Bank of China Limited (3988) Earnings Call Transcript & Summary

Dear friends from the media, good afternoon. Welcome to Bank of China 2021 Interim Announcement. My name is Mei Feiqi, the Secretary of BOC. Today, I, myself, and spokesperson of Bank of China and the General Manager of President Office will cohost this meeting. First of all, I would like to introduce the leaders to you. They are Vice Chairman of BOC, President [indiscernible]; Executive Director, EVP, Mr. Wang Wei; Executive Director, EVP, Mr. Lin Jingzhen; EVP, Mr. [indiscernible]; EVP, Mr. [indiscernible]; EVP, Mr. [indiscernible]; Chief Information Officer, Mr. Liu Qiuwan; and Chief Risk Officer, Mr. Jiandong Liu. Because of the pandemic control concerns, this interim announcement is convened via video conference. We will first give the floor to Mr. Liu, President of the bank, to introduce you 2021 interim results of the bank. Then we will have questions and answers. For a long period of time, dear friends from the media, investors and analysts have paid continuous attention, support to the bank. We're deeply impressed by your support. And we have many investors, customers looking at our press conference online. Thank you for your efforts, and thank you for your attention to BOC. Now I want to give the floor to Mr. Liu, President of the bank, to introduce you about the interim results of the bank and the key works progress and also our plan for the future.

Thank you, Mr. Mei. Dear investors, analysts, and friends from the media, good afternoon. Since the pandemic started, we have convened our announcement -- result announcement in such a video conference way for many times. We previously hoped to have on-site press release, however, many things changed our plan. Because of the pandemic situation, we can only convene our press release in such an online way. In March, we have made announcement -- made announcement about annual results. I have introduced to all of you that we are at the starting year of the 14th Five-Year Plan and the Bank of China started a new phase of development, and we have started a new journey to establish a global level, first-level modernized banking group. Half a year has elapsed, I'm very confident to introduce you the interim result of Bank of China. We have made steady progress on many fronts and we have enjoyed high-quality growth. First of all, the data that we have released today shows that we have a steady growth of fiscal results. Realized operating revenue CNY 302.9 billion, a year-on-year increase of 5.53%. After profit -- after-tax profit and profit attributable to shareholders increased by 9.96% and 11.79%, respectively. Operating efficiency increased continuously. ROE increased 0.87 percentage points, reached 11.97%. Cost-income ratio was 24.06%, a reduction of 2.67 percentage points. [indiscernible] and liability scale increased steadily. Total assets exceeded CNY 26 trillion, an increase of 7.85%. Loan amount grew by 8.44%. And also the amount of loan to total asset reached 57.18%, an increase of 0.43 percentage points. Domestic RMB loan enjoyed faster growth, long-term and midterm loans percentage increased. Total liability increased by 8.31%. And domestic and foreign ForEx deposit increased. And we have made a record deposit growth. Our risk control efficiency have increased. Nonperforming loans, special loan -- special [indiscernible] and loan amount and ratio enjoyed double reduction. And the provision coverage ratio increased 6.42 percentage points to 184.26%. and we have generated capital internally, and we have supplement our capital externally. Capital adequacy ratio increased. And also, Bank of China's market influence further increased. We have won many rewards. And also the external credit rating of Bank of China remain among the highest within Chinese banks. We also achieved good results in other aspects. First, we have supported real economy. Domestic RMB loans increased by CNY 863.2 billion, a record high. The investment in local government bond, CNY 246.4 billion. And our market share increased. Inclusive loans grew by 35.8% and we have achieved to -- increase two-control requirements for the regulator. Strategic new emerging industry, green financing also increased. We have increased our lending to manufacturing -- advanced manufacturing. Long-term and midterm manufacturing loan increased by 18.4%. And we also got deeply involved in reform and opening up. International settlement grew by 45.24% and ranked #1 in the market. Cross-border RMB clearing amount increased by 35.4%, #1 among the world. And we also helped customer to issue bond and we are participating in the Belt and Road project. We facilitated the development of offshore RMB bond market. Second, we focus on One Body Two Wings strategy. In the past half year, our domestic commercial banks are developing in a good manner. Well, domestic and foreign currency deposit increased. Well, One Body, this is our cornerstone. This is further consolidated. And for overseas, deposit and lending, they increased by 13.86%, 11.95% year-on-year. And we further enhanced intensive management, we have one policy for each bank in overseas regions. And we further optimized our service networks and online channels. We further enhanced our management of integrated operations. We have set up integrated operation continuation office in 7 branches to enhance customer referral and resources sharing. Secondly, we focused on development of key projects and the key businesses, person or banking contribution and the market competitiveness increased. The number of effective individual customer reached 321 million accounts. And also customer financial assets exceeded CNY 11 trillion. While domestic individual account operating revenue, noninterest income contribution reached 48.78%, 56.82%, respectively. And the number of medium- to high-end customer increased by [indiscernible]. Well, consumer finance further increased digitalization and other scenarios. Credit card installment grew by a good margin. And corporate accounts also enjoyed enhanced market facilities. And the number of corporate accounts increased by 19.89%. And the total financial covered assets increased by 6.58% year-on-year. And also deposit from government agencies increased. Pressure further developed. We also update our close financing. We also promoted digital financing. Fourthly, we further promoted digitalization of the bank. We focus on 2 projects. One is enterprise level architecture establishment, one is data governance. We focus on staff capability, that is enhancing customer experience, sharing product services and optimize business classes, enhance risk control and enabling ourselves at various levels. We are making progress in scenario development and technology enablement. In July we have issued the seventh version of mobile banking. And we further provide special services like more scenarios in life, wealth management and Winter Olympics games. Fifthly, for the enhanced risk management. We further strengthened our comprehensive risk management system and also the digitalization in risk management. In the first half, we followed the 14th Five-Year Plan of the country and of the bank. We developed 8 major finance projects, optimized the credit structure and strengthened our credit approval management. We focus on risk control in key areas, optimize our NPL resolution and asset quality continuously consolidified. And for various risk indicators, we have satisfied the regulatory requirements by continuous improvement of liquidity risk warning systems and stress testing. Since the beginning of last year, we began to focus on top design and grassroots suggestions. We have started the combining our 14th Five-Year Plan, and we pay attention to our alignment with the national strategy after several rounds of discussion revision, this plan has been printed out to guiding the group. We will further use our 14th Five-Year Plan as a blueprint to guide the development of commercial bank and guide our globalization and also integration to turn ourselves into a global first-level modern banking group with activity, agility and making breakthrough in key areas. In the next steps, we will make breakthrough in the following areas. One is promoting One Body Two Wings. Second is to follow the rules of economic and social development and make economic transition and promote each major financial area. Thirdly, promoting digitalization. Fourthly is to coordinate development and security focused on risk management. Fifthly, we will seek growth among transition and among changes, and we will build a better culture. Bank of China will make steady ahead and try to implement the 14th Five-Year Plan and try to connect the world and creating benefits for the society, turn ourselves into first-level modern bank and to make our contribution to the rejuvenization of Chinese nation.

Thank you, Dr. Liu for your speech. Now we have question-and-answer. We first [indiscernible] question, give the floor to investors and analysts. [Operator Instructions]

Now we got connected with the first question. We have the first question to be asked.

From Morgan Stanley. My name is [ Ji ]. Now people pay more attention to credit growth and credit breakdown. In the first half of the year, Bank of China enjoyed rather fast credit growth to support the economic recovery. Can the management introduce us corporate lending growth and also the lending breakdown. And what is your plan for the next half of the year? Recently, we are seeing Central Bank convening meetings with commercial banks about the next year's plan so -- o the next half year's plan. So I want to know your plan.

Thank you for your question. Credit business have attracted attention from the market and the credit business is an important business for Bank of China. So the floor is given to Mr. Lin, EVP of the bank.

Thanks to our friends from Morgan Stanley for your question. Yes, as we all know, for banks, we play a very important role in terms of promoting social economic developments and in terms of improving people's livelihood. For our bank, BOC, we have been catching up with the pace of the time. We have been serving the national strategies. We have been supporting the tangible economic development. In the first half of this year, BOC has implemented the government policies for 6 protections and the 6 abilities. We have lent more to inclusive finance, green finance, strategic new industries, manufacturing, et cetera, according to the coordinated green innovative principles, especially for key areas and for key industries, they have got more lending from the BOC. By the end of June, the domestic corporate loans balance was CNY 7.1 trillion, up by CNY 631 billion as compared with the end of last year, all representing an increase rate of 9.72%, hitting the record high. In terms of the recipients, frankly, our lending has been going to inclusive finance, green finance, strategic new industries and manufacturing. Per the regulators' requirements, we launched CNY 780 billion, up by CNY 200 billion, to those key industries. For strategic new industries, the lending were CNY 407 billion, up by CNY 180 billion compared with the end of last year, representing increased rates of 8.35%. And for manufacturing, the lending increased by 18.4% to 25%. Private sector loans, up by CNY 138 billion or CNY 7.9 billion -- 7.9%. The increased rates often have hit record. In terms of geographic averages, we have supported the key geographic development programs by the end of June. To the Yangtze River Delta, we lent CNY 196 billion; to the Beijing-Tianjin and Hebei, CNY 68 billion; to the Greater Bay, CNY 105 billion. And the increase of lending to these key areas was 10.3%, much higher than the average. And for the branches in 56 key cities, the lending was CNY 4.8 trillion. In the first second half of this year, BOC will continue to implement the government's requirements and we will follow the 14th Five-Year Plan. We will maintain the reasonable growth rate of corporate lending, that's in line with the government's policies for new development landscape and to circulations. We will also lend more to foreign trade so that foreign trade companies can have more orders to control risks, especially to the SMEs in the foreign trade, we will give them more lending support and we will also work with insurance and other industries. So for export, financing, it will have a greater coverage. And we will also have more online and scenario-based services. Second, we will also give more lending to the key projects in key areas according to the 14th Five-Year Plan, [indiscernible] and the 2 major projects. There are also local governments' major infrastructure projects in terms of 5G and ultra-high voltage power transmission, et cetera. And for the new strategic industries such as biomedicine, new materials, et cetera, they will also get more of our support. For aviation aircraft, the rate wage and other infrastructure projects, they will also gain more of our support. Transport and communication is very important, and we also serve the national interest in the area of energy and green development. For the aid to financial service areas, we will develop new business models. We will have a high-quality growth of the corporate lending. And we will also make use of our fintechs and our comprehensive services so that we can provide all necessary services to companies throughout their life cycle. We will accelerate the green financing to be an important player of eco civilization. For the green transport, clean energy, energy conservation and efficiency and industrial value and they will become our priorities, we will have more integration with these strategic industries. And also, we will further promote our overseas financial services development in terms of structured financing, international settlements and trade financing. We will play a bigger role in terms of financial innovation along the One Belt, One Road initiative. Thank you.

Thank you, our President.

[indiscernible]. I have a question about the wealth management. It's a very broad concept. Many analysts are very interested. Our people also have a higher demand and expectation of wealth management. The country also has reiterated the national strategy of a common prospect. I believe major banks like BOC have an important role to play and banks also I think are in a slight transition. Many banks wealth management business very seriously. For BOC, BOC, I think, has a strong foundation in terms of personal finance and wealth management. In recent years, you also have carried out a lot of reforms, arousing a lot of attention form the market, so from the personal finance and in particular the wealth management business, I would like to know the progress so far this year. And I also want to know your future target strategies, et cetera. This is my question.

Thank you, Mr. [ Ma ]. Yes, you are right. For personal finance, especially wealth management, it's very important because the Communist Party's principle is common prosperity. Common prosperity for all people is our national strategy. I give the floor to VP [ Chen ].

Yes. I would like to thank the friends from CITIC Construction Investment Company. BOC has put clients in the first place and has implemented the national strategy of common prosperity. By value creation, our reforms in personal finance have unleashed the department's potentials and have realized high-quality developments of wealth management. First, the returns are significantly increased for the bank. Our revenues from wealth management increased by 25% in the first half of this year, the fastest among the big 4. For our clients, the returns from these investments also outperformed the market. In the past 1 year, the equity funds product and the portfolios had a return rate of 38.8%, much higher than the industry average and also the highest among the big 4. Thus our wealth management products have created value for our clients. Second, the scale is increasing very fast for the whole group. The financial assets with us from the personal clients are more than CNY 11 trillion. The growth rates are the highest among the big 4. For our private banking clients, the financial assets with us are more than CNY 2 trillion. And the growth rate of the number of medium to high clients and the amount of financial assets also are the highest in the past 3 years. Second, optimized structure. For the asset structure, we are the only bank among the big 4 to have a positive growth of the investment financial assets. The investment asset proportion increased by 0.7 percentage points as compared with the end of last year. And there is also optimization of the structure of our clients. The growth rate of wealth management clients is higher by 5 percentage points. And fourthly, digitalization. We have released the version 7.0 of the mobile phone banking. We have upgraded the wealth and fund management channels. We have the exclusive zone for private banking. In the first half of this year, the mobile phone banking, investment and wealth management clients in terms of their numbers increased by 10.81%. For the BOC smart investments service, it has a 2.0 version. It has sold products worth of CNY 29.6 billion, with the total number of clients more than 250,000. The return rates is 41.68%, up -- higher, 27.4 percentage than [indiscernible] the industry average. We'll continue to implement the 14th Five-Year Plan to serve national increase tangible economy and the people's livelihood by the digitalization, asset light and professional strategies. We will also push forward the development of the wealth management cross-border financing and consumer financing. And so according to the requirements of the tenth meeting of the Central Financial and Economic Committee, we will continue to put clients in the first place by creating more value and by having win-win institution with the bank. We will promote development of inclusive financing to provide more wealth management services in the primary distribution, secondary distribution and third distribution. We will make use of FinTech so that wealth management services are available to all households. We're also developing more scenarios and settings as well as to better integrate financial and nonfinancial services. We have the 6 strategies, switching first from the sellers' market through the buyer's market, we will have our open wealth management platform to improve the product competitiveness and the client's return rates. We also switch from single product to product portfolios. So that with the BOC smart investments, we will be able to provide differentiated asset allocation services to different clients. We will also switch from the trading driving through alternative service driving. That's to say we are the advisers and the consultants for our long-term clients. And also, we will make our team more professional. We will increase their capability and capacity. Fifthly, we will switch from offline marketing to online marketing with our mobile phone banking. We will embed more settings and scenarios, channels in the mobile phone banking. The mobile phone banking can also provide smart marketing, smart risk management and other capabilities. And the sixth, also, we will make a full use of the BOC advantage as a global comprehensive banking. We have the Asia Pacific region private banking platform and BOC International. They can help provide technical, professional, comprehensive and global financial services network.

I have noticed that your financial statements, you have a good growth of the brokerage and the commission and the agency fees. But NIM is under stress. I want to have the elaboration and your next steps. Can you also give us the forward-looking statements about the future brokerage and commission agency fees and NIM?

Yes. Thank you. I could say that for our midterm financial statements, you are a careful reader, you also have pointed out the very important highlights. Now I'll give the floor to VP Wang, he will answer the question.

Yes, thank you. Thank you for your interest in BOC's brokerage and agency commissions and the fees. In the first half of this year, these fees were CNY 46.8 billion, up by 11.93% year on year. And they accounted for 15.46% of the group total operating revenues. The ratio was up by 0.88 percentage points, mainly for the domestic fund sales, wealth management, internet payments, custodian services and overseas brokerage fees, they are the highlights. They have contributed the most to our increase of brokerage and agency commissions and the fees. And we will enhance our innovation and try to meet the demands of the market as well as the demands of the consumers and their investment demands. And we will try to increase a steady growth of the fee-based revenue. And we also need to enhance our international settlement as well as the selling and buying of the foreign exchange. Those are the traditional business, and we will consolidate our strength. The second one is we need to grasp the opportunity of deepening the market reform and try to use this opportunity to address consumers' demands for investment. And we will just increase the quality of our products, for example, fund service, asset management and as well as custodial business. The third one is to address the digitalization of the economic development. Based on different scenario, we will have the multi measures to -- for the customer acquisition, customer retaining. And also, we will just enhance the increase of our online revenue generation. So that's about the fee income. And as for NIM-related business, in the first half, the NIM is 1.76%, 9 basis points lower than the previous year. The major reasons are as follows. First one is the interest rate is decreasing at the market level. The last year's LPR has been decreased and we also have the repricing of the loan which are matured. So all these are the negative factors influencing our views of the NIM because the use of those loans decreased. Therefore, the NIM is decreasing during the past few months. So we will just try to take some measures to reduce the impacts, and we will have a dynamic adjustment of our operation. And we will optimize our asset structure. For example, in terms of the pricing and volume, we will just increase those 2, and we will try to expand the low cost fundraising sources and try to control it, in particular control the cost at a reasonable level. And we will also try to satisfy the comprehensive financing demand and increase our mid- and long-term loan disbursement. And during the first half, you can see that we have 1.77% compared with the previous half. And during the second half, we expect more pressure for NIM increase, and we will prepare for that in a proactive manner. And we will try to balance the deposit volume as well as price, and we will increase the demand deposit proportion, try to control and develop the demand deposits in a quality manner. And also, we will try to increase the proportion of mid- and long-term loans and try to increase our capacity for pricing and then improve the NIM in the future half. Thank you.

Thank you. So let me add a few words. First of all, I'd like to answer your question. You raised a very good question. And your question is a praise for BOC's performance during the past 6 months. As you mentioned, we have good fee-based business performance, but NIM is not that satisfactory. Where do we get NIM? That is the difference between the deposit and the lending. So for the deposit market, we do not have a big difference in terms of the interest rate and the liability of BOC is not changing either. So NIM is under pressure is because we actually try to support the real economy. We actually sacrifice some of our profits to support the small and medium-sized enterprises. So next one. Next, we will, based on the EVP Wang's answer, we will try to have better performance in terms of the volume and pricing of the deposit and we will do a better job for NIM during the following half year. And also, we believe that with the recovery of Chinese economy, the economic fundamentals will be better. So we will improve our business, reflecting that better recovery. And we will also respond to our national strategy to support the real economy. But we believe that we will have better performance in terms of NIM. And as for fee-based business, we have the 11.9% increase, and we will do our best to increase the business of the fee-based business. And we also switch to the retail as well as the corporate lending. And I believe that in all these areas, the fee-based business will have better performance in particular. In terms of the transformation of the retail business, we have the mobile banking 7.0 launched a few days ago, a few weeks ago. And this is a very good news for BOC. This is a great means for BOC to acquire a customer. And we can also, through this channel, provide better services and products. Of course, at the same time, BOC benefits because we have more fee collected through this business. And recently, for the private banking customers, we also have in-depth research and analysis. And also we have the more than 100,000 private banking customers and more than 20,000 private banking customers. They are high net worth customers. And we can see a higher percentage or proportion of the high net worth customers. We will dig deeper in terms of their potential in terms of how we can improve our service quality. And we believe that we will have more income generated from fee-based business. So we are very confident about the future. Thank you.

[Operator Instructions]

[indiscernible] My question is related with green financing this year. Our country proposed for carbon neutron carbon for our society. This is the assistant transformation and of course it will have new requirements for banking business and at the same time bring opportunities. I noticed that BOC has already integrated green financing as one of our 8 major areas for our 14th Five-Year Plan. So could you give us the introduction about the refinancing development during the first half? And also what are the concrete plan and targets for BOC's 14th Five-Year Plan?

Thank you very much. Green financing is a very hot topic all over the world. BOC prioritized green financing in our strategic development. And also this is a very macro question, so I would like to give the floor to President Liu to answer your question. Thank you.

Thank you for your question. And with the 2030 and 2060's carbon neutral and carbon peak target, so the peaking and neutral of carbon is not a concept there. It's already changed to action. BOC proposed green financing as our top priority and tried to support the development of green financing in BOC. Last time, I gave you the introduction of the 8 major area for BOC to develop in the future. First one is the science and technology. The second one is green financing. We also -- in the first half, we have a leader group for the development of green financing and the green FinTech. The Chairman is the group leader. And also, we have already uplifted the committee of green financing in terms of the administrative level. I myself as the President of BOC is the leader of this committee and to coordinate the group level green financing-related work. And also we know BOC is a commercial bank, and we also will play our strength of globalization and comprehensive business to try to promote green financing and try to build this one body to win structure. By the end of June, our balance of green finance has exceeded RMB 1 trillion and it grows further. In the first half, in order to implement the green bonds issuance, we have reviewed the credit structure of BOC in particular for the key branch. In terms of their plan for the green bond issuance, we have review and adjustments. During the first half, in terms of the issuance, we ranked #1 for the green bond issuance and we have issued RMB 50.9 billion and BOC underwriting, RMB 20.97 billion, ranking #1. And then our competitors. And also, we support 3 [ coach ] group to issue their carbon-neutral bonds. And we have also due currency. First, the public bond issuance for the transformation and is USD 1.8 billion and USD 500 million, respectively. And also, we work with the Kazakhstan's power group for the M&A. BOC's role is the consultant. And we also try to enhance our international cooperation. And this year, BOC has become TCFD's supporting bank. And we also participate in the China and Britain financial institution climate and environmental information release piloting group. We participate in those carbon peak and carbon neutral work actively. And we also try to implement the green investment principle. And we also work with ICMA in 2020 and 2021, the green bond issuance. And also we participate in the corporate social responsibility bond difference guideline formulation. So all these are our participation with the international partners. So with such participation and roles played, we improve the image of BOC in the international markets. So these are the BOC's globalization strengths. When we talk about One Body Two Wings, we have another strength, which is the comprehensive business strength. We try to improve the green products as well as our comprehensive service provision level. We work with the China Securities Index Corporation to issue this -- the 300 ESG. And we also, with the BOC Wealth Management, we have issued our first carbon-peak low carbon wealth management products. It's a series of products to support the low carbon development. And 37% of the leasing assets are green asset. And we also consider green financing as our strategic focus. We have our BOC's 14th Five-Year Plan, green financing strategy. During the 14th Five-Year Plan, we tried to implement this low-carbon idea, not only idea, but also action. We tried to build BOC a green financing-oriented bank and we tried to provide more services and products serving this green financing development. During the 14th Five-Year Plan, we plan to provide no less than RMB 1 trillion support for those green industries. And for the corporate lending, compared with 13th Five-Year Plan is going to be 5% more. We try to reach 10% of the support for the corporate loans to support this -- the green financing development. So by the end of this year, we are going to do more. And also, the second one is to try to control the lending business for brand business, brand lending-related business, meaning we will try to help those traditional industries for their transformation. And also, we will reduce the proportion of the coal mine as well as the coal power-related products. And we will try to help those -- the traditional enterprises to have their technological upgrading and as well as the clean use of the fossil fuels. And we try to reduce our customers, the per capita or per unit consumption and emission of carbon. The third one is that we will try to implement our state councils, the requirement. We will have proactive structure-based readjustment. At the same time, we try to avoid those -- the blind reduction of loans towards those traditional industries we try to balance. Number one, we try to support the green development. Number two, we protect the transformation of the traditional enterprises. So we have this inclusive and differentiation-based green finance transformation. The third one is to serve our emission trading market building. We will play our BOC's comprehensive business globalized business provision strength. We'll try to introduce in the business experience from advance countries and rely on the professional financial market and transaction banking services to help with the emission market development and also energy market system development. Fourthly, we try to create green financing product innovator on this product. We create our brand as a green BOC, develop new business models, the product models to issue green loans, green bonds and carbon neutralization bond as well. Fifthly, strengthen international cooperation and promote linkage and alignment on China and overseas green financing standards. The international organizations, such as TCFD and TIP will take active participation in the standard starting process. Sixthly, we will carry out environmental risk stress testing. Environmental risk will be included into the comprehensive risk management system. By the end of this year, we will carry out stress testing for the wind, for the thermal-powered plants. Seventh, we will manage our own carbon footprint, have a green office and a low-carbon operation, conserve electricity, paper and the usage of cars so as to enhance our carbon footprint management and explore carbon neutrality operation and timetables and action plans. We have engaged a special consultant to help us to achieve carbon neutrality in our own operations and also come up with green financing suggestions.

We'll have the final question for the first half of the strategic...

I'm from JPMorgan. My name is [ Lily ]. So my question is about asset quality. In 2021, we are seeing stable last domestic economic recovery and asset quality of the bank reduced pressure. However, the market do vary about certain industries, certain regions, asset quality. So we are seeing Bank of China performing well in NPL amount and the NPL ratio. So I want to know whether this trend can be continued. And also to be specific, some of the inclusive financing are giving deferred payment of principles and the dividend on the interest of expansion. And can this situation be sustained? And is the overseas assets under pressure?

Thank you for your question. You have asked very good questions into 3 layers. And before we have for this press conference, and we are trying to solicit questions from the investors. In this process, we get a lot of questions about asset quality. Now the floor is given to Mr. Liu, CRO of the bank.

Thank you, JPMorgan analyst, for your question. Asset quality have been a question of concern for many people. And in the first half of 2021, Bank of China asset quality maintained a stable progress. NPL amount and NPL ratio enjoyed a double growth. NPL amount was CNY 200.348 billion, a reduction of CNY 6.925 billion. NPL ratio 1.3%, a decrease of 0.16 percentage points. While special mentioned loan balance and overdue loan balance both reduced. And the gap between overdue loan and net performing loan continuously reduce. Asset quality were further improved. And also, we are stepping up efforts in NPL resolution in domestic institutions. By the end of June, overseas nonperforming loan amount and nonperforming loan ratio increased slightly. The only incurred NPL happened with real estate and aviation industries which are suffering continuously negative impact from the pandemic. Overall, the risk is within control. It is expected that in the latter half of the year, the asset quality of the bank will make progress steadily, but there are many uncertainties. For example, the outbreak of the pandemic repeatedly and also some geopolitical tensions. Some of the industries like really sector and also for government businesses and export businesses, in these areas we may face some uncertainties. We will try to prevent financial risk and serve the real economy at the same time. And we take active matters to improve our asset quality and try to provide a industry-wide guidance. We try to enhance potential risk management and control and also handle those risks where they are. Certainly, we strengthened our risk disposal efforts, try to strengthen NPL resolution and we expand collection efforts on noncontact basis. Firstly, we will have dynamic estimate of expected credit loss and make adequate provision so as to increase our risk tolerance capability. As you mentioned just now, in overseas markets, we are facing more pressure than domestic market, but generally the risk is within control. And the overseas markets are making steady progress. And we will further improve asset quality overseas region. And for different regions, we will adopt differentiated policy so as to increase our risk management. You also mentioned inclusive lending, which have deferred payment of principal and interest. We pay continuous attention to this sector. We support the resumption of work of small and micro companies. We actively support those companies who are in difficulties while we try to prevent financial risk at the same time. Starting from January 2020 until June 2021, in total, we have arranged extension of payment period for a total of RMB 117.854 billion of principal and the total deferred interest was 600 -- RMB 64 million, RMB 64 million. According to our initial understanding, for the deferred principal and interest loans, the total asset quality is good, stable and with risk within control. According to our latest estimate, in 2021, the amount of NPL coming from this deferred payment part will only contribute to less than 0.4 percentage points of our total NPL and which is within control. And we will make further efforts to do a better risk control. Thank you for your question.

Thank you. Due to the time limit, the investors and analysts part will finish now. For investors and analysts, if you have further questions and queries, you can contact our colleagues and the Investor Relations team of Bank of China. Now I'll give the floor to Mr. [indiscernible], Spokesperson of Bank of China and also he's the Manager General of President's Office.

Thank you, Mr. Mei. And we are saying the convening of our mid-term or interim result announcement in a timely manner. Thank you for your support and continuous attention to Bank of China. Now we give the floor to media friends to allow further questions. [Operator Instructions] Now we would like to invite in the first media friends. We have the first question.

I'm from [indiscernible]. This year, we are seeing the starting of the [ commenceation ] of the 14th Five-Year Plan of the country. As mentioned by President Liu just now, that Bank of China's 14th Five-Year Plan aligned with the national strategy, and you have specified One Body Two Wings strategy and focus on 8 major financial areas. Can you introduce us the vision of Bank of China in 14th Five-Year Plan? And how could you further promote the implementation of the 14th Five-Year Plan.

Thank you for your question. To further implement the national strategy and try to contribute more value to the country, Bank of China have drafted and issued the 14th Five-Year Plan of Bank of China Group. What you ask is a very comprehensive question, so that's why I want to give the floor to President Liu Jin.

Thank you for your question. 2021 are important historical delta at which we are seeing the celebration of 2 centennial ceremonies. And also, this is the starting year of the 14th Five-Year Plan. On this important historical juncture, Bank of China stick to the guidance of President Xi Jinping. And we take the national Five-Year Plan -- 14th Five-Year Plan as our prophet and we try to honor our mission as connecting the world and creating wellbeing to the society. And we have tried to speed up the establishment and the treatment of our strategy of One Body Two Wing with Commercial Bank as the main body and globalization and integrated operations as the Two Wings and try to turn ourselves into a global first level modern bank. Now from 3 aspects, I want to answer your question. First, Bank of China will assume the role to be a state-owned big bank, and we will develop new development patterns and try to speed up the establishment of One Body Two Wings, which is our strategy. We are trying to find the position of Bank of China in domestic and international dual circulation, and we try to find out our competitive advantage and try to connect domestic market with international market and try to give full play to our advantage as a globalized and integrated operating bank. And we try to connect domestic capital market with foreign markets. We emphasize One Body Two Wings. One Body means we will focus on being a large commercial bank. And we will follow the national strategy and implement the major decisions of the state council and channel our resources to key areas of the nation and the key links of the national economic development. The commercial bank will make a breakthrough development. And we also identified major areas for development, and we have identified the plans for transformation and development. For the Two Wings, I emphasized repeatedly that we should be determined and have a unanimous understanding about strengthening our globalization advantage and strengthen our advantage as a integrated operating bank. This is the requirements of our development and also the requirements of serving in the national economy. In the first half of the year, Bank of China in major international areas, in cross-border financial services, we are taking the lead in the market. Many customers who became a customer to Bank of China many years ago, who stick with Bank of China for many years and some of them try to keep a distance from Bank of China in the past years because of some of the reasons, now they are coming back. And many of the old customers are coming back to Bank of China to enjoy the globalized and international services of Bank of China. And we are having a larger client base now. In terms of globalization and internationalization, we will continue to consolidate our strength in conventional products. We will also do more in terms of product innovation, service innovation or even theory and methodology innovation. For example, at the beginning of this month, we had more than USD 900 million worth of bond issuing and also GBP 300 million of the bond issuing with floated interest rates. For the software bond, it was first created by us in 2019 for the British part Sony bond. We add Pioneer. And also, it's the world's first publicly raised guarantee-free debt issuing. Actually, these bond issuing projects are highly technical and complicated. I have aroused a lot of attention and interest from the market. Actually, the market participants are very enthusiastic. So I'm not only talking about the issuing of the new bonds with floating interest rates, and they actually are symbolic that we are innovating in an accelerated manner in terms of product and services domestically and internationally. Then second, I will talk about implementation of the 14th Five-Year Plan. In that manner, we should continue to serve the tangible economy. We have identified 8 financial service areas as our starting point and our platform for the financial supply side structural reforms. And for the key economic areas and the weak links of the national economy, we will do more. We will have already identified the 8 financial service area as our priorities. They are FinTech, green finance, inclusive finance, cross-border finance, consumer finance, wealth management, supply chain finance and accounting level finance. And also we have decided to do more than 20 projects to implement. Well, to serve the tangible economy, of course, we need to increase lending. We need to increase investments. But we can do more. Actually, it's about the NPL. You might be very interested in NPLs. My colleague already has answered a question about the trend of our NPLs in the second half of this year. The NPL ratio of 1.3%, I think, is relatively low. But for the NPL ratio, it's dynamic and it will change. That's to say sometimes it might go down or sometimes it might slightly pick up. But they will not represent any fundamental change for our NPLs or for the NPI management and credit asset management. We will continue to serve the tangible economy as a major bank. We have that responsibility. We have to work closely with local governments to help businesses overcome their debt difficulties. Some SOEs, some are private businesses. Some private businesses are big in terms of size. Maybe from the media report, you already know that some businesses have increasing debt. They are under stress. Major banks like BOC must work with the local government to resolve potential debt crisis or debt problems. Our Chairman sometimes will ask me, well, our NPL ratio is only 1.3% given our balance of loans of more than CNY 200 billion. Is it problematic? Our Chairperson sometimes is not reassured. At our board meeting, many directors also give us a kind reminders. They remind us that the domestic NPL risk and overseas NPL risk cannot be neglected. I want to share with you that as long as you are confident in the future of the Chinese economy, as long as you are confident in the advantages of socialism with the Chinese characteristics, you should be confident in BOC and in BOC's role in China's economic developments. Our NPL ratio volatility, the small volatility, does it represent a significant shift of our asset quality? And you should sense the advantages of our socialism with the Chinese characteristics, if 1 locality, 1 business, 1 SOE has debt crisis, our provincial governor, the mayor and officials at other levels will work their best to help those businesses in difficulties. We have that institutional advantages. So although some clients have difficulties, but the loans are not immediately labeled as NPL because we are still confident in the future prospects and we are confident in the country's capability for debt crisis resolution. Maybe sometimes the NPL ratio will be more than 1.3 percentage points, it will slightly pick up. But our fundamental asset quality, I think, is good and the situation is under control. There is also our efforts to support tangible economic developments. Third, BOC also catches with the pace of the time. And so we'll continue to accelerate digital China development. BOC itself must be comprehensively fully digitalized. That is the top priority in changing our business and the development model. Here, we will make use of the big data, cloud computing, AI, blockchain 5G and other technologies. We have the 2 major engineering projects. That's the enterprise architecture developments and the data governance. And we will make use of our One Body Two Wings strategy to improve the open financial ecosystem. And we have 5 projects for improving capabilities and the capacities in terms of improving customer experience, opening up and assuring products and services, integrating and optimizing business processes, smart and efficient risk management control and reducing the burden of our employees while empowering our employees. We will continue to serve the digital economic developers, digital society program, digital government program. Last time, I already made the introductions to you. I told you that we have the 2 major digital engineering projects. One is the enterprise level architecture development, the other is data governance. We believe with such capability and capacity building, you will see the good outcomes of our digital strategy. Ladies and gentlemen, for the 14th Five-Year Plan or for the 8 major financial service areas, they are the BOC strategy. But the execution of strategy of a plan is even more important. At the Board meeting, our directors also have reiterated the importance of execution and the implementation. For the 8 financial priority areas, I have communicated with the senior management teams, with the key employees. And so when we visit the local branches, we also listen to the reports and we discuss with our employees about how to really substantiate the 8 priority financial service area strategy. So we will continue to push the execution and implementation so that our strategy or our blueprint is not a piece of paper. It has tangible outcomes. The Board requires that on a quarterly and half year basis, the management must report to the Board about the progress of implementing the 14th Five-Year Plan. For the management, we are quite confident that the 14th Five-Year Plan will be well executed. So under it, so there are also 20 sub plans. So in that way, I'm confident that the BOC 14th Five-Year Plan and the 8 priority financial service strategy will be the guiding principles for the future developments of BOC.

For the long-term overall comprehensive development strategy of BOC, I think you already have got a good answer. If you have follow-up questions, you are welcome.

State Council meeting has emphasized that financial industry greatly supports the tangible economy, especially the SMEs and the micro businesses. In the first half of this year, the banking sector in China has increased more in terms of the inclusive lending so by the situation of BOC in the first half of this year and how will we continue to support SME and the micro businesses?

[indiscernible] is from China Securities Newspaper. Thank you for your question. Yes, BOC is a major state-owned bank. We have our responsibility in supporting the tangible economy and the SMEs as well as micro businesses. Our VP Wang Wei will answer the question.

Yes. I'd like to thank the journalist for your question. Yes, BOC has always been implementing the national strategies and policies for supporting SMEs and micro businesses in the tangible economy. We have taken multiple measures. First, increasing lending and the strengthening financial services to them. By the end of June this year, the inclusive financing lending by BOC balance was CNY 781.6 billion according to the regulator's definition, an increase of CNY 206 billion or an increase rate of 35.8%. The government's target for us was to increase such inclusive lending by 30%. And the recipients were 567,900, up by 99,500 clients. NPL ratio was at 0.61%, down by 0.22 percentage points in the first half of this year. For the new inclusive financing loans, the interest rate was 3.94%. And for the small other micro business, the comprehensive financing cost went down by 48 bps. Second, more fintechs and more digital services. For the online inclusive financing lending, in the first half of this year, the balance was CNY 52.3 billion, an increase of CNY 48.9 billion as compared with the end of last year. And also the products are more diversified. So we not only have the credit lending but also taxation-based lending and collateralized lending and other online lending products. Third, innovation to support major clients. For example, the specialized pioneering new and niche SMEs innovative technology enterprises. Therefore, we have worked with the MIIT so as to provide more than CNY 80 billion of lending to more than 10,000 SMEs. We also have Huawei inclusive lending plan for the benefit of a supply chain and industrial financing. We also have the platform-based small and micro enterprise supply chain financing. And fourthly, to improve the market reputation. And for the last spring festival, many people stayed where they are for the Spring Festival and didn't go back to their hometowns. The employees also stayed here. Therefore, we provided services to more than 7,500 SMEs and micro businesses for these micro and small businesses. They could have multiple withdrawals and revolving lending facilities for us. So that's our lending to the small and the micro businesses is more flexible. We also have worked with CNIPA, the national IP agencies so that we can provide financing to those small and micro businesses with a strong IP foundation. And in the next step, we will continue to push the development of inclusive financing for SMEs. And we will support the science and technological advancement and try to support those, the good quality base for these medium-sized enterprises. And we will also support those strategically prioritized area for SMEs. And we also will support those -- the innovation for the high-tech companies. And we will formulate a special action for the support of these more medium-sized enterprises. And we will also support those what we call the little giant and other small but strong enterprises, try to support those the good quality enterprises in terms of their, for example, IP, intellectual property-based financing as well as other online products. We will try to enrich our product portfolio. Next one is about the stabilizing and supporting of the normal operation of the SME and micro enterprises and try to give them more the supporting policies for the repayment. When they are in difficult situation, but still, they have potential for future development, we will just try to stick to the principle of continued support. We will not stop the lending. And also for those enterprises, we may have a book review at the annual level, and we will give them the bridge lending to try to help those -- the enterprises suffer from the pandemic in terms of their repayment. And also we will just implement the due diligence principle and try to build a long-term mechanism to support the small- and medium-sized enterprises. Thank you.

Okay. I'd like to add a few words. And after Mr. Wang's answer, I would like to -- always, I would like to say a few words. And talking about inclusive financing first, we try to implement the regulator's requirement. At the same time, in terms of the number of borrowers as well as the proportion of the credit loans were the first borrowers loans, BOC has performed well, meaning we performed really well in terms of inclusive financial service provision. But in today's Board meeting, our Chairman and the directors raised even higher requirement for the senior management of BOC, mentioning that we do not simply stick to numbers or we simply satisfy the requirement of regulators. That's not our achievements. We need to aim higher, and we need to be more stringent with -- in terms of our self-requirement. We need to optimize our inclusive financing system and in real manner to implement our inclusive finance to support real economy. And it's going to be a very important model or module for BOC to support the real economy in China. So based on these higher requirements, we have done a lot in the first half. We also have the cross-sector corporation within the group as well as the interaction with our customers, we try to optimize the mechanism as well as the system. In terms of the management system, we try to clarify or enrich the function of inclusive financing. And also based on the department of inclusive finance, we also have another division supporting the revitalization or rejuvenation of the country and the rural area in China. So we combine the strategy and the system-based and inclusive financing sector have a better basis for future development. So we will do more to support the BOC's inclusive financing development is going to be another famous brand for BOC in the future.

Okay. Thank you, EVP Wang Wei. Thank you, President Liu Jin for your comments. And also during the first half, BOC has implemented a series of measures to support inclusive finance development in BOC and just now President Liu Jin gave you a lot of examples. And BOC take real actions to support the real economy in China. And we also believe that in the second half and in the future, we will take more actions to develop our inclusive finance services, financial services and try to benefit more small- and medium-sized as well as the real economy. And after this release, and if you want to know more, you can contact us later we would like to give you more updated information in this respect. And now I'd like to give the floor to another journalist.

I'm from [ iPhone Net ]. My name is [indiscernible]. I'd like to ask about the overseas branch in terms of their operation. For the first half, we have a general recovery, yet we still suffer from the pandemic -- COVID-19 pandemic due to its rebound. And also, I'd like to know more about the operational situation of BOC services branch. What are the challenges? And what are the opportunities? And what does -- BOC will do? What will BOC do to address these challenges?

You'll see, as Mr. Liu also mentioned, we have some new strategy. We have the One Body Two Wings. We have the strength of a globalized business. You may also care a lot about the globalized business where our overseas branch business operations. So now I'd like to give the floor to Mr. [ Chen ] to answer your question.

Thank you for your question. For this year, the BOC pay high attention to the development. We try to improve our -- the global business and try to have the steady development. By the end of June, the overseas deposit and lending balance has increased 13.86% and 11.95%, respectively. And we are still have in -- ranking #1 in terms of the lending business, that is the -- we also have their classified management and differentiated management. We try to improve the development capacity for the overseas branch and as well as the coordination between the branches and the groups. And also in terms of our future development, BOC stick to the principle of extending China facing the world. And we also stick to our globalized business development. So as China's economy becomes stable and have very good trends, and we will use this opportunity as the new -- we will use this great situation as new opportunity. We will have a high-level going global strategy implementation. We have a lot of good great opportunities, belt and road initiatives, Greater Bay Area, freight trade zones as well as the due opening of the financial sector. So we can connect the domestic and overseas market properly. The second one is the new momentum. We have the bank digital transformation, the speed of the transformation is quicker. We also will use the 5G technology to boost the Internet-based service provision. And we also will grasp new opportunities. Now we are facing the low-carbon green development, carbon peak and carbon neutral has become a real target for us to realize. And we will have the transformation of our business operation. And these are also great opportunities. At the same time, we are facing a lot of challenges in terms of its future development. We have quite complicated international situation. We also suffer from the pandemic. We have this global economy in a fluctuated situation, it's bubbled. And we also have this huge fluctuation as well as the inflation expectations. So the financial market risk has been increased substantially. And also for those, the sovereign debt risk is also increasing. And we have lower NIM. And we have the pressure for the overseas BOC branch in terms of their profitability. We also have higher standards for the anti-money laundering and as well as the compliance for taxation, information, safety. And we also have more stringent standards for ESG. Facing all these complicated situation, higher regulator's requirement, BOC will always bear out the micro goal of build a society of human beings and will shoulder our responsibility as a leader in the international business. And we will support China's higher level open up. And we will stick to the stable operation and we will try to control the pandemic as well as the risk brought by the pandemic. And we will address the financial market risks. And we will also build our baseline, try to increase the risk compliance awareness. And we will take the proactive manner to manage our risk management. We will implement the ESG principles in terms of the development and design of our products. We also will try to actively develop the green financial products as well as the service provision model. So in the future, BOC will have both quality-based and quantity-based development to finish our transformation of the business. Thank you.

Thank you, Mr. [ Chen ]. So next question.

I'm from [ Financial World ], my name is [indiscernible]. I'm interested in the Beijing Winter Olympic game. After the Tokyo Olympic closed, the focus has switched to Beijing's Winter Olympics and Paralympics is going to be held in Beijing and the [indiscernible] area. And it will just increase the Beijing-Tianjin-Hebei coordinated development. So I'd like to ask you, how do you support the Winter Olympics? And what kind of role BOC can play? And how could we use this trend as a double Olympic bank?

Yes. Thank you. Thank you for your question. So this -- BOC is really proud to answer this question. BOC is the partner for Winter Olympics and the Paralympics, which means 5 months later we will hold our Winter Olympics. And the BOC has supported these great events for 4 years. And we will continue our support and also is the value of BOC. So we are proud as the partner of the Winter Olympics in 2022. So now I'd like to ask Mr. Wang to answer this question.

Thank you for your question. So now we have Beijing time for this Winter Olympics. In terms of the preparation of the Winter Olympic and the Paralympics, the preparation is processing well. And we are now in the last stage of welcoming these 2 great events. BOC will deploy it as well as try our best to support these 2 Olympics. The first one, we will use high standard financial service to support the Winter Olympics. This is BOC's commitment and also we consider this as our mission. During the Winter Olympics we will provide financial service to the domestic and overseas staff as well as the local and foreign currencies business support, online and offline financial service. And also in the venue of the Winter Olympics, we have set 5 outlets there and 6 self-service provision area. We can provide multi-language services, including English, French, German, et cetera. And also based on the requirement of the pandemic, we also provide the cash as well as the foreign cash provision for the service provision. And we try to make sure we have good support to support this, the Olympics. The second one is about the innovation-based financial service provision. We want to support this science- and technology-oriented Winter Olympics. We have some of the time-based credit cards and issuance. And we also have the digital RMB Winter Olympic piloting project. We also have those the visible chip wallets as well as the other digital currency-based, the ATMs. We also formulate the service provision plans for those overseas visitors as well as athletes from other countries for the tax reimbursement, et cetera. The third one is to using financial service to boost the ice- and the skate-based sports and in particular to support the high-quality development of these ice and snow-based sport. We have support to winter project. In Beijing, Beijing-Tianjin-Hebei and other 10 also promises cities and autonomous regions by the end of July 2021. In total, we have let out RMB 28.4 billion, and we try to help 300 million people to be involved in winter sports. In the last stage, we're trying to create a better platform for Winter Olympics games. And try to enable more people to understand our bank's brand as a sponsor in to Olympics games. And we try to encourage collaboration among Beijing-Tianjin-Hebei province, and try to improve our market share in this area and contribute more to the coordinated development of this region. Thank you for your question. That's the end of my answer.

Thank you, Mr. [indiscernible]. And to be involved in winter sports and come to Bank of China, let's expect safe and simple, excellent Olympics games. We'll have the final question to be asked due to time limit.

I'm from China Business Daily. My question is regarding global banking transformation and about FinTech. FinTech are becoming a major driver of business growth and with breakthrough for bank transformation. I want to ask management, what are the progress that has been made by Bank of China in the first half in terms of FinTech-enabled businesses. And what is your plan for the 14th Five-Year Plan period?

Thank you. Each of the press conference, we have media friends who asked questions about fintech development of Bank of China. The 14th Five-Year Plan of the group have a special chapter devoted to FinTech development within the group. I would like to give the floor to Mr. Liu Qiuwan, Chief Information Officer of the bank.

Thank you, friends from China Business Daily for your question. I want to media friends for your long-term attention to fintech development within Bank of China. Bank of China has willingly promoted the strategy of technology as the leader and innovation-driven development strategy. We have developed the focus on key projects which have blossomed. And we are seeing results from technology-enabled businesses and which has supported business growth in the first half of the year. And technology has enabled us to provide online services. We have a newly launched version 7.0 of our mobile phone app. And we add special zones for private banking, digital credit card. We also add terminal for senior clients. I mean, elderly clients. And we have the features of combining financial services with scenario, combining technology with care, combining smart services with professional knowledge. And our global transaction banking, iGTB, have strengthened our online services for corporate customers. And we have offered cross-border remittance supply chain financing and other services to these customers. And we have a full process online from collateral loan application to the final issuance of these loans. Second, we increased the smart and the intelligent services level of our bank. We have upgraded our smart investment application to versions 2.0, with yield exceeding pure performance. And for quantitative transactions, in the first half, we have launched domestic precious metal, RMB bond and spot foreign exchange transactions in other markets. We have automatic market making and treasury businesses are becoming smarter and more intelligent. And we have developed an application called smart antifraud machine learning model, which has won us Digital Banker's award. And also, we have increased our risk management level by using smart volt and smart cash trunk. And we also achieved mobile operations. We have developed the digital Bank of China app so as to increase the speed and granularity of the data services provided to senior management. And also, we have provided mobile office and internal management and operations support through mobile banking ecology. Fourthly, we strengthened our technical support for major project. Green oasis project have been fully implemented, and we have speed up the implementation of oasis project. And in the next step, we will further strengthen our digitalization process. We will focus on 3 major tasks: First, we will try to provide support to the business. And we will establish IT capacity and next-generation IT infrastructure, try to establish new infrastructure for the bank. Second, we will strengthen technology-enabled business development and try to serve front office, middle office better and try to enable the 8 major financial tasks of the bank. Certainly, we will be forward-looking in combining scenario with ecology development. And we will enhance our conversion capability and collaboration capability. We will promote cloud computing, big data artificial intelligence, blockchain and other mature technology to be used in a large scale. We will reshape our business models. Promoting the integration of 5G, Internet of Things with financial businesses. And we will also try to be the first mover in the next phase, fintech development. And we will pay continuous attention to 6G quantum computing and linkage between brain and computer, so as to seek more opportunities. In the first half of the year, we have set up a financial digitalization committee to coordinate the development of digitalization, fintech, data governance within the bank. We -- in the latter half of the year, we will further optimize our technology management and a focus on the integration between fintech and businesses. This is the starting year for the 14th Five-Year Plan. We will further implement the 14th Five-Year Plan of the group and enable the business with our fintech and start the new journey of FinTech.

Thank you, Mr. Liu Qiuwan, CIO of the bank. Because of time limit, that's the end of the Q&A session. And if you have further questions, please contact us, contact our friends and colleagues. I want to thank media friends, investors and analysts for participating into this result announcement. I also want to thank all the friends who are listening to us through online broadcasting. That's end of our interim result announcement and wish you happy life and healthy stay in Beijing.