Agricultural Bank of China Limited (1288) Earnings Call Transcript & Summary

Welcome. I would like to say welcome to all the investors analysis and media friends to attend the 2023 Annual Results Announcement of the ABC. Well, actually, for ABC, we have left Hong Kong for 8 years in terms of the convening of our announcements. So we are very happy to come back to Hong Kong to have this face-to-face meeting with all of you. And also, we have a lot of friends, analysts attending this conference online or in Beijing's venue. And today, we also have management representatives as well as independent directors attending this conference. So we can start from our operating results of 2023 for the ABC. And last year, China's economy rebounded paving a solid foundation for the development and finance industry. And our performance was also pretty good last year. So to sum it up, I think there are 2 points worth mentioning. One -- the first one is that our operating revenue is experiencing steady growth. Our net profit was CNY 269.8 billion, a growth rate of 4.2% and ROE is 10.91%. Our operating income was CNY 694.8 billion, maintaining positive growth. And in the last year, we've been faced with very complex external environment. Our operating income still remain positive growth. That is not an easy task for us to do. Second, our strength of the core group continues to increase. Our total assets reached CNY 39.9 trillion, an increase of CNY 5.9 trillion, and the loans increased by CNY 2.85 trillion to CNY 22.6 trillion and the NPL ratio was 1.33%, down by 0.44 percentage points to compare with the end of previous year. And our provision coverage has reached 303.87% and the balance of the customer deposits was CNY 28.5 trillion. And domestically speaking, our customers -- the deposits of our customers domestically increased by CNY 3.91 trillion, to compare with the end of last year. And another statistics we want to disclose is that our daily increments -- the average daily increments of the deposits of our domestic customer would reach CNY 3.9 trillion. So pretty similar to our deposits -- the total amount of our deposits. And we replenished our capital by CNY 230 billion and our adequacy -- capital adequacy rate was 17.14%. So here, we have already illustrated you about our revenues as well as our income -- some important content or highlights in our income statement. So looking back at our operation last year, we believe that we need to adhere to a systematic concept of management. We need to achieve 3 endeavors related to coordination. That is why we could achieve such results last year. The very first reason for our rebound last year is because of the rebound of macro economy. And for us, I think we need to do 3 coordinating endeavors. And the first one is that we need to coordinate the two markets in the urban area and the rural area. And now we have 23,000 outlets of ABC and half of them are located in counties and another half are located in the urban areas, and the layout of our customer base in rural areas and urban areas are kind of balanced. This is our biggest differentiator, which also represents our competitive advantages. And based on the different features of different regions, we have made a lot of innovations or tailor-made innovations for those county outlets or customers in county areas to improve our capacity to serve the residents in county areas. And now we have 281 products related to rural revival. And we have 255 products with unique county characteristics. And at the country level, we have a total of 546 million in customers in rural or county areas, accounting for 63% of the total customers we have in ABC. And in ABC, the revenues at the county level accounts for 47.7%. And the increased rate -- the growth rate is 4% -- percentage points higher than the industrial average. And the balance of the loan is CNY 8.78 trillion, an increase of CNY 1.45 trillion. And our county level loan has increased at the rate of 19.8% higher than the average of the whole industry. So in the past 3 years, the scale of deposits and loans have both increased. In the county level deposits and loans are increasing in its share in our overall bank. But if we zoom out, not only looking at a 3-year scale, we could see that the county level loans have risen more rapidly. So that means for ABC, we are using -- we are injecting a lot of capital to revive the rural areas and to promote integrated development of the urban and rural areas as a whole. That's a first coordinating endeavor we need to do when you are coordinating the urban area and the rural area. The second thing we need to do is to coordinate a high-level security and high-level, high-quality development. And we have an increasing supply of finance. Last year, we have issued a loan worth of CNY 2.85 trillion. And last year, our NPL ratio, it was 1.33%, down by 0.04 percentage points, showing a downward trend for 3 consecutive years. And in our annual report, we have also disclosed a lot of forward-looking indicators for our asset quality, for example, our NPL ratio was 1.33%. And our special mention loans ratio is 1.42%, down by 0.04 percentage points and our overdue loan rate was 1.08%. And our provision coverage was 303.87%, increasing at a relatively high level at the beginning of this year -- of last year. In terms of deposits, we not only organize the funds in a really good manner, we also provide good services for our clients. And the increments of our deposits was CNY 3.91 trillion, ranking the top in the industry. And we are optimizing our services provided to the clients and the complaints -- number of complaints per 1,000 outlets and per 10 million customers is pretty low, lower than the industry average. And the third coordinating endeavor we need to do is to coordinate our current operation and future development. So here I want to stress technology. Technology will reshape our future. The current -- the key for us is to promote digitalization and to better leverage technologies so as to lay a solid foundation for future development. So here to sum up how we're going to leverage technology to facilitate our future development. I would like to use three sentences to sum up that: First one -- firstly, our business -- our core business system have already basically completed the transformation of distributed architecture. And last year, we have already finished the system migration for individual customers totaling 800 million. And our daily transaction volume -- our transaction volume has exceeded CNY 1.9 billion. And the second one is that we need to increase our capacity and scale as well as our computing power. And we all know that AI is based on computing power. So we are accelerating our speed to -- accelerating to develop our AI capacity. And we have also developed our centers, data centers in Mongolia. We have already finished the first phase of the construction of our computer -- our data center and computer room in Mongolia for the first phase. And last year, we started to build the second phase of our data center into operation in 2025, increasing our computing power. And the third thing I want to mention is that we need to continually establish our business model driven by data. We have already built 42,000 high-frequency internal scenarios and the scenario-based financial ecology continued to expand, improving our efficiency to provide services to the customers in a primary level. And the user experience of our bank application has also been optimized. Our MAU, the MAU of our mobile app has exceeded 230 million, and we have also optimized our products in terms of digital debt products. So the balance of the e-loan of ABC has increased by 39% last year. And we have a lot of experience in last year's operation. So we also want to -- just now I've already summed up our endeavors in the past year. So now I'm going to talk about this year's operation. And in terms of the overall market, the economic growth potential in China is still very large, and the resilience is sufficient. And this year, our economic growth target is set to be 5%, still very high in the global arena, providing a very favorable environment for the development of our bank. And if we look at the first 2 months in this year, you will see that the main indicators of production demand in the first 2 years is increasing. For example, like the retail sales, the total retail sales of consumer goods is increasing and industrial value added and export growth were also better than the market expectation. So our economy has started steadily this year, and our credit demand is also increasing in a good way. So we believe that Chinese economy will move towards a positive direction providing a favorable environment for our operation. And in 2024, we will better do -- do a better job in our businesses related to rural area, agriculture and farmers and to become -- and to provide better services for real economy and to better serve the stability of the finance as a whole. And we will also deliver more value for our shareholders. And finally, I hope that we can gain the support from you as always. And now I will open the floor for questions. And the Chief Risk Officer, Mr. [indiscernible] will preside over this Q&A session.

Thank you, Mr. Gu. So during this Q&A session, -- you can only -- for one person, you can only raise 1 question. And before you raise the question, please introduce yourself as well as your department you're from. So the first question will be raised in the Hong Kong venue.

I'm from UBS. I'm Yan Meizhi. It's very happy to see you again here. And just now you've said that we have a really good year of 2023, so I would like to congratulate you on that. In this complex environment, your stock price is very positive, especially compared with our counterparts. And my question is related to credit growth. And just now you've mentioned that last year, we have an increase of 10% to -- 14% to 15% of credit growth. So my question is, whether this credit growth is sustainable? And where can we see this growth if we look at these growth in terms of individual loan or retail sale loan, what is the proportion in that. And in terms of retail -- for retail, have we seen any increase of the credit demand or credit -- the loan issuance demand there? And is this credit growth sustainable?

Well, actually, last year, our issuance of loan is increasing. And our pace of loan issuance is consistent with our national policies as well as our management level at ABC. So just now you've also mentioned that the overall landscape is positive. We have an increase loan issuance scale last year. And the second thing I want to mention is that the county level loan issuance was increasing really fast. Accounting for about half of the total loans issued to our clients. And also, last year, we've issued a lot of loans to those emerging -- newly emerging industries as well as green industries, and our loans issued to those industries is higher than our counterparts in the industry. And also for individual loans, last year, we've had a -- the individual loan has increased by more than CNY 500 billion last year, maintaining the first place in the industry for 4 consecutive years. And for consumption loans -- individual consumption loans last year, the figure has exceeded CNY 100 billion. So for this year, what is about the demand of loans? Is -- can this growth trend sustained. That's a very important question that we need to answer. And just now I said the economy is moving towards a positive direction. So I think the reserve and the demand of the loans or the credit will also increase towards a positive direction. And in the opening remarks, I've briefly talked about the loan issuance. We will definitely stick to our main principal business area. That is our county-wide loans or county-wide finance. And secondly, we need to focus more on rural areas, agriculture and farmers. And this year, there are several focuses for us this year. First of all, we need to continue to provide better services in terms of loan issuance for county level related to rural areas, agriculture and farmers. And this year, we plan to have a loan growth in the county level reaching CNY 1.3 trillion, accounting for 50% of the overall loans being issued from ABC. And for county-level loans, we need to talk about the industry is involved in this area related to -- are related to grain or food security and so on. So in related areas, our loan issuance is expected to increase by CNY 200 billion and the balance will exceed CNY 1 trillion. And for the loans -- in terms of the loans providing for those farmers, we expect to see a growth of CNY 300 billion and the balance would reach CNY 1.5 trillion. And if we can really give out CNY 300 billion loans to the rural households, it will be definitely sustainable. And for individual loans, we have personal business loans, which is related to inclusive financing, and we also have individual consumption loans and the housing loans. And these endeavors are aiming to stabilize the real estate market and prevent systematic risks in the macro economy. So we will definitely stick to the monetary policies as well as regulatory policies of the country. And just now you've also mentioned personal or individual loans from the perspective of ABC, the CNY 300 billion loans to farmers is a key for us. If we can manage these loan -- these amount of loans very well, we can stabilize the whole individual loan market. So we need to better correlate ourselves to rural areas, agriculture and farmers. And also, we need to focus on universal and inclusive financing. And the ABC is actually the bank that provides the most loans to the inclusive finance fields and serve the most customers in this area. In 2024, we aim to increase our inclusive financing by CNY 800 billion. And the third thing is that we need to be greener. And as you can see, our logo is green. So we need to be greener. We need to provide more green loans, and we expect to increase our green loans by CNY 1 trillion. So I've already tell you all of the statistics or the scale. And fourth, we need to improve our supply -- our supplier financing to facilitate the improvement of the real economy, especially those industries related to new projected forces. The financing supply should be consistent with -- should be aligned with the demand of the industrial transformation in China. It should serve the Chinese modernization. So the loans related to rural areas, agriculture and farmers and the loans related to inclusive financing and the green loans as well as the loans aiming to facilitate new projected forces are all aligned with our positioning and our cultural DNA. And just now, I gave you so many numbers. If you add them up, it will be astronomical. And of course -- so here, I want to clarify a bit. Just now, I've mentioned so many numbers, and some of them are overlapping. For example, some of the loans related to rural areas, agriculture and farmers they are also included in green loans. Some of them are also related to inclusive financing. So you can never like add them up very simply. So all in all, we need to strike a balance of our loans.

And now the next question will come from the Beijing venue. The left area lady in the third row.

I'm with [ Lei Shan ] Agency. I am [ Xinhua News Agency ]. And my question is about the quality of the credit assets. So my question is, where are the risks of the credit line in ABC in 2023. We know that ABC has spent a lot in terms of -- it has spent more in facilitating real economy, so the debt -- the loan is increasing really fast. Will that pose any pressure for the future asset quality of ABC?

So Mr. Zhang Xuguang will answer this question.

Actually, ensuring preventing risk or minimizing risk is our bottom line. We need to do -- at least we need to do that. And recently, our asset quality has continued to optimize. NPL ratio was 1.33%, down by 0.04 percentage points and the incidence rate of NPL rate was 0.85%, down by 0.07 percentage point. And the special mention loan ratio was 1.42%, down by [ 0.04 ] percentage points compared with last year. And our overdue loan ratio was 1.08% equivalent to the beginning of the year. And the negative difference between expected and the [indiscernible] difference of the expected loan and NPL is -- was CNY 56.2 billion, which has been negative for 14 consecutive years, and the provision coverage was 303.87%, up by 1.27 percentage points. So we increased our capability to fight against risks in our NPL mainly concentrated in real estate market, and it is -- the overall market -- the overall risk is preventable. It's controllable. And we have implemented our 16 measures to minimize the risk in this area. And -- so which has already generated good effect. So the NPL ratio of real estate is going down recently. So you can see that our risk management has been well performed. And in the future, we are very confident about our risk control. And also, you've mentioned we have a really fast credit or loan issuance growth. We will always strike a balance between the risk prevention and the business development. We will definitely ensure no systematic risk will happen. And this year, the quality of our assets will remain stable based on several reasons. First of all, the macro economy is very positive, providing a favorable environment for the quality of our assets. And we'll also optimize our structure of our credit or loans. And 80% of our loans in 2023 were issued to manufacturing or advanced manufacturing. And we also continue our countercyclical adjustment capabilities. And we have also continued to strengthen our research and adjustments capability to manage the credit risks. So we are very confident that we can continue the stable asset quality at ABC.

So now the next question comes from the Hong Kong venue. The left area, the first -- the guest in the first row.

I'm with [indiscernible] TV. And we know that the profitability of ABC has maintained a really positive growth. So in the future, in the following years. How can we strike a balance between the profitability and our risks? So how can you do that? How can you strike a balance between serving the real economy and the management of the risks? And how do you perceive the net interest spreads as well as the net interest margin and the profitability of ABC this year?

I know that a lot of people are concerning about our profitability. I want to answer this question from the following perspectives. First of all, for e-bank, no matter we're talking about the long term or short term vision, if we're going to have a good operation, the most important thing is to stabilize our asset quality, especially for the long term. If we do not have a good quality asset, even if we can make profit in the short term, we will lose money in the long term. So the first -- the priority for us is to stabilize our asset quality. And second, the current economy is recovering really fast, and we have seen the emerging of new product in forces. And just now we've mentioned that Chinese economy is very resilient, and it's recovering -- the recovery of the economy is undeniable. And the overall financial risks of the whole industry is controllable. And just now we've repeatedly said the same thing that -- we were repeatedly discussing about the quality of assets. And your question is also related to quality asset. So for us in ABC the nonperforming loans, the NPL ratio is -- was 1.33%. We have disclosed that in our report and we have also included many forward-looking indicators of risks in our annual report. Just as Mr. Shu mentioned, the incurrence rate of NPL is -- in 2023 was 0.85%, down by 0.07 percentage points. And overdue loan was 1.08%. That is another forward-looking indicator. And the scissor difference between overdue and nonperforming loans as well as the provision coverage ratio, these are all the forward-looking indicators to identify the risks, assuring all the clients that ABC will strike a balance -- will definitely strike a balance of profitability, both in the long run and in the short term. That's the first thing. That's the first point I want to mention. And secondly, what we need to do is to stabilize the net interest margin, the NIM. And we also need to look at NIM in the long run. We need to look at the assets and liability at the same time. From the perspective of assets and last year, the interest rate of our loan, last year, was 3.79%, down by 30 bps compared with last year, which is also similar to our counterparts in the industry. It's because that we really wanted to support the real economy. We want to provide that with more like profits -- benefits. So next step, we will better coordinate this whole mechanism. And we will also optimize the asset margin pricing. While supporting the real economy, we will also maintain sustainable development on our own -- for ourselves. So from the perspective of liability, just now I've mentioned that the deposits of customers of ABC has increased at the fastest speed among the counterparts. The increment of -- the daily increment as well as annual increments are synchronous. Another thing I want to -- another highlight in our annual report, I want to mention is that our interest payment rate of our customer deposits is 1.71%, which is the best to compare with all the counterparts in our industry. And in 2024, for deposits, we will make more initiatives to promote digitalization to leverage our advantages of a massive scale of outlets in the customer base and to provide more low-cost deposits. As for NIM, or NIM, here I want to add something. When you're analyzing our annual report, if we're going to look at the NIM risk, we should not only look at the interest rates of deposits and loans, we also need to look at the investment portfolios. Because for a lot of -- for other state-owned banks, the amount of their investments could reach over CNY 10 trillion. So if we are going to analyze NIM, you should not only look at the deposit and loan, you should also look at investments. And last year, we've invested a lot in the bond -- the government bonds. The interest -- the benefits, interest rate is relatively low, of course, but in safe. And also, it has -- it can exempt tax for us. So if you're going -- if you are analyzing the NIM, you should also look at our income tax. It has changed drastically last year. So we strongly advise you to look at our tax -- the investment and the tax when you're analyzing NIM, the net interest margin. And thirdly, we need to stabilize the value delivered for those intermediate business services. On the one hand, we will continue to work for the real economy. And second, we need to improve our ability of comprehensive financial services. We will focus on key areas and promote the value to the intermediate business by providing customers with high-quality financial services. For example, for consumption industry, we will seize the opportunity of resuming consumption growth. And we will also improve our capability of third-party payment credit cards. And in terms of the price, we will provide more benefits to our customers and third-party partners by lowering down the prices a little bit. We will also improve our comprehensive service capability. And for intermediary business, we also need to improve our international settlement, the RMB settlement, bond underwriting and consulting business and integrated services and so on. So we need to look at different aspects. So all in all, we need to stabilize the asset quality. If we can stabilize that, we can provide basis for long-term and midterm profitability. And if we can stabilize NIM, we can ensure that our profitability in 2024 is well assured. We reiterated that we need to make more benefits for the real economy, no matter for the regulatory body or other departments. No one was saying that we need to cut the price disorderly. We need to be -- we need to stable this whole process. We need to do it. We need to cut the price in a steady way. And in CDF, China Develop Forum, Premier Li Qiang has delivered a speech. He was saying that we need to slow down our economic growth in a steady way. That also we need to do in the banking industry. We need to guarantee our -- stabilize our -- guarantee the financial needs -- get insured to meet the financial needs of our customers while maintaining the profitability of ourselves.

So the next question should come from Beijing venue. The gentlemen in the second row.

I'm [indiscernible] from CICC. And my question is related to individual or personal loans. And in 2023 in supporting personal consumption loan or business -- individual business loan, what achievements have you achieved -- have you got? And in 2024, what are your expectations on that?

So [indiscernible] will answer this question.

China is really resilient and potential in terms of economic development and the fundamentals or the basic trends for long-term improvement hasn't changed. And ABC will resolutely stick to the decisions made by the Party Central Committee and will actively serve for the steady growth, expand domestic demands and to serve the people's livelihood. And we will also strike a balance between the services -- of the services between the rural areas and urban areas. And we'll also do integration of offline and online services. And we will do a better job in terms of providing better services for those SMEs as well as individual businessman in rural areas. We have achieved pretty good results. And at the end -- as of the end of last year, our retail credit balance exceeded CNY 8 trillion and the personal loan -- consumption loan as well as the business loan and credit loan, the balance, in total, reached CNY 2.891 trillion, an annual increase of CNY 690.4 billion, a year-on-year increase of CNY 366.7 billion, up by 31.4%, and the growth has been maintained for 4 consecutive years. And in terms of management, we have done a really concrete jobs in 5 perspectives. First, we always we always prioritize the expansion of the consumer financial services. Last year, the retail sales of consumer goods is rebounding. So based on the expansion of traditional consumption, we will accurately meet the demands of the new consumption. We have been absolutely integrated ourselves into green consumption health care, [indiscernible], home appliances as well as the cultural tourism. So based on that, we will expand -- cultivate and expand new customer groups and to increase the provision of loans for them. And in 2023, the resident customer loan increased by CNY 147.1 billion. And the credit loan increased by CNY 52.4 billion. And all year around, the total spending of the credit card has increased or has exceeded CNY 2.2 trillion. Second, we will deeply cultivate inclusive financing. We are providing services for individual businesses as well as SMEs. We have innovated our e-loan for those -- for farmers. We have also increased our loans providing for husbandry and retail and many other industries related to rural areas. And last year, we've issued CNY 1.97 trillion of personal domestic loans, up by 38.3%, a year-on-year increase of CNY 254.4 billion, an annual increase as well as the increased rate has ramped up in the -- among all the counterparts. And our individual industry and commercial households has -- in our customer base reached 6.35 million with the average balance of CNY 29 trillion. And thirdly, we have leveraged our advantages of spending both urban and rural areas. We provide active services for rural revitalization. And in our operation, we always grasp the service, and we always grasp the gist to provide services for rural revitalization, and we pay close attention to the upgrading rural consumption. And we have also -- we also issued those [indiscernible] net fast loan or the entrepreneurship loan as well as those other loans facilitating farmers to develop. And now we have organized 18,000 service team related to rural vitalization and these teams will go to the field, all the ordinary people -- all the ordinary households to provide point-to-point financial services. And last year, the business -- personal business loan could reach CNY 1.62 trillion, up by CNY 390.5 billion. accounted for 76% of the total increase of loans in the whole bank, up by 29 percentage points to compel with last year. And we are -- fourthly, we are also accelerating our digitalization process. And we will always be customer-centric and innovation-led We will build a production system for online and offline collaboration will strengthen data-driven endeavors. We will leverage more data capability to facilitate the business to facilitate the services for our customers to save the customers' time and energy. And we are also using smart technologies, such as OCR, as well as digital figure as well as many other new centralized authorization processes, making the whole process of providing services less time-consuming and the digital application has already reached a share of 40% of all the services we provide. So our services has become smarter. And the fifth thing we need to do is to coordinate the development in a secure way. And we will strengthen our ability to be forward-looking and be more intelligent. And also, we will be compliant with risk control regulations. And we will also do a good job in protecting the rights and interest of our financial consumers. In 2023, our NPL ratio of personal loan and personal business loan is 1.04% and 0.88%, relatively. So the overall risk is controllable and NPL rate for credit cards was 1.4%. So the quality of our assets is pretty good, satisfying. So here, I want to tell you that the retail credit business is -- keeps the good momentum. And as of now, the increment of the retail loans has reached CNY 492.4 billion, up by CNY 192 billion year-on-year, ranking the first in the whole industry. So if we look at the asset, all of these endeavors is conduced for us to stabilize our NIM. And in next stage, we will further implement the guidelines of the Central -- the National People's Congress as well as Financial [indiscernible] conference and economic web conference as well as guidelines of the 2 sessions. We will provide better and high-quality financial services to our customers in the following years.

And the next question comes from the Hong Kong venue. Lady in the third row.

I'm [indiscernible] from Goldman Sachs. Just now, you have mentioned about the agri-related businesses, which is also your advantages. So what are the specific differentiator for you in terms of the countywide business? And in the future, how we're going to leverage this county-wide businesses to better serve the rural revitalization while providing greater contribution to the profitability of the bank as a whole?

So Mr. Liu Jiawang, responsible for agri-related business, will answer this question.

Well, as a state-owned bank provide -- [indiscernible] providing services for rural areas, agriculture and farmers, we have implemented the government strategic plan to comprehensively promote rural revitalization. And we continue to increase our financial supply to agricultural rural areas and farmers. We have kept these good momentum. So the chairman of the Board have already iterated some of the advantages. I will build on his remarks from 5 perspectives. First, in terms of integration between -- or the interaction between urban and rural areas and ABC is the only institution or commercial banks covering all counties in the country. And we spent two major markets of the urban and rural areas, half of our outlets are located in the county areas -- in counties. So with faster integration of urban and rural areas, more and more customers are laying out their business, both in the urban area and rural area, making it easier for us to play out our advantages. And secondly, we have agro-related products. In addition to some products that are common for the -- for all the people, we have some specific agro-related products. For example, our branches has launched several -- has launched more than 280 products with rural characteristics. For example, we have many -- we have -- we also have many subsidiaries located in the rural areas, focusing on the business in a rural area, and they have a strong comprehensive management capability, so they can provide diversified comprehensive financial services for our clients in the rural areas. And fourthly, in terms of technological empowerment, ABC has continued to improve our investment in technology. We have the [indiscernible] e-loan and SME e-loan. And these are online agro-related loan product system -- are part of the online agricultural-related loan product systems. And we also have the mobile banking application as well as the agro-related applications, specifically for agriculture. And fifthly, we aim to develop our brand image as an agro friendly banks. And since our establishment, 70 years ago, we have worked really hard to serve the agricultural rural areas as well as the farmers, and we have made positive contributions to poverty alleviation and rural revitalization as well as the development of inclusive financing re-loans. And we have been widely recognized by all kinds of customers in rural areas. And ABC is also the only one bank recognized or [indiscernible] at the highest level in terms of the services provided for the rural areas for 3 consecutive years. So in the future, we'll continue to deepen our services for agriculture and we will consolidate and improve our capability to provide financial services for rural areas and to better serve the implementation of the national rural revitalization strategy. And we'll -- we want to make greater contribution in the following years. We will do it in three perspectives. Firstly, we will improve our supply of -- the financial supply for the counties so as to help them to meet the needs of grain and other agricultural products. And second, we will channel more funds to the counties. And on the basis we have been implementing the national policy of fee reduction and profit concession, we will actively channel the fund to go to the counties and to vigorously provide -- vigorously attract funds from the rural areas and to expand our low-cost source of funds for our bank. And we will also cater to the rural needs in terms of settlement and deposits or financial or wealth management. And thirdly, we will consolidate and improve effectiveness of business operation in accounting. We will follow the trend of AI big model, the generative AI algorithm as well as IoT to address the bottlenecks of agricultural development currently, which include high cost or high risk. So another goal for us is to reduce the NPL ratio and to improve the efficiency of operation.

And the next question comes from the Beijing venue. So in the middle, in the rear, the lady.

I'm a journalist with the 21st Century Business Herold. And just now our Chairman who has mentioned, technology will reshape the future events. So my question is related to Fintech. Fintech is actually a very important force for financial institutions. And my question is about the utilization of your -- of ABC. And in the next step, what kind of strategies will you adopt?

So Mr. Xu, responsible for technologies and adoption will answer this question.

I want to answer your question from three perspectives. First, ABC is promoting digital transformation by using the technology learned by doing. And we have grasped the essence of digital transformation. And the essence is to leverage data. So we haven't done a large transformation of our old system. Instead, we built a data layer and enterprise architecture on the system. In 2023, we accelerate the promotion of cloud-native data lake, data pool as well as a real-time data warehouse platform, and we have initially established a data layer enterprise-grade architecture. We spent a lot of time, energy and resources to grasp construction and the optimization of the model to identify -- to better identify key products and to improve the precision marketing and the precision management so as to develop a data-driven operation model. And secondly, we need to have layer solid foundation for our digital transformation. We have a customer base of 880 million customers, and the daily trading volume would peak -- the peak of daily trading volume could be close to 2 billion. And for per second, the peak transactional volume could reach 50,000. So last year, we basically -- we have basically completed the transformation of the distributed architecture. At the same time, we have safeguarded our stable operation. It is not an easy task to do because we have a such large volume of transactions, while at the same time, we need to stabilize the trade, it's not easy. Let me give you a metaphor. If you have -- if you only have 100 million customers, it's like that you are driving a truck carrying 10 ton of cargoes. But if you have 800 million people, it's like that you are driving a truck carrying 80 tons and you cannot change your tires in the way. And you can -- you should also ensure a smooth ride to avoid any accidents. So it's not easy task to do for us. So in the past years, we have optimized our distributed computing center as well as our disaster relief center, disaster protection center and so on. We have also built our production operation system. And we have also built a network security defense system. So all in all, we've done a lot to guarantee the stability of our trade. And thirdly, we take the customer experience very seriously, but it's very hard to satisfy every and each customer. To facilitate our customers to use every and each services, we want to use only one application to provide all the services. That means we integrate all the functions needed by individual retail customers in one application. That is something our peers want to do, but they haven't done it yet. So in this way, we have increased the satisfaction of our customers. So at the end of 2023, the MOU of our mobile application could reach 230 million, leading the industry for 34 months in a row. Because we have already identified the most important thing is data, and we have also paid great attention to customer satisfaction. That is why we can achieve such large -- such great results in terms of digital transformation. And -- but how -- what is our future expectation on digitalization? Also, you want to answer this part of question from three perspectives. First of all, we will continue to reinforce our technology security. We will prioritize the security of our customer and we will be responsible for them too. That is why we will upgrade our network security and the defense system for our data to make sure our financial services are safe, stable and precise. Second, we will make efforts to build a smart bank. AI is a buzzword. And in terms of earlier application, like Symantec analysis, facial recognition, we have already adopted AI. But in the future, we will implement AI in a deeper and more profound way, will improve a new data-driven operation and to accelerate the construction of the smart banking. And third, we will deepen our online and offline collaborative operation. We will leverage the channel advantages of 22,000 outlets as well as the online advantage of more than 200 million MAU, so as to better collaborate both online and offline.

So the next question comes from the Hong Kong venue. The left area, the guests, the lady from the fourth row.

I am with the Hong Kong Commercial Daily. I'm [indiscernible]. And my question is about pension finance. According to the data released by the Ministry of Civil Affairs at the end of 2024, the 60-year old population is 210 million, accounted for 14.9%. And the state council has also released some documents related to gray hair economy. So I want to know more about your strategy related to senior care finance as well as how you're going to adapt yourself to the aging society?

President [indiscernible] will answer this question because he's responsible for individual finance services.

Thank you for your question. Last year, after the convening of the Central Finance Work Conference, the ABC has deployed and implemented 5 endeavors. And we have specialized our research to promote the high quality development of pension finance or senior care finance. And in this, we have made a plan, featuring the 3 plus 2 high-quality senior care financing system. So the 3 here -- 3 plus 2 in the 3 covers pension finances -- senior care finance as well as senior care industry finance so as to cater to the aging population in China. And the 2 in the 3 plus 2 layout covers the consolidation of pension system as well as financial technology support. And we will also strengthen our protection for customer rights. We will cater to the whole life cycle of customers and to have an overall planning and forward-looking systematic layout. And in this plan, we have specifically identified 188 items of services to provide services and specific differentiated financial products for the gray hair population. And in terms of pension, I think in our country, China has achieved remarkable results in safeguarding the senior people. And first of all, in terms of security -- social security, ABC has absolutely responded to the interprovincial social security interaction system. And now our social security card has already covered 272 million people in China and our electronic social security card users has reached 125 million. And the medical insurance card has covered 68.57 million people. And in terms of annuity, we are making efforts in trusteeship as well as custodianship and the annuity -- the customer -- the number of customers in annuity -- in enterprise annuity ranks the top in the industry and the scale of business also continues to grow. And in terms of individual pension, we have been the first in all the counterparts to provide a full portfolio of products related, including deposits, wealth management funds, insurance family trusts and the scale of pension -- customer pension accounts for the largest portion in China. And also in terms of the senior care services -- finance service. We also done -- we have also done a lot to do to improve our services for the senior people. We strengthened our service channels, and we also have the self-service devices specifically designed for the senior people. And we also have the -- we also optimized the mobile app for the senior people. For example, the mobile app will provide larger size of character for the senior people. And we also have the outlets. We have also optimized the business processes to help specific -- to help those senior people to get their business done really smoothly. And we also provide special services for those disabled or the senior people suffering from dementia. And we also -- we have also improved our service system. We have a fast response mechanism. And we also provide 100,000 door-to-door services for the elderly customers who has reduced mobility. And we also have the the remote services provided for the senior people. And in terms of the pension products, we have commercial -- the senior care insurance as well as exclusive commercial pension insurance. And now we have 131 pension related funds and 14 insurance products. And we also have the senior care related wealth management products. So in terms of both scale as well as diversity, we ranked top among the industry, and we will make more efforts on that. And in terms of senior care industry, we believe this part needs our great support. We have released -- relapsed the extended the scope of access to pension institutions, so as to improve availability of financing for pension institutions to support the senior care industry and another thing we have done is to increase provision of loans to inclusive pension institutions. And last year, the balance of the loan for the senior care institutions could reach CNY 7 billion, up by 11%. So in next step, ABC will continuously implement the decisions arrangement of CBC Central Committee, and we will be people-centric and play the advantages of ABC as well as our layout in both other areas and rural areas, we will keep building demonstration outlets to cover more people and we will also pay attention to science and technology and to develop new projected forces. And we are also absolutely exploring and promoting the digital service for the elderly people, to make it -- to make our services for elderly people more convenience and more professional.

So the next question comes from the Beijing venue. On the right, the third row, gentleman, please.

I'm [indiscernible] from Citic Securities. And my question is related to the organization and staffing. And we know that serving the rural area and serving the revitalization is one of your priorities. And last year in the Economic Work Conference, the government has also emphasized that we need to coordinate rural revitalization and urban development. So in this regard, how can the ABC coordinate the services in revitalization as well as the agro-related businesses in terms of staffing and organization structure?

And Mr. Liu Hong will answer this question.

Thank you for the question. Recently, ABC has carried out in-depth -- has carried out the policy of the CPC Central Committee to promote the rural revitalization and build financial system with Chinese [indiscernible]. We have continued to optimize our layout in rural areas and to put more resources in those -- in counties with high-quality financial services. In terms of organization or institutional establishment based on our framework [indiscernible] framework in the agricultural areas, we have optimized our channels, providing services for the agriculture areas. And we have continued strength in our professional department or service team for rural revitalization to make sure that we have a dedicated team to better serve the agro-related customers. Second, we have continued to optimize our business outlets -- a layout in rural areas. We'll have more agencies or outlets in rural areas in 2023. The newly established -- among the newly established outlets, 70% were located in the county areas. And as at the end of 2023, the county level outlets reached 12.7000, accounting for 55.9% of the total number of the outlets, covering all counties in the country. And thirdly, we have strengthened our establishment or service channel establishment, both -- combining both online and off-line services to improve the accessibility of financial services for all the people. And as of the end of 2023, our [indiscernible] has welcomed 126,000 customers covering 2,542 counties and districts. And [indiscernible] coverage has reached 97.8% and the registry -- registered customers on mobile application -- one of our mobile application could reach 229 million. And in terms of staffing, ABC has strengthened the construction of our workforce to better support the rural revitalization. And we have invested more human resources in the rural areas and 50% of our recruitment -- personnel recruitment stand out to rural areas. And recently, we have recruited 41,000 new employees in the country-level outlets. And as of the end of last year, the total number of the county level employees could reach 188,000, accounting for 42% of the total number of employees of the bank. And second, we have strengthened our cultivation of the talent in rural areas. And we -- in total, we have cultivated and selected county-level young talents, totaling 18,000. And we also provide special support for those customers -- for those talents working in a county level. And thirdly, we have strengthened the construction of the county level account manager team. And every year, we will have a special recruitment of the account managers. And we we will help train them between the business skills and to -- so as to improve the efficiency of serving the agriculture areas. And in next step, we will further strength -- we will further strengthen our construction and professional departments and service team for agriculture and will also optimize the layout of our services, service structure both -- featuring both online and offline, so as to improve the coverage of our financial services.

And the next question comes from Hong Kong venue. How about the rear of this room, may be on the right, the lady in the 5 row?

I'm Katherine L. Lei from JPMorgan Chase. My question is related to green finance. I know green finance is a part of your strategy. So in terms of green finance, what are the characteristics? And how can we strike a balance between the volume and price as well as the price and the risk?

So Mr. Zhang Xuguang will answer this question.

Thank you for the question. Well, the Central Financial Work Conference has put for 5 endeavors for us, and green finance is an important part of it. So the ABC has always attached great importance to green finance. In 2021, green finance has been included in the 3 top strategies of our 45-year plan. It's our top priority. And as at the end of 2023, the balance of the green credit is CNY 4.05 trillion, which is released by [indiscernible] financial regulation, increased by CNY 1.35 trillion to compile with the beginning of the year, striking a record high. So our characteristic is that we will always serve the agricultural areas and integrate agricultural development and the green development, and we have promoted many unique or feature products, for example, [indiscernible] fund, PV fund, Ocean Husbandry fund and beautiful village loan and so on. We have different kinds of loans provide specifically related to green finance. And as of 2023, our county level green loan balance exceeded CNY 1.6 trillion, accounted for more than 40% of the total green credit. And we have also made innovations in terms of the wealth management related to green finance to have -- and we also have diversified green investment in financing channels. And next, we will better leverage our positioning as a green bank and to improve our investment of green funds, and we will also help to support the green development of agriculture and rural areas to empower rural revitalization. And we will also integrate the concept with green development into all areas of ABC business philosophy. We will implement green offices, green outlets, implement green procurement and advocate green business travel. And we will also improve the quality of the information disclosure related to green finance, so as to build ourselves into a green brand. So since the beginning of this conference, we also have many questions flooding in on the Internet.

So how about we open the floor questions for the online audience. Maybe we can have one more question from the online venue. So I will read out the question. And recently, I watched a news saying that the balance of the inclusive finance of ABC has exceeded CNY 3.5 trillion, up by average annual growth rate in the past 5 years has reached 30%. So now you have a pretty large credit or loan issuance recently. So how can you ensure that the risk can be fully controlled. And whether inclusive financing profit is profitable? And how can you strike a balance between the pricing and the risks? So Mr. [indiscernible] will answer the question.

I will answer this question. Well, the Work Economic Conference has included the inclusive financing into the 5 endeavors. So it indicates importance of inclusive financing for the livelihood and for the national economy. So in the past several years, ABC has implemented the development strategy that includes the financing and strength and enhance our efforts in that. We have expanded the coverage of inclusive financing, improve the quality for that and increase the volume of inclusive financing. And by end of last year, according to PBOC, the loans related to inclusive financing exceeded CNY 3.5 trillion, an increase of about CNY 1 trillion. In terms of coverage, our clients of inclusive financing, the number of the SME clients with our inclusive financing reached 3.54 million households. So in terms of quality of our assets, I think it's still within the scope of regulatory requirements. And we are also improving our inclusive financing in accordance with requirements of the regulatory bodies. And based on the requirements of the SMEs and the private enterprises as well as the characteristics of their development and operation, we are constantly promoting our mechanism providing -- making it easier for the customers to apply for loans and they will be -- they will dare to borrow, and they are also willing to borrow money from us. And we will also increase our support services for loans, the credit loans, medium and long-term loans and so on to satisfy the needs of SMEs and the private enterprises. And we're also absolutely involved in construction, the new generation of the system, who will employ digital means to continuously improve the efficiency of the approval of the inclusive loans. And just now you -- in your question, you are wondering whether we can sustain this growth? So to answer this question, I want to tell you that the inclusive financial business is continuing -- is maintaining a good growth trend. And according to PBOC, the total loans of -- inclusive financial loans has exceeded CNY 4 trillion, an increase of CNY 400 billion. And our -- the number of inclusive small SME enterprises loans has already exceeded 4 million households, and we have a very large coverage of inclusive -- our inclusive financing have a really large coverage of customers, and we have strike a balance between the volume, price and the risks, in terms of the volume or the amount. Our China's economic development is of great potential vitality and resilience. We maintained a stable and positive development trend. And the country has attachable importance to inclusive financing, and we've created a very favorable environment for inclusive financing and our market analysis has exceeded -- has reached 180 million. And every year, we will have more than tens of millions of new entities being registered in the market. So we have new market players, new business scenarios and new financial demands flooding in, paving a solid foundation for the ABC to improve our inclusive financing. And in terms of the pricing, the interest rate of inclusive loan is consistent of the average [indiscernible] all the other loans in our bank. In 2023, our analyzed inclusive loan interest rates is 3.67%, decreased by 20 bps from the previous year. And relying on the strong support of the national policy as well as the transformation of the digital technologies, the cost for inclusive finance, the cost of capital, the operational cost and the risk cost for inclusive finance has been -- can be better controlled. And we are solving the problem of the SMEs. We can reduce the price of the money they get. And from the perspective the risks, and this year on, we have been very actively deploying technologies, making innovation in terms of risk control methods as well as a model of risk control. We are providing precision services and precision risk control so as to effectively solve the asymmetrical information distribution between us and our customers. And the quality of assets of our inclusive finance is also satisfying.

So in this conference, we have exchanged a lot due to time limits. We are open for one more question, and this question comes from the Beijing venue. In the middle, the lady in the first row.

I'm [indiscernible] with Shanghai Securities News. So I want to know about the current demands of the private economy loans? And how can you increase your credit support for the private economy this year?

Thank you for your question. And your question could be divided in two parts. And the first part is related to the loan demand or credit demand for the private economy. And if we look at 2023, I can give you some numbers. If we deduct the investment in the real estate development, the speed rate of the private investment is 9.2%. And the private investment growth rate in manufacturing infrastructure was 9.4% and 14.2%, respectively, and higher than other industries. So the government report this year has also put forward that we need to provide a level playing field for all the industries. So the private economy is -- the private economy will be more confident and expectation will also be optimistic. And ABC will relatively -- will resolutely implement the strategies laid out by the central committee -- central government. And in 2023, the balance of loans to the private enterprises was CNY 5.5 trillion, an increase of CNY 1.1 trillion, up by 25.6%, higher than the average level of various other loans according to the state administration financial supervision, and the interest rate of the newly issued loans to the private enterprises. In terms of this, the interest rate is 3.06%, down by 31 bps from the beginning of the year. If we exclude all the note financing, the figure would be 3.54%, down by 1 bp. And the second part of your question is, how can we increase our efforts to the private economy? In the first two months of this year, the newly issued loans to the private enterprises was close to CNY 300 billion and the growth rate is higher than the average -- the industry average. And there's one line from the work report this year saying that, we need to improve -- we need to increase the proportion of loans to private enterprises, which is definitely what we are doing now. And the growth rate of private enterprises -- the loans of the private enterprises got from our bank is higher than the average of the industry. So how can we support them? First of all, we will intensify our allocation of resources for private enterprises. And this year, we will separately list our loan operation plan for private enterprises in our annual business plan so as to guarantee the fund provided for the private enterprises and to make sure that the loans -- the share of the loans for the private enterprises will continue to increase. Second, we need to highlight the focus of our services. We support -- we will support our private enterprises to deepen their -- to identify to launch more local products -- products with local features and to promote -- encourage them to improve their new productive forces and to go green and go low carbon. And we will also provide financial support for those private enterprises to participate in the implementation of major products and technological transformation. And we also need to make innovation in terms of product and services, especially providing greater services for industrial clusters and feature industrial parks and niche market. We will provide better greater support for SMEs and optimize our loan portfolio, loan products matrix, both online and offline. We will also facilitate the convenience of loan issuance for private enterprises. And we'll also continue to improve our long-term mechanism for -- to encourage those private enterprises to be willing to apply for loans from us. And we will also have the due diligence extension for tolerance mechanism and to boost the enthusiasm of private enterprises to get loans from the ABC. Thank you again for this question. And also thank you again for coming. And here, I would like to avail myself this opportunity to express my gratitude to all of you. And today, I know Hong Kong will have a holiday. So I will not take up too much time of you. So that's the end for this announcement. If you have further questions, please feel free to contact our investment team or our News team. Thank you.