Industrial and Commercial Bank of China Limited

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.