technology and business and build such an intelligent organizational ecosystem. We incorporate ESG philosophy into the bank's development strategy and decision making and promote sustainable development. We promote the development of green finance and enhance our green operation capability. Green loan, green leasing balance grew by 21% and 23.89%. We assist enterprises to issue nearly 100 ESG bonds and raise their funds to support energy conservation, clean production, clean transportation, and other industries. We attach great importance to green investment. Our companies and subsidiaries are holding more and more balance of green loans, green bonds, and ESG products We continue to strengthen our green operation and deepen the carbon emission reduction and enhance our own carbon management refined level. We continue to enhance the quality and efficiency of serving real economy. Tech, green, inclusive and manufacturing loan balance have taken up more and more proportion and the Minsheng ESG rating has received the highest level of AAA rating for two consecutive years. This is my brief overview of the 2025 result. Now I will give the floor to President Wang on the bank's operational information. Thank you, Chairman Miao. Now I will introduce the bank's 2025 operational information. The year 2025 is an extraordinary year, facing multiple challenges. Under the leadership of the Board of Directors, we have withstood pressure, maintained determination and promote the international, comprehensive, differentiated and intelligent transformation and maintain a good trend of operational results and our business are moving towards new and better direction and building up our own strength and competitiveness which were mainly reflected in the following five parts. We continue to consolidate our customer base and our business development are both a are both directing towards good volume and quality. We remain customer-centric and strengthen high-quality customer acquisition and strive to build ourselves into a client's principal bank and first bank to approach. Retail customers totaled 224 million, up by 6.67%, among which Golden Sunflower and above clients 5.93 million, up by 13.29%. Customers holding wealth products amount to 64 million, up by 10.15%. For corporate customer, it was totaled 3.62 million, which was up by 14.4%, among which corporate customers newly acquired reached 657,000, serving tech clients as many as 350,000. And for corporate withholding customers, their amount was 1.53 million. We also optimized category asset allocation, total loans and advances, accounts for 55% of the total asset. Retail Loan accounts for 51% of the total loans and advances. And Investment Assets accounts for 31.77% of the total assets. Interbank Assets accounts for around 7.36% down by 0.02%. Bonus Counting accounts for 4.43% down by 1.09%. We continue to strengthen liability management and enhance the proportion of high-quality liability. Total deposits account for 83.43% of the total liability, up by 0.12 percentage point. Core deposits daily average balance accounts for... 87% of the total customer deposits daily average balance up by 1.17 percentage point. Interbank deposit grew rapidly. Its demand deposit accounts for 93.77%. Customer deposit cost ratio 1.17% down by 37 bps. Interbank deposit cost ratio 1.02% down by 29 bps. Secondly, our four major segments are developing in a balanced and coordinated manner, and we are showing stronger development resilience. First, we secured the dominant position of retail finance, and our leading advantage was further consolidated. Retail AUM balance exceeded 17 trillion yuan, up by 14.44%. Year-round increment reached 2.16 trillion yuan, hitting a record high. Retail customer deposit total 4.5 trillion yuan up by 11%. Retail demand deposit daily average balance accounts for 47% of the total. Retail low end 3.72 trillion yuan up by 2.07%. Market share growing steadily. We strive to overcome adverse factors such as weak demand and consumption. Our credit card business continues to grow in their market share. Active credit card users surpass 70 million develop against the trend. The transaction value was 4.08 trillion yuan down by 7.62%. Credit card loan amount to 939.1 billion down by 0.92%. The credit card transaction value and loan balance remain leading in the industry. And secondly, we speed up to build our characteristic in corporate finance and build up our strength in specialized segments. The FBA balance was 6.73 trillion yuan, up by 11.08%. Corporate loan balance, 3.22 trillion yuan, up by 12.29%. We focus on modern industrial system. We prioritize our loan granting in tech, green, inclusive, manufacturing and other industries and increase our competitiveness. Corporate deposit balance 5.34 trillion yuan up by 5.46%. Corporate deposits are accounting for 50% of the total. And retirement finance improved in both quality and efficiency. Annuity entrusted surpassed 300 billion. Pension fund under custody 1.55 trillion yuan. Private pension accounts exceeded 15 million. And contribution was among the top in the industry. Transaction banking focused on the trade finance and treasury management needs of the corporate customers. The number of customers using treasury management cloud further specialized. Third, investment banking and global market business further specialized and innovate. FPA contributed by IB business grew by 10.38%. The bank as lead underwriter, that instrument was 579.16 billion yuan. Number of clients in GM business of client flow trading and transaction volume both grow. RMB bond investment transaction value grew by 1.96 times. Bill discounting business grew by 12.89%, ranking second in the market. Fourth, wealth management and asset management continued to expand. We enhanced asset allocation capability, grasped opportunities arising from the capital market, and the wealth management business experienced robust growth. Tree asset allocation clients was amounted to 11.76 million, up by 13.31%. Retail wealth management product balance grew by 12%. Agency distribution of non-money market fund, trust scheme, and insurance premium grew by 18.13%, 150.65%, and 25.93%. Corporate wealth management product balance reached $524.9 billion, up by 31.28%. Asset management business growth totaled 4.71 trillion yuan up by 5.13%, as a custody scale rank among the top in the industry, reaching 26.09 trillion yuan. Extensive wealth management income grew by 16.91%, top for the past three years. and accounting for 52% of the total fee and commission income and increased by 5.78%. Fifth, we speed up the business development in key regions and enhance the contribution brought by the branches in these areas. We have 16 branches in key areas and their customer base AUM core deposits and other key indicators are having higher level of growth than the average level of other branches. And the Retail AUM's proportion increased by 0.79 percentage point, and the corporate loan balance account's proportion was up by 0.12 percentage point. Third, for international and comprehensive development, we actively built up our new strength. We actively serve Chinese enterprises going global and residents' needs of making global allocation of their assets enhance our service capability. The overseas contributions are making more and more contribution. Their total asset grew by 12.88% and the net operating income grew by 33.78%. Institutions in Hong Kong grasp opportunities and make good performance. Their total assets grew by 13.84%, net operating income grew by 36.36%, net profit grew by 63%, and CNB Wing Lung Bank's retail AOM grew by 22.14% for CNBI. The number of Hong Kong IPO underwritten and sponsored actually ranked No. 2 and No. 4 respectively. For cross-border business, it showed strong momentum. Number of corporate customers in respect of international BOP exceeded 100,000, and the volume of international BOT grew by 12%. We deepened our comprehensive development, and subsidiaries delivered various performing highlights. Their total asset was 952.8 billion yuan, up by 11%. Operating income accounted for 12.26% of the group's total, up by 1.96 percentage point. Net profit, 16.38 billion, up by 41%. CNB Leasing focused on new energy, new infrastructure, new tech, new mobility, and new intelligent manufacturing and new material, a.k.a. the sixth new industry, to build their service mechanism. Their total asset was $325.3 billion, up by 5%. CNB Wealth Management's product scale, 2.64 trillion, up by 6.88%, maintained the top in the industry, and the equity-related products, actually increase in their market share. CNB Fund has managed a total scale of 961.5 billion, up by 9.29%. Cigna and CMAM Insurance Fund under fiduciary management, 223.3 billion, up by 23%. CNB Investment commenced operations, and we make new breakthrough in the layout of our comprehensive development. Fourth, We upheld bottom line of risk and compliance, enhanced risk management capability, and have an even stronger solid foundation for development. We strictly classify assets and fully expose risks, actively resolve risk assets, and maintain a good management of credit, market, operational, liquidity, and compliant risks and other type of risks. Our asset quality remains stable. Special mentioned loan ratio 1.43% up by 0.14 percentage point. Overdue loan ratio 1.25% down by 0.08 percentage point. NPL to loans overdue for 60 days ratio was 1.18. NPL formation ratio 1.03% down by 0.02 percentage point. As we are facing with the Profound adjustment of the real estate market and rising individual risk. Some mismatch in supply and demand in some industries. We stick to risk-oriented approach and dynamically adjust risk strategy and resolve risk in key indicators. Corporate NPL ratio 0.89% down by 0.17%. Property NPL ratio 4.78% down by 0.16%. Manufacturing NPR ratio, 0.43%, down by 0.06 percentage point. Retail NPR ratio, 1.06%, up by 0.1 percentage point. Residential mortgage NPR ratio, 0.51%. Retail SME NPR ratio, 1.22%, and credit card loan ratio, NPR ratio 1.74% and consumption law and NPR ratio 1.02% all remain at a relatively low level in the industry. Fifth, we strengthen management and innovation to promote high quality development and we have stronger momentum for future growth. First, on one hand we consolidate our foundation and conduct refined management. We consolidate our management to strengthen as a liability for cost operations, service and team management so as to guarantee our high quality development. On the other hand, we continue to promote our innovation capability and maintain a leading technological capability. We consolidate our technological foundation. The overall accessibility or availability of the cloud has surpassed 99.99%. We use hybrid deployment, elastic scaling, and other technologies to increase the input-output ratio of cloud. Big data service has covered over 76% of the business personnel. We have implemented a large model in four business scenarios and saving 15.56 million manual working hours and effectively enhance our efficiency. We upgrade retail Xiao Zhao intelligence service and construct AI Xiao Zhao service for the corporate clients. we speed up to build our AI organization. Over 98% of the personnel has already passed the preliminary level of competency certificates and adapt to the change of the technological risk condition in the AI era. The above mentioned is the major operational information of the year 2025. Now I'll give the floor to Chairman Miao on the 2026 outlook and operational strategy. Now, I will briefly introduce the company's outlook and strategy of 2026. Looking into 2026, for the banking industry, challenges and opportunities coexist. On the one hand, the external environment are exerting greater impact, and we see uprising risk in geopolitical condition. The world economy are sluggish, multilateralism, free trade are under severe threat. The new and growth driver continue to switch and there are strong imbalance between supply and demand. The market expectation tend to be weak and the bank are continue to face with the three low low interest rate low interest rate and low fee rate and they're taking pressures in their profitability. On the other hand. For Chinese economy, the supporting condition and the future condition has not changed that the economy will continue to be developing in a good momentum. Along with more proactive fiscal policies and monetary policies, we seek to make domestic demand in the dominant position, build up strong domestic market, and we believe that there will be more favorable factors for the operation of commercial bank. In the year 2026, we will stick to our value creation bank strategy and continue to promote our three capabilities of wealth management, digital and intelligent technology and risk, expand our moat and explore a new layout of high-quality development. Firstly, we will maintain our strategic determination and follow the developing principle of the banking industry, focusing on high-quality tech self-reliance, strengthening the domestic market and high level of opening up and other key areas to seize opportunities and seize the customer need, strengthen the capability of innovation and promote professional, differentiated, comprehensive financial service to clients and maximize our value that we can bring to customers, employees, shareholders, partners, and the society. Secondly, we will focus and sell through the cycle and maintain our competitive edge. In the low interest rate cycle, we will make sure that we will pay more attention to stabilizing the NIM and maintain an industry-leading level. Secondly, we will build up our strength and make up for what we are not good at and strengthen our asset allocation capability, maintain our strength in wealth management business. Third, we pay special attention to the pricing and risk management of credit assets and maintain good asset quality. Fourth, we will promote the reasonable growth of RWA, optimize the capital allocation and maintain high level of CAR. Thirdly, we will seize opportunity to speed up the transformation of the full initiative and build up the new strength, speed up international development and promote overseas institutions to achieve high quality development, build up our cross-border business and help enterprises going global, promote the comprehensive development of our subsidiaries and increase their contribution to the bank. build up our differentiated competitive edge, consolidate our systematic advantages in retail finance, and speed up to form a new growth pole in key areas. And we will also speed up our digital and intelligent transformation, stick to AI first philosophy, and build up an intelligent bank, realize the model upgrade, and construct our new mode in the new era of AI. Fourth, we will build up our resilience to promote the balanced and coordinated development of the four business segments. We'll consolidate the dominant position of retail finance, build up our strengths in corporate finance, and promote a stronger and better IB and global markets business, and speed up the development of wealth management and asset management business, and promote these four segments. to promote each other and support each other in a higher level and construct a more resilient and competitive business development layout. Fifthly, we will guard our bottom line to consolidate a fortress-style risk and compliance management system. We will stick to a prudent and steady risk culture, enhance our capability to understand the market, prevent credit risk, market risk, operational risk, liquidity risk and other risks, and strengthen AML and internal control management to make sure that CNB could remain steady and resilient in the path of high-quality development. Thank you. Thank you, Chairman and President. Now we will enter into the Q&A session. 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