Industrial & Com Unsp/Adr

Welcome to Half 1 Earnings Core of ICBC. I'm Wang Liancheng, General Manager of Corporate Strategy and Investor Relations Department of ICBC. Thank you for joining today's Earnings Core. And also, thank you to you for your support and attention to our bank. In today's call, the management team of ICBC led by President Mr. Liao-Ling will have a free and in-depth communication with you. Today's call is a global investor call. We are joined by Mr. President Dalin, Vice President Mr. Zheng Guoyu, Wang Jingwu, Zhang Wenwu, and Board Secretary Dr. Guan Xieqing. And we are also joined by our directors, namely Mr. Lu Yongzhen, Feng Wendong, Cao Liqin, Chen Yifang, Dong Yang, Yang Dingbang, and Shen Si. And we are also joined by the Chief Economist and General Manager from Financial Accounting Department, Credit Management Department, and ALM Department. And our general managers from other 21 relevant departments from the head office are also joining us via phone. Now I would like to give the floor to Dr. Guan Xieqin to give you highlights of half one earnings of 2021. Since the beginning of the year, facing the increasingly complex, severe, and uncertain external environment, SBC implemented in depth the important requirements for COVID prevention, economic stability, and safe development. And we have made stability as our top priority and pursued progress while ensuring stability and with the aim to pursue a high-quality development. We have continued to pay attention to people and customers adhered to the financial development path with Chinese characteristics. As a result, we have delivered interim results which was better than expected and outperformed the same period of last year. Firstly, the bank fulfilled its responsibilities as a large bank to assist in maintaining stable macroeconomic performance by giving into full play the dual functions of volume and structure of investment and financing. Secondly, we have achieved crucial breakthroughs in implementing our development plans and fully demonstrates the feature of strong, excellent, large, and distinctive operations. Thirdly, we have solidified the lines of defenses in risk management by giving priority to actively forestalling financial risks. Fourthly, we have unleashed a drive for reform and innovation. We have revised the Articles of Association, and the stability and effectiveness of corporate governance were further improved. Fifthly, the bank ushered in a new stage of team building and continued to create a highland for talent and a leading bank by talent. And to give you more details, Firstly, we have improved our services to the real economy and made our due contribution to stabilize the macroeconomy. The domestic RMB loans exceeded 20 trillion yuan, up by 1.61 trillion RMB compared to the end of last year, an additional increment of over 34 billion RMB. And the bond investment balance hit 8.93 trillion, up by 10.1%. we continue to enhance our support to key areas with distinctive features of our credit extension, among which the balance of our loans to the manufacturing sector totaled 2.79 trillion yuan, up by 29%, and balance of loans to strategic emerging sector totaled 1.42 trillion RMB, increased by 38.7%. Green credit continues The balance of the green credit was 3.5 trillion, and the balance of inclusive finance was 1.4 trillion, up by 27.4%. Agriculture-related loan was 3.08 trillion, up by 16.2%. Secondly, we continued to enhance our value creation capability and demonstrated strong, excellent, large, and distinctive features. with core metrics continue to improve for the first half. For example, at the strong front, the capital adequacy ratio was maintained over 18 percent, ranking the top among the global peers, and ROE 11.25 percent and ROA 0.93 percent, both ranking relatively good levels compared to our peers globally, against the backdrop of margins contraction in the banking sector, our means to that 2.03 can you need to be positioned in a reasonable range. And we continued improved our strength in terms of the size of assets, capital, loans, and deposits. In the first half, we realized an operating income totaled 443.8 billion, up by 4.1%. and the net interest income grew by 4.5%. Net fee-based income totaled $76 billion, registering on positive growth, and other non-interest income grew by 15.4%. PVOP increased by 3.1%. Net profit grew by 4.9%. Thirdly, we continue to leverage our strengths, tackle areas of weakness, and solidify the foundation for further development. In terms of the strong sectors for us, the corporate loans grew by 9.2%, and the size of institutional deposits and interbanking deposits continue to rank the first among our peers. And the corporate settlement accounts also increased by 0.62 million compared to the end of last year. In terms of the number one personal financing bank, the personal AUM totaled nearly 18 trillion RMB. And with the proportion can grow from the personal business. And in terms of the Forex business, the balance of our Forex deposit also grew by 5%. In sharpening competitive edge in key region strategy, the deposits and balance of loans from the key five areas continue to rank first among our peers. And we have also progressed our urban-rural collaborative development strategy. Another key important sector for us is the acceleration of our DICBC construction. from the five dimensions of digital ecosystem, digital assets, digital technology, digital infrastructure, as well as digital genes. The construction of the ICBC won the first place in the annual integrated SciTech supervision rating from CBRC. We continue to deepen our GBC Plus initiative by promoting synergy between G end, business end, and the consumption end. We have developed our customers for both G, B, C, and by a large margin. The customer ecosystem continues to be optimized, both in terms of the total volume, the personal customers exceeded 712 million customers, and corporate customers exceeded 10 million, and private banking customers totaled 216,000. The number of customers with daily average assets over 10,000 continued to grow by a large margin. And the total number of personal mobile users and MAU and also legal customers, online customers, customers all ranked the first among our peers. Through all this work done, we have managed to grow our deposits quite outstandingly. By the end of June, the deposits, incremental deposits, for the first time exceeded $3 trillion. Fourthly, we continue to enhance our risk management by effectively manage five accounts books, namely the domestic and overseas institutions on balance sheet and off-balance sheet business, commercial banking and investment banking, and other business, online and offline business, as well as the pairing company and subsidiary companies. We continue to pay attention to conventional risk as well as other newly emerging risks to ensure all kinds of risk is manageable. We further improved our Asset quality with core metrics continued to improve. By the end of June, MPL was 1.41%, down by 1 bps compared to the end of last year, and overdue ratio was 1.2%, down by 3 bps. The gap between overdue loans and MPL loans was negative 47.3 billion, remaining to be negative for consecutive nine sectors, and creating the history low The provision coverage ratio was over 200%. And going forward, ICBC will continue on the path of building a financial development with Chinese character risk-based and high-quality development. Thank you. Thank you to Dr. Guan's highlights. Now we are opening the line for Q&A. Please state your name and organization before raising the question. The first question, please.

Mrs. Xu from Morgan Stanley. Thank you for this opportunity to ask the first question. I am concerned that the economy in the first half of this year with the complicated international environment coupled with the pandemic domestically, I think the macroeconomy of the country is under pressure. and the loan interest is decreasing. And we also have the pressure of lack of proper assets. And I would like to ask in the next phase, how will you maintain the stability and sustainability of the growth of operation income? And what's your look for this year? and was the main drive for the growth. Thank you. Yeah, Mr. Xu is a very familiar friend. Thank you for the question about our operation income. Of course, operation income and net profit are very important. In the first half, the whole bank Our operation income maintained a very sound growth, with an increase of 4.1% under the international standard. Among our peers in the interim, we exceeded the threshold of 400 billion RMB. And you could also notice that the structure is optimized. So from the first half, we could see the three features. First, we continue to enhance investment and financing to help support the stability of the economy. And we make up the price with the volume and we realized that our net interest profit is growing very stably. In the first half, new loans is added a volume of 1.6 trillion RMB and the speed for growth is more than 8%. And the increment is 350 billion RMB and with this volume and we made up for the narrowing of the name through our measures to share our profit with the real economy and in the first half the interest net income is 351 billion RMB and the growth is 4.5%. That is to say that this is a feature for the first half of this year. That is, we make up for the narrow down of the name with increased volume. And second, we tap our potential and try to conquer the factors that will lead to reduced income. And our fee and commission-based income maintained positive growth. And indeed, in the first half of this year, some of the income are under impact. but we tapped potentials. And in the areas of asset management, settlement clearing, and bank cards, in these sectors and products, we increased our income. We also would like to remind that, we also reminded the whole bank that we need to pay attention to the key products. For example, asset management products, settlement, clearing products and bank card products. And for these areas, we have achieved an 8% to 10% increase in terms of income increase. And with such a very good growth for key products, our fee and commission-based income is fully supported. And that made up for the gap for in other areas such as the agency sales of funds, commitment and investment banking business. And we correctly judged the situation that we realized that the agency sales of funds and commitment and investment banking in these areas we will have reduced income and with such a judgment we correctly chose other products to make up for the gap in these areas. And I'm very satisfied with our achievement. And so our fee and commission-based income maintained a positive increase. And for the first half, that is about 76 billion RMB. And third, we take the initiative to carry out innovation and to have diversified income source. We expand the transaction and improve the other non-interest income. This is also important. With a larger transaction volume, we have debt to equity swap and we increased our income in this area and the income increased by 2 billion RMB and we chose the good opportunities and chose a good bond and enhanced our transactions and we have this advantage of our non-bank subsidiaries And our other non-interest income realized the growth of 16.3 billion RMB, up by 15%. And that accounts to as much as 2%. That is a proportion of this. The contribution in this area is increased to 4% from the 2% in the previous years. And We, from this aspect, we could realize that ICBC is such a big bank and since we are a very large flagship and we have a very ample space for maneuver to support the stable, to support the structural change of our business operation income. That's three features for the first half of this year. And as for the next half... I believe that ICBC, according to the correct judgment and the timeline adjustment of our strategy and with the implementation of the bank in the next phase, our operation income for the next phase will be balanced and coordinated and sustainable. And we'll have this maintenance momentum of high quality development. And we'll also serve the real economy, especially that we'll optimize the mid- and long-term asset layout. As for the mid- and short-term liability layout, these are two sectors that is very critical to us. That is the mid- and long-term asset layout and short- and mid-term liability layout. And in the next phase, we will also focus on our wealth management businesses and investment, transaction, as well as other non-interest businesses. We will further have detailed development of wealth management products and build a resilient operation and management system. In the first half, we have this GBC Plus ecology project in terms of settlement volume and transaction and customers, and our head customers could lead our SME customers. Such ecology has already yielded very remarkable results. And I think that the pressure on the economy will be eased and the economy will pick up again. And looking out for the whole year, I expect the operation income will maintain a balanced, coordinated and sustainable growth. Thank you.

Next question from Daniel of Credit Suisse. ICBC has a large deposit with rapid growth in the first half of the year. However, the cost of deposits also increased. How did you balance the quantity and pricing in terms of these deposits? What is your outlook for deposit growth in the future? Furthermore, this year we've seen mounting pressure faced by the entire Wealth management sector, what is the latest development of ICBC's wealth management business? What is your outlook on wealth management contribution to the bank's value from the four years' perspective? Thank you. This question will be answered by Vice President Mr. Zhengguoyu. I will try my best to answer your question. You have noticed that the deposit of ICBC is very eye-catching. By the end of June, our client deposit has increased by 2.83 trillion RMB compared with the first half of the year. an increment of 1.4 trillion RMB. And the balance of deposit, including interbank deposit, has exceeded 30 trillion RMB, which ranked first in the market. There are two features. Since the beginning of the year, we have achieved a sustained and fast growth of deposit. And second, all kinds of deposits have achieved good growth and has reached a historical high. Mr. Guan has mentioned this while introducing our performance of the first half of the year. This result is achieved due to two reasons. The first of the market factors, the willingness of the residents to pursue fixed-term deposit has increased. But I believe the major reason is that we are forming high-quality development of deposit. And meanwhile, we are promoting the establishment of client ecosystem by implementing GBC Plus and net making and the passion program. Our foundation of clients are more consolidated. In recent years, we are pursuing the best mobile banking bank and increased the efficiency and the quality of physical outlets. Our capacity to serve clients have been increased. Besides, by digitalized transformation, We can accurately match our services with clients' demands. While our deposit is increasing, we have noticed the problem of increasing interest payment cost. This is due to both market factors and some other factors. While the capital market is very weak, the residents' willingness to pursue deposits has increased. So this has contributed to the increase of interest payment costs to some extent. While providing sound services and optimizing client ecosystem, we have done the following works. stabilize the growth of deposit. Our deposit growth rhythm is very sound. And second, we have optimized the term interest rate, product interest of deposits, and controlled the extension rhythm to maintain the interest rate of deposits at a relatively sound level compared with the pairs. Third, we have optimized the structure of deposits. Since June, the interest rate of new fixed-term deposits is lower than the industrial average level. the interest rate has decreased notably compared with the same period last year. This means our capacity to coordinate the volume and price of deposits has been notably increased. For the next step, we will constantly optimize the new deposit structure and term structure to control the cost of deposits and maintain the deposit growth at a moderate level. Your second question is also concerned by the market. ICBC is a large wealth management bank among the peers and in the market. The propaganda is relatively weak in this regard. We have nearly 60 million wealth management clients, increasing by 9.8% compared with beginning of the year. The AUM of wealth management clients has stood at 6.3 trillion RMB. The fee and commission-based income from wealth management business has increased by 3.3% year on year. So overall, SBC has achieved steady and sustained growth in terms of wealth management business. We have done full work. We have done work from four aspects. We have established our own development paths to promote inclusive and a steady growth of wealth management products. And second, to adapt to the changes in the market. In the first half of the year, the market is relatively volatile, especially the capital market. So we have adjusted our strategies. We have strengthened cooperation with the flagship corporations in the market and industry. And second, we have increased the life insurance products and the guaranteed wealth management products. Besides, we have increased the matching between the product and the client's demand. And finally, we have strengthened education for investors. For the next phase, our wealth management community will open to the market, and we will increase our team building in R&D and the wealth management development. So we have expectation as well as confidence in our wealth management development in the next stage.

Next question from CLCC. Thank you for giving me the opportunity to raise a question. I'm from CSCC. My question is about the credit mix. Over the past three decades, SBC has been the leader of China's banking industry. Now standing on the new turning point of China's economic growth, we are facing the declining demand from conventional industrial property, and for banking sector, the credit is also converting to some other new areas like green and inclusive and advanced manufacturing. So what is your outlook on your credit extension? And as a leading bank, how will ICBC to cope with this change and continue to remain as the leader? I would like to invite Mr. John Wenwu to answer your question. In the first half, for ICBC, our RMB loan growth by 1.6 trillion. And that's just an extra incremental volume of 346.5% YOY. And with the balance, with the loans extending to manufacturing sector of 2.79 trillion, a growth of 29% with a balance of the loans to manufacturing and growth rate ranking the top of in the market. And the balance of inclusive finance totalled 1.4 trillion, a growth rate of over 27%. And currently the prioritized area for our credit extension mainly includes the following. First is the advanced manufacturing industry because we see bright future for the development of manufacturing industry in China. and we think the relevant risk is also totally manageable. Secondly, we see opportunity in developing green finance, and we will continue to make more efforts to grow our green finance, particularly to low carbon areas like renewable energy sector. Firstly, we will step up our efforts to sign, tag, financing. Fourthly, we will also enhance our support and credit extension to some key infrastructure areas, particularly those kind of projects in the new infrastructure area and meet China and Western China. We will also step up our efforts to grow our credit extension to inclusive customers in the agriculture area Another key area for us will be the personal prime mortgage. We will continue to grow our personal consumption loans, including the card overdraft business. And we will also pay a lot of attention to the business owners over $100 million and to provide more relevant services to them. So going forward, we will continue to leverage our comprehensive strengths and to acquire more synergy between the parent company and our subsidiaries and branches, and also synergy between commercial banking and investment banking, synergy between credit extension and bond investment. and to provide comprehensive services to meet diversified demands from our customers. In terms of the regional location, we were mainly focused in the area like Jingjingji, Yangtze River Delta, and Chongqing, Chengdu, Greater Bay Area, these five key areas. And we will continue to enhance and leverage our strength in terms of talent and other kind of resources and continue to optimize our credit mix. Thank you. Further questions, please.

Thank you. I'm from Fidelity International. My question is about asset quality. We know that the NPR ratio of ICBC maintained stable, but there is a slight increase. And currently, we see pandemic and the complicated external environment. What are the key risk points we are concerned with? And how about the fluctuation about risks? And I know that the exposure of ICBC to the real estate industry is relatively low. How about our exposure to the high-risk real estate developers? And will the NPR ratio in the real estate sector further increase? And will you strengthen your write-off? I'll ask Mr. Wang Jingwu to answer your question about asset quality. Thank you. Since this year, ICBC effectively conquered the multiple difficulties, such as the rebound of the pandemic and the complicated internal and external environment. The risks are quite stable, and the core indicators are stable and getting better, though we have a slight increase in terms of the deterioration of loan quality But we used the right of the provision resources and the profit increase. We strengthened the disposal. And we managed to maintain the decreasing momentum for NPL ratio. And the overdue loan is about 1.20%. are down by 0.03 BPs. And the gap between overdue loan and NPL loan is negative for 47.3 billion RMB. And it's negative for the ninth consecutive quarter. And the loans falling to the category of attention is 1.87%. are down by 0.25 BPs, and the proportion of risk loans is further reduced. In areas such as real estate, wholesale and retail, and credit cards, we have a slight increase of NPR ratio, and for some big borrowers, we have exposure of credit risk. And in terms of risk management, we have this philosophy of nine plus X and five one book leisure philosophy. The risks concerning the management is risk, credit risk, market risk, since the global market is constantly changing. And also we have the impact for geopolitical issues, et cetera. But in general, our control on market risk is very sound. We also pay attention to new risks, such as climate risk, data risk, information security risk, and third-party risk. This year, we pay a lot of attention to the risk management in the real estate sector, already taking serious measures to strengthen management and disposal. Until the end of June of 2020, the NPL ratio for the real estate sector is 5.47%, up by 87 basic points as compared to last year. This is mainly a result of the default of some large borrowers, but the disposal and restructuring are in very good progress. And in general, I think the risk exposure in the real estate sector is fully exposed. And the quality for the asset in the real estate sector is also temporal. And we have recovered a lot of the MPLs. And the actual loss is limited and the value reduction is limited. And we have... ability to control risks and our strong physical ability, I have to face that we will be able to embrace such impacts.

The next question from Goldman Sachs Asset Management. This is John from Goldman Sachs. My question is about internationalization. How have recent geopolitical tensions impacted ICBC's ongoing international strategy? For example, is there any impact on your business in Russia from the recent conflict in Ukraine? With this backdrop, what are some of the biggest risks the business is facing overseas, and what are your plans over the next two to three years to mitigate such risks? This is a good question. It's in line with the international background in this area. I would like to invite Mr. Guan, board secretary, to answer your question. He has experienced a working experience overseas. Mr. Guan is speaking. I'm very delighted to answer your question. has close contact with ICBC. As China's largest commercial bank, ICBC has promoted international development for over 20 years. We have established 421 overseas institutions in 49 countries, and our development capacity in overseas has basically been formed. Despite anti-globalization, geopolitical pressure and the impact of COVID-19, ICBC's confidence in international strategy will not be changed. And ICBC will adhere to international strategy so as to service our major clients. Second, facing these new changes, we will still seek progress while maintaining stability. timely and dynamically adjust our strategies and policies while pursuing global development. To ensure high-quality development of overseas institutions, we adhere to the bottom line of risk management, closely followed country risk, credit risk, market risk, and compliance risk, as well as AML risks, sanction risks. and control well the exposures of various risks. Our overseas institutions comply with regulations and supervisory requirements. In the first half of this year, the overall operation of overseas institutions is very sound. By the end of June, the total assets of overseas institutions have reached $44.2 billion. Profit before tax 2.3 billion USD, and the NPL ratio is lower than the group level. Meanwhile, we closely follow the changes and impact of regional conflicts and changes, pay high attention to the impact on overseas institutions by these geopolitical conflicts. We examined the risks, established preparation And currently, the ICBC Moscow's operation is well and sound. In the coming two to three years, ICBC will adhere to international development strategy, promote compliance development and operation of overseas institutions, serving high quality opening up of the state, and conduct various businesses according to market marketization principles and professional operation standards so as to increase the quality and efficiency of international development. Thank you for your question.

Next question, please. Thank you for giving me the opportunity to raise a question from UBS. My question is about the net interest margin. We have seen the entire banking sector facing the pressure of contraction of margins. So going forward on the asset side, we have seen the continuous declining of LPF, particularly 45%. and governments are asking the banks to lower the loan rates to support the real economy and the demand for loans have been also weakened. And on the liability side, we have seen the mechanism of deposit pricing self-discipline adjustment can help to alleviate pressure on the deposit cost. against the backdrop of the term trend for deposits. Could you give us some cover as to the trajectory of margins for the second half of this year, and what is the impact of the repricing for the existing mortgage by January next year on the margins? Will costs continue to be lowered? Thank you for your question. margins are paid a lot of attention by investors and analysts. However, I don't see there is need for investors and analysts to consider too much about the compression of margins for China's banks. We have studied the margins for years, both from domestic and abroad, and Particularly for the international peers, we have seen a U-shape of their margins recently. For some of them, margins stood at 2%. Some of them are higher than 2%, and some of them are lower than 2%. And basically, we have seen a U-shaped trend for margins development. We believe the margins for China's banks will continue to be stabilized in a reasonable range. And for ICBC, due to the impact of COVID-19 and slowdown of the macroeconomic growth and also some other unexpected factors, the margins contracted, overly speaking. And for ICBC, we are also in the same, in line with our peers. For the first half, our name was 2.03%. which has seen a contraction comparing to the beginning of this year, but also in the same trend with our main peers. And I think it's closely related with our GDP growth, our PR reform, et cetera. The contraction of our margins is also related with the changes of our deposit and loan mix. You just now mentioned during your question, on the asset side, we have seen the lowering of interest rate of loans. And on the liability side, we have seen a very good growth of deposits for large banks. However, we do see a trend of the deposit to become a term deposit because as a result of which the La Bohie cost will also be rising compared to our international peers. The margins of our domestic banks are actually in line with them. We have a strong team which are working closely on the 30 G-SIBs on their core indicators and we have also started on the 1000 banks on their indicators on the 1000 banks published by England bankers magazine besides that we have also studied closely on the performance of the four big banks from America. We do see there are a lot to be comparable with them. And based on our study with our international peers, we are also working closely as to future work, how to stabilize our margins in the future. Currently we do think the changes of our margin is in line with the global environment and also our international peers. For large banks in China, we do not see a fast decline for our margins in the near future. And for ICBC specifically speaking, we would adopt multiple measures to slow down the further declining of our margins and try to stabilize margins. And maybe just like before big banks in America to make sure the margins perform like a U-shape. And we will try our best to slow down the declining of our margins. So from the management and strategically speaking, we will continue to implement our key strategies, namely the number one personal bank and to become the preferred bank for forex business and also the synergy between rural and urban areas and also to enhance our competitiveness in the five key areas. Another effort we will make is to accelerate our DIGBC construction to enable and empowering by technology and digital transformation. In the first half, we have seen a very good growth of our deposit because that is attributable to the solid foundation of our customer base. and most of them are prime customers and leaders from different industries. So that constitutes a very good ecosystem for our clients, which enables the flow of our capital, of our customers within SPC. We will also try to improve our assessment and evaluation system to mobilize the branches to strike a balance between the volume growth and pricing and try to achieve a sustainable growth. In terms of the customer client base, we will continue to try to optimize the client base. As we all know that ICBC is quite strong at our prime customers, and we will also try to step up efforts to grow our mid-sized and also small and tail customers. While exploring more potential from our primary customers, we believe we can also further optimize our customers of mid-sized and small-sized and micro-sized customers, which has already been proven quite effective from our first half-one performance. And on the asset side, we will continue to improve our asset mix. And on the liability side, as Mr. Deng just now answered the question, ICBC has a very strong deposit growth. You cannot also change the trend of the deposit becoming more term deposits. But at the same time, we have taken the initiative to compress our active viability products, which can help us to lower the viability cost to a large extent. As to the asset allocation, while providing our support to the key projects, we will also step up our efforts to grow our personal business and retail business, particularly for the medium-term and the long-term personal loans, and also try to increase the yield for our personal customers by leveraging our strength in the settlement and transactional banking, which we have heritage, legacy, strength. Previously, we have paid a lot of attention to grow our corporate banking and wholesale banking. Now we are also trying to grow our personal and retail business. With all those measures taken, we are confident that our margins will be managed at a reasonable range and also be stabilized within a reasonable range. Thank you for your question.

Ping An Asset Management. Thank you for this opportunity to ask questions. I know that in the first half you have a huge growth in terms of the inclusive and SME loans and the impact of the pandemic. How about the demand for credit? I'll ask Mr. Zhang Wenwu, our Vice President, to answer your question. About ICBC carry out inclusive finance as a key strategy, out of the need to fulfill our social responsibility as well as the need to gain more commercial value. We maintained a very high speed and high quality development in inclusive finance and the structure is also huge. By the end of June, the volume for inclusive finance loan is 1.4 trillion RMB and and our speed is leading in terms of our peers and our risk management is also sound. The NPR ratio for inclusive loans is only 0.78% or down by 0.06%. And the interest rate also reduced at 3.9%. The growth is also fast. I should say that we maintained the very good momentum. For example, we continue to deepen our models. We have online product lines and have the digital application. And our digital inclusive finance is pertinent, fluid, and smart. and we enhance the integration of information and the connection of ecology so that the financing service is more convenient and accessible. We continue to provide comprehensive service. We provide not only the funding but also the intelligence and business opportunities. So we have the diversified and whole chain financial support for SMEs. And for the manufacturing industry and for the specialized smart and new sectors, we also strengthen our support. And with all these measures, we want to achieve more effective inclusive finance supply. And we also coordinate development and risk management we have coordinated risk management online and offline, and we have this closed-loop management of all the risks. And I think that we still have quite some demand for this sector, and we will enhance our ability to provide and achieve healthy development.

The next question from of China Securities. Thank you for the opportunity. My question is about capital and dividends. ICBC has to reach TLAAC standards in the coming two years, and there is still some lagging behind in terms of capital. How is ICPC's plan for capital management for the coming years? And how to balance capital management and the dividend payment? According to our calculation, If we maintain the current 30% dividend ratio and maintain 5% profit growth for the coming years, we need to supplement 100 billion RMB capital to reach the TILAC standards. Our calculation may not be that accurate, but my question is about how to balance this kind of business demand for capital and the expect of investors for dividends. President is speaking. I believe ICBC's CAR is relatively high. And while conducting in North Europe, the investors all mentioned that our capital equity ratio was very high. I would like to invite Mr. to answer your question. Mr. Guan is speaking. Thank you for your question. Your question is very long but very important. Indeed, we need to balance dividends payment and capital management. To serve the real economy and develop our business, we will maintain but we will balance the short-term profits, and long-term interest of our investors. As you can see, the current CAR of ICBC is relatively high, about 18%. And the time for us to reach TLC standards is not that sufficient. According to our analysis, we have established a three-year plan for capital management and the relevant departments have refined the calculation for capital management. We believe our capital tools for capital management is very sufficient and the pressure for reaching the standards is not that high. At appropriate time, we will launch the issuance of T-LAC bonds. Overall, we will stick to supplementing our capital by internal just way that is by a supplement to core tier 1 capital through retaining profits on the other hand we will supplement capital management by issuing other tier 1 capital and tier 2 capital in terms of profit sharing you can see that our profit-sharing level is at a moderate level. And we have won the recognition of investors in terms of long-term value. The senior management will balance serving real economy, long-term development, capital supplement, as well as profit-sharing. Based on Indonajah's supplement, we will pursue capital saving businesses and restrain capital management to increase our capital management capacity and optimize the capital structure so as to stabilize ROE level and give return to investors. Thank you for the question.

Next question. Next question from CLSA. Thank you for the opportunity to raise the question. I'm from CLSA. I have several questions about the mortgage, about the demand and the asset quality. From the demand side, we have seen a relatively low transaction volume of the property market, and a lot of customers prepay their mortgage. Judging from ICBC, how is the prepaid mortgage of your customers for your bank? And the shrinkage of the residential mortgage, is this a trend or just a transitional problem? And from the perspective of asset quality, we have seen a rising of the MPL of your mortgage loans. What is outlook for the NPL for your mortgage loans for the second half? And as a lender, how will ICBC participate in the disposal of the uncompleted property projects? Mr. Zheng, we'll take your question. This is a very heated topic, which was paid close attention by the market. I think it's a quite difficult question. So I can share with you some figures. As for the first question of the prepaid mortgage of our customers due to the low transactional volume of the property market, judging from ICBC, do mortgage customers prepaid their mortgage as mainly because of improving their assets and the structure of the family. But compared to previous years, it's not a remarkable change. In the first half of this year, the total mortgage repaid totaled $381.9 billion, and with the prepaid mortgage totaled $263.9 billion, only increased by $32.3 billion. compared to the same period of last year. However, we have to take into consideration of the total volume growth of the mortgage in this first half. So we can see the prepaid volume also is in line with the general growth of our mortgage loans without any remarkable changes. You also asked me about the SHINC compression of residential mortgage whether it's a trend or transitional question. We don't think it's highly likely for the leverage of residence mortgage to be recovered. However, we do think that changes will not be altered, which is the investment nature for property will continue to be change for consumption. And at the same time, there are also huge room for the demand for houses purchased and also demand for improving their living conditions. So this is a solid foundation for our mortgage loan growth. These two factors. will lay solid foundation for mortgage loan growth in the future. While providing mortgages, we will also try to enrich our product lines to meet more diversified demand from our customers for housing purchase or renting. As to the asset quality of our mortgage loans, I would also like to give you more data to show up your confidence. The market NPL for our bank was 0.31 percent, up by 7 bps. NPL relating with the suspension of mortgage totaled $637 million, same as we made the information disclosure back in June. We haven't seen any changes, remarkable changes, as to the MPLs relevant with the mortgage boycott. Among our total mortgage, the first house loans making up 76%, and the new house making up 76%. The first buyers making up 90%. The LTV is over 50%. So all this data have shown that we have a solid quality for our mortgage loans and also a security buffer for our mortgage asset quality. And according to our monitoring statistics, the mortgage loans relating with the uncompleted real estate projects is quite small, which has no obvious impact to the total mortgage asset quality. As to the part we will play in terms of disclosing the uncompleted property projects, firstly, we will make our due contribution to coordinate and support the work of guaranteed delivery of buildings and to maintain the stability and to support relevant property developers to mitigate their risks. Secondly, on the precondition of implementing guarantee and effective risk insulation, we will give more grace period of existing loans and also to meet the demands from developers and mortgage borrowers and also to conduct more M&A loan business. Thirdly, now the market are paying close attention to stringent requirements for the pre-sale proceeds. So for our bank, we will also try to optimize the monitoring system for the pre-sale proceeds to make sure they will be addressed to the particular projects and in guarantee the legal rights and the lawful interests of the home buyers. Fourthly, we will try to monitor more closely as to the relevant risk of our mortgage and try to prevent from any further risks. We have answered a lot of questions. Now we will invite two more questions.

Question from . Thank you. Thank you, management, for this opportunity. My question is mainly about growing finance, which is ICBC's main focus for the past several years. Last year, we noticed that we have seen the fast growth of green loans and was a target for this year. especially considering the macro situation, especially the climate change this year, and some energy issues for this year, and what's the target for green finance for this year, and how about the pricing for green finance? And in terms of insurance, do we have some regional concentration? I also noticed that the various banks and the guidance of the government, 30-60 target banks facilitate accelerating the insurance of green loans. And what's the competition situation for green finance project reservoir? I'll ask Mr. Wang Jingwu to answer your question. Thank you for the question. In the recent years, under the target of the carbon summit and carbon neutrality, ICBC paid a lot of attention to ESG, green finance, and climate change management. We seized the opportunities for green finance development and upgraded increase our support for the clean energy, green upgrading of infrastructure and the ecology development. We have a plan for every year and continue to increase the proportion of green loans and also enhance the green transformation of our loans. By the end of June, the volume for green finance is 3.5 trillion RMB and we underwrite a green bond by the amount of 26.7 billion RMB and we are the number one in this area and in the areas where the green transformation is faster and we have faster growth of green loans. It is ICBC's opinion that green finance is very critical. for the green transformation for the national economy. According to the 3060 target, we also have our action plan. First, we will manage our own carbon emission. On the other hand, we will properly manage the low carbon transformation of our financial assets. Our target is to continue to maintain and solidify our position as the number one green loan bank. to optimize the threshold pricing and resource allocation for green loans. First, we increase the assessment weight for green finance. Second, optimize the threshold standard. Third, to have a proper FTP. Fourth, we have a favorable quotation for green finance. So in general, we are quite competitive in terms of capital, customer, and funding. And we are also quite competitive in terms of the reservoir for potential green finance projects. In the next phase, we will further implement the growth of green finance. First, optimize, strengthen our support for industries and properly push forward the transformation of eight major industries to have this low-carbon transformation. And second, properly manage climate risks, reduce our credit risk exposure to brown finance, and support the transformation of high-carbon industries. Third, we will continue to manage ESG and develop this sustainable finance, construct a more optimal ESG management disclosure and sustainable financial development system. At the management level, we have ESG and Sustainable Financial Development Committee, and we have issued ESG and Green Finance annual report and interim report. Here I would like to ask our analysts and investors to pay attention to our ESG and Green Finance report that we are going to release. ICBC is a responsible bank. We will fulfill our commitment, push forward our ESG building, our green finance, and sustainable development finance. To enhance a diversified disclosure system, probably tell ICBC's story. We expect more attention and recognition from the investors and the society. Thank you. I would like to ask a question about monetary policy. We notice that the environment is going through a downward trend. And overseas, we also have some pressures. And I would like to ask that how about the monetary policy in the government? We notice that interest and we also have a symmetrical downward trend. I would like to ask that do you think there will be further space for the reduction of interest rates? And while the economy is under plenty of pressure and without opening the faucet for the unlimited liquidity, what kind of monetary tools could we use? So what have we got in our toolkit? This is a very macro issue. I'll ask our chief economist, Mr. Zhou Yueqiu, to answer the question. I think you have asked three questions. The trend for the interest rate and the further space and the monetary policy tools. The trend. I think we need to first look at the whole economy. Let me review the economy for the first half. I think the government coordinated the pandemic prevention and the economy, socio-economy development, and I think the economy is picking up. The GDP growth is 2.5%, and for Q1 and Q2, the growth is 4.8% and 0.4%. And indeed, I could say that we have faced the pressure and realized the positive growth. It shows the strong resilience of Chinese economy. Well, in the second half of this year, In the political bureau meeting, there's a sentence that will solidify the trend that the economy is picking up and stabilize employment and price and make sure that the economy is in the proper spectrum and strive to achieve the best outcome. And I think this is a very important layout for the macroeconomy. I think the government has already taken a series of fiscal and monetary measures to maintain growth, maintain the market players, maintain expectation, and maintain and stabilize employment. And with such policy support, I think compared to the first half, the next half will see better economic growth. This is one angle. And another angle is that the global economy. And we realize that the global economy is faced with quite some daunting challenges and pressures, especially that in Europe and in the United States, they are faced with very severe inflation, which is quite different from China. And the inflation is about 8% to 10%. Well, the cumulative CPI for the first seven months is only 2%. So the environment for monetary policy is totally different. And basically, in terms of choosing the monetary policies, they have to have this fast increase of interest rate. However, overseas, increase of interest of interest rate of course we will have this pressure of imported inflation but as we previously said that our CPI is at a relatively low level so I think that the Compared to Europe and the United States and America, we are faced in different environments for monetary policies. So I think that our monetary policy will stick to the keynote to see our own situation as the main base for judgment to provide strong support and high-quality support for the real economy Well, as for the space for adjustment of interest rate, you mentioned that recently the one-year LPR dropped by five basic points, and for five-year LPR, it dropped by 15 basic points. It fully shows that the government sticked to the policy that will not turn on the faucet for the limited liquidity and we stick to the pertinent conduit for monetary policy. ICBC, as the largest commercial bank, will properly conduit this monetary policy to the economy and guide the downward trend of the actual interest rate to enhance the real economy and the market players' willingness to invest and to consume. And this is also a very good choice for the commercial banks, which will open up for a very good environment for commercial banks to operate, which is also conducive for the management of asset quality and management of risks. Thirdly, the monetary policy tools in terms of volume and in terms of price and structure, I think that the government has plenty of monetary tools to choose from And these tools can also combine. And monetary policy is not isolated. It can also work together with other macro policies, such as fiscal policies. The two can work together to create a synergy. And it could also be used together with regulatory policies, industry policies, and regional policies. to create a better result. And I think this is my opinion on your question. And this is also on my own judgment. Thank you again for your question. I think the investors have asked a very last question, please.

The next question from City Securities. Thank you for the opportunity for the last question. My question is about fee and commission-based income. For the long time, ICBC has maintained a high proportion of fee and commission-based income by transformation of business structure. And in recent two years, the growth of fee and commission-based income is relatively weak, especially against the background of surrendering profits by reducing fees. What's your judgment for the outlook for the fee and commission-based income for the 2022 whole year? And what will be the major drivers for the income for the coming years? President Liu Ling is speaking. Actually, I have mentioned this issue while talking about operating income in the first question. Your question is very good because it's from a long-term perspective. ICBC is a bank with a long history. From 1984 to 1994, the first 10 years of ICBC has achieved good development of personal finance. And in the next 10 years, And for the different 10 years development, ICBC has different features. And now we have made full preparation to serving modernize the economy and the country. We are improving the implementation of strategies and the coordination and coordinated development capacity, as well as digitalize the transformation capacity. control capacity as well as the visionary judgment capacity. So it's very rational to look at the bank's development from long-term perspective. For your specific question about fee and commission-based income, I think we don't have to worry about this issue. The operator income has changed a lot the structure has changed a lot. For the first half of the year, the net income of fee and commission-based income reached 76 billion RMB, positive income, and we have consolidated our leading advantages. The contributions mainly come from two aspects. First, the clients and second, products. The products are mainly insurance, wealth management products. The AUM of fund and wealth management subsidiaries has contributed a lot in this aspect. Second, the expansion of customer base, especially in corporate settlement and acquiring business. These two aspects have contributed a lot for fee and commission-based income in the first half of the year. And these are two pillars for fee and commission-based income. For other aspects, agent sales fund, investment banking, commitment, and guarantee business have been decreased due to the impact of downward economic growth and volatility in capital market. For the next step, we will increase our fee and commission-based income from three aspects. Digging the potential, expand the origin, and save expenditures. We will increase equity investment, bond investment, and other transaction income to stabilize the sustained development of fee and commission-based income. And we will seize the major businesses such as third-party payment, RMB settlement, and foreign currency settlement. Besides surrounding the demand of our clients, we will increase our potential for income in digging the potential of funds, custody, insurance, etc. In particular, we will play our advantages in GBC coordinated development, strengthen the coordination of wealth management, asset management, and investment banking. And of course, we will control the expenditures to refund our management in terms of fee and commission-based income. Meanwhile, we will still surrender our profits by cutting the fees. We will accompany our clients in retaining our clients. This is also the base for our sustainable development and increases the contribution and the loyalty of our clients. And a strong ecosystem will be established to support our development. as well as the fee and commission-based income. Thank you for your question. That's the end of Q&A session, and thank you for your enthusiastic participation. The senior management has candidly answered investors' concerns and questions, and we believe this will help the analysts and investors to make a better judgment for the future development. And thank you for your long-term concern in ICBC. If you have any more questions, we welcome you to contact with us. Wish you all the best. Thank you.