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

Dear investors, analysts and friends from the media, good evening. Welcome to the Bank of China 2024 Annual Results Release Conference. I'm Joe Chengwen, Secretary of the Board of Directors of the Bank of China. Today's conference will be hosted by me and Ms. [indiscernible] spokesperson of our bank. This conference will be broadcast live simultaneously. And so I want to extend welcome to all the friends who are also joining us online. First of all, I'd like to introduce the leaders. We have with us Vice Chairman and President of Bank of China, Mr. Zhang Hui; Mr. Zhang Xiaodong, Vice President of our Bank; Mr. Cai Zhao , Vice President of BOC; and Vice President, Wu Jian; besides the Independent Director representative of our bank, Ms. Liu Xiaolei is also joining us online. Our annual results for 2024 were already announced today. The presentation can be downloaded from our official website or reviewed at the bottom of this live broadcast page. All financial figures presented today have been prepared using IFRS unless otherwise noted. Today, we have two parts, including the results release introduction and the Q&A session. First of all, let's give the floor to President Zhang Hui to introduce the annual results.

Dear investors, analysts and friends from media, good evening. A big welcome to all of you to our 2024 Annual Results Release Conference. And thank you so much for your long-term trust [ equity ] and support to the Bank of China. Now please allow me to briefly introduce you the operation of our bank in 2024 and the outlook in 2025. Afterwards, we would like to have a Q&A session together with our management with [indiscernible]. In 2024, Bank of China rigorously implemented the decision-making plan of CPC Central Committee, so implement political and people-oriented nature of financial work and give full play to our advantages globalization integration and seize opportunities domestically and overseas and promote an overall operation of work and achieve good results. We fully support high-quality economic and social development and steady growth of assets and liability. Total assets exceeded about RMB 35 trillion and the total liability reached RMB 32 trillion, up 8.11% and 8.20%, respectively, from the end of last year. Domestic RMB loans have achieved total growth optimized structure, balanced and reasonable asset portfolio and abundant liquidity. We actively promoted improvement quality and efficiency with steady increase in our financial benefits. Our operating income reached about RMB 632.8 billion, representing a year-on-year growth of 1.38%. After-tax profit amounted to about 252.7 billion, a year-on-year increase of 2.58%. NIM was about 1.4%, while the ROA was 0.75% and ROE was 9.5%, while cost-to-income ratio was 28.77%. All the key indicators were within the reasonable range. We continuously lay a very solid foundation for risk prevention and control and effectively improved comprehensive risk management. Asset quality remained stable, while NPL rate was about 1.25%, down by 0.002% and risk offsetting capability continued to improve with provisioning coverage ratio rising to 200.60% and the capital adequacy ratio reached 18.76%. We actively responded to the shareholders' demand for returns and the shareholders' earnings were considerable. In 2024 the bank implemented the interim dividend for the first time and the share prices of Asia and Asia rose by 55.24% and 42.97%, respectively, after regaining the rights. Specifically, over the past year, our bank has focused on our main business and made solid progress in high-quality development in serving the construction of financial strongly -- strong financial country and made steady progress in all aspects. Firstly, the ability of financial services continue to grow and the quality of efficiency of services to the real economy improved. We support the development of new productive forces in line with local conditions and do a good job in five priorities. We provided about RMB 1.91 trillion in credit support to about 102,900 technology-based enterprises. During the 14th 5-year plan period, comprehensive services totaled over RMB 710 billion, serving over [ 70% ] Chinese unicorn companies and the balance of domestic green credit grew by 31.03%. Investment underwriting scale of green bonds remained the market leader and a number of innovative green financial products were launched the balance of inclusive loans and the number of households for small and micro enterprise increased by 29.63% and 39.62%, serving more than 40,000 credit customers. And for national and provincial specialized innovative small and medium-sized enter providing a total loan of more than RMB 600 billion. And the bank has provided individual pension fund account service to over 10 million customers -- ranking second and third in the market in terms of the number of individual accounts of corporate annuities and pension trust funds, respectively, with a 23.44% increase. And secondly, the comprehensive competitiveness of the market continues to increase and the quality of our high-quality development is even better. Our balance of domestic RMB companies exceed RMB 12 trillion with known for strategic emerging industries, manufacturing and private enterprise increasing by 26.31%, 16.6% and 18.72%. We supported our customers in direct financing. Our bond sales volume was among the highest in the interbank bond market. Cooperation among financial institutions have been further deepened with a number of cross-border RMB interbank transaction leading among our peers. International settlement volume of domestic institutions and crossover RMB settlement volume increased by 20.51%,26.27%. Cross-border e-commerce settlement volume increased by 39.82%. Market share of personal housing loans and non-housing consumer loans have steadily increased and total number of individual customers was nearly 540 million with a number of high-end customers and financial assets growing steadily. The financial market has consolidated its business advantage and has initially participated in market innovation such as RMB to MOP exchange in the China Foreign Exchange Trading Center and the RMB foreign exchange trading in the free trade loan. The size of assets under custody exceeded RMB 20 trillion and the growth in the size of key products such as bank wealth management custody and insurance fund custody ranked first among main peers. The integrated operations segment further optimized cooperation mechanism between the banking and corporate departments with over 400 linkage projects, providing integrated finance for customers of nearly RMB 150 billion. We have also consolidated and distinctive advantages and achieved remarkable results in opening up to the world with a high level of services. We have continuously improved global layout and covered 64 countries and regions. The mechanism for the regionalization and intensification of overseas institutions has been continuously improved. BOC HK's leading role in Southeast Asian institution under its jurisdiction has continuously strengthened. BOC Europe's regional management capability has been continuously strengthened and the coordination leakage mechanism among Latin American, South Asia and South Pacific region institutions has seen steady progress. Value-creating roles of globalization has been a great highlight and the pretax profit of foreign income ratio banks increased by 40.75% year-on-year in 2024 and the contribution to the group has also increased. The key business continued to develop with more than 1,200 corporate credit projects followed up in the countries that have jointly BRI initiative and credit support of more than USD 372 billion. Fourth, comprehensive risk management was continuously improved and the foundation for safe and sound develop continuously laid. We further promote construction of comprehensive risk management system, further improved the closed-loop management mechanism for risk assessment, investigation and emergency response to sound and risk the effectiveness evaluation system for comprehensive risk management steadily push forward the implementation of the new capital regulation, one line one policy formulated risk strategies of various overseas institutions to continuous to improve the comprehensive risk management capabilities. We have also effectively identified the risk characteristics of our off-balance sheet business and strengthened on-balance sheet and off-balance sheet integrated risk. And also we have further increased the digital finance and top level [indiscernible] and strengthened the indicators of the digital finance. And we have also improved the full location and three centers landscape and also increased the landscapes that's covering the world and also to enhance our service capability to serve the customers. And we have witnessed about 12.57% of domestic active users. And also for the newly integrated remote verification and cash operation and also the mobile office as well as the enterprise level robot modules cover about 3,000 modules, and we have also been able to enable the businesses with technology. While in 2025, the bank will take -- Xi Jinping [indiscernible] socialism with Chinese characteristics for new era as a guide and serve the real economy as its fundamental purposes and take risk prevention and control as our everlasting thing and take consolidating, expanding the advantage globalization and enhancing our global distribution as the main task adhere to its principle of seeking progress while maintaining stability and promoting stability with progress and uphold integrating innovation and establish first and the integrated system and cooperate with the system and firmly stick to the road of financial development with China -- Chinese characteristics and create a new situation of high-quality development in the construction of building a part of financial service country. First, focus on customer demand, optimize financial supply and build a diversified and professional financial service system. Corporate finance accelerated. The increase in quality helped to foster and expand new quality productivity and continuously improve the quality, efficiency of financial services to the real economy, focusing on MAU and AUM, personal finance continue to push forward the six key projects of payroll agency, third-party payment, wealth management, mobile banking, cross-border business and social security card and devoted all efforts to build six basic systems of management, users right and interest marketing operation and risk. The financial market business accelerated enrichment and improvement of the product system, strengthen of customers such as financial factor market, nonbank and insurance business. The second is that we are going to focus on the national strategy to give full play to the traditional advantage enhance ability of global distribution and international competitiveness, focus on key areas of the AI to improve the quality and effectiveness of Chinese funded going out and also the foreign funded bring in services, and we will consolidate and expand our traditional business leadership and the banking leadership in the FTZ and create cross-border RMB integration service support overseas institutional investors participating in China market. The bank will enhance distribution, regional management and market part of overseas institutions, consolidate the advantage of Hong Kong and Macau branch and enhance our capabilities of regional headquarters such as BOC Europe and promote overseas institutions, strengthen their advantage and create their own features. Thirdly, focus on financial security and strengthen extreme thinking and firmly hold the bottom line that no system risk will adhere to the principle of identification and rewarding and exposure and disposal and improve the comprehensive risk management capability with full coverage process and life cycle, firmly established bottom line thinking and extreme thinking, properly deal with external risks to prevent and resolve risks in key areas, strengthen internal control and compliance management. Fourthly, focus on strengthening the foundation, laying a solid foundation for development, improving the quality and efficiency of our science and technology operation. We will speed up the construction of integrated operation and maintaining system and disaster recovery and prepared and enhance our to support science and technology, establish digital transformation in financial system and increase digital support for key needs such as long tail customer operation and public chain marketing, strengthen the centralized management of the group's data and increase the use of data mining. The year 2025 will be the final year of the 14th 5-year plan. The bank will continue to focus on its main businesses, steady operation, risk prevention and control, continuously improve its operational efficiency and value creation ability and repay the trust and support of consumers, investors in all sectors of the society with better performance. Thank you.

Well, thank you, President Zhang, for your presentation. Now we will start our Q&A. To ensure everyone has the opportunity to ask. So please make sure you ask only one question at a time, and please identify yourself. So now for investor analysis. Now we have four questions. The gentleman in the front row, please.

I am [ Ma Kun ], the Chief Analyst of CITIC Investment Banking. My question is BOC still achieved good results under various external pressure challenges last year. So now facing the current low interest environment, would you like to -- the management to introduce BOC's operation and management thinking and major countermeasures in 2025.

Mr. Ma, for your question. And now please, President Zhang Hui will answer your question.

Thank you very much for your recognition and affirmation. Indeed, in the year 2024, we are now facing a low interest environment with the relevant pressures. And BOC did a very good job in the five articles in finance, fully supporting the high-quality development of economy and society, giving full play to our advantages and characteristics and effectively cross market opportunities and promote cost reduction and efficiency enhancement. And we have very, very satisfactory results in the year 2024. So now I would like to elaborate on the following four aspects in terms of our experience. First, we actively responded to the interest rate cut environment, and we adhere to the coordinated development of volume and price and strive to stabilize the basic net interest income. And actually, in 2024, our NIM was 1.4%, which is expected to be the same as that of the major peers. From a long-term perspective, during the recent round of interest rate downturns, the gap between the bank's NIM and its major peers has narrowed significantly and the gap narrowed from about 40 bps in 2018 to almost the same as that of the major peers at present. And the second is to focus on customers' financial needs, enhance their comprehensive service capabilities and expand net interest income sources. On the one hand, we actively implement the policy requirement and active reducing our waiving or waiving some of the service industries. And on the other hand, we will give full play to the advantages of overseas brokerage businesses and enhance the contribution overseas handling. And actually, the group's net handling fee income narrowing on a quarterly basis in the second half of 2024. And thirdly, we adhere to the principle of keeping expenditure within the limit of revenues, continue to strengthen refund management and steadily push forward cost reduction efficiency improvement and the cost income ratio for the whole year was 28.77%, which was kept at a very low level. And actually, we have our NPL rate, 1.25%, and down by 0.02 percentage points and the credit cost 0.58%, almost the same with last year, and we have the provision coverage ratio 200.60%, up by 8.94 percentage points. Now looking ahead into 2025, there will be both pressures and opportunities for our further business development. On the pressure side, under the background that the growth of the monetary and the credit has changed from supply constraint to demand constraint, the market competition will intensify and the continuous downward adjustment of LPR will have repricing impact on the asset return. In terms of opportunities, the supporting conditions and the basic trends for the long-term sound operation in domestic economy have not changed. And there is a broad base for demand upgrading, structural optimization and energy conversion. In the next stage, the bank will continue to give top priority to strengthening the management of the net interest margin in all work under the low interest environment, adhere to and carry forward the effective practices in the previous stage and reasonably control the change range of net interest margin. And actually, in terms of assets, the bank maintained a steady growth in asset size and continues to optimize the asset structure, and we will continue to give top priority to this. We will continue what we did before. We will reasonably control the change of NIM and to adapt to the market changes. We will change our policy structures and our operation models, and we will do a better job in this regard so that we can improve our operation quality. So we will do our best. In the next -- in the following aspects. First, in terms of assets, we will maintain a steady growth in our size and continuously optimize the asset structure. We will take various measures to further increase the proportion of high-yield assets such as loans and bonds, and we will seize the market opportunities and maintain a steady and healthy development of credit business. We will implement a more proactive fiscal policy, increase investment in government bonds and local bonds and moderately increase investment in credit bonds. We will seize the market opportunity of relatively high foreign interest rates, and reasonably increase the investment in foreign currency bonds and moderately lengthen the bond duration and effectively control the low-income assets such as bills and interbank assets. In terms of liabilities, secondly, efforts would be made to enhance the competitiveness of the deposit market and reduce the cost of comprehensive liabilities. We will optimize deposit expansion model. We will improve deposit pooling and core management mechanism focused on the key products such as payroll and fast payment and grab low-cost settlement funds and source funds. We will increase the allocation of resources and promote the continuous improvement of deposit base. Thirdly, on the customer side, we will continue to promote the transformation of the customer structure and consolidate the customer base. We will adhere to the principle of two households and two bases, and we will focus on improving customer base, raising the pricing level and promoting the transformation and development of this medium-sized credit customer base and increase the expansion of small and micro enterprises and individual customer bases. The fourth is in revenue. We will focus on key products and services and optimizing the revenue structure. We will focus on expanding key products, focus on customers' demand for multiple level financial services. We will consolidate the advantages of traditional business [indiscernible] Also, we will do a good job in pressure reduction and control of key handling fee expense items and strive to improve the leverage efficiency of relevant expenses to the businesses. We will also try to minimize our cost and also waste. In terms of regional restrategizing, we will continue to consolidate our strength, and we will increase our global competence and we'll continue our global strategies and deploy new business models and presence throughout the globe. And we'll step up our investment in developing regional businesses, and we will start to expand to different types of businesses in overseas markets. So with these measures, we will optimize our overall global business layout. At the same time, we will improve the global business layout. And according to regional features and resource endowments, we will expand the field of personal finance, financial markets, the financial institution, asset custody and enrich the business types. In six, in terms of risk, we will strengthen comprehensive risk management to ensure the asset quality is stable within a reasonable range. We will adhere to the principle of early identification, early warning, early exposure and early disposal to improve the comprehensive risk management capability with full coverage, full process and full life cycle and ensure the NPL ratio remains at a low level among major peers. We will increase incentives, constraints and resource allocation, maximize cash receipt and pay equal attention to quality and quantity to improve the effectiveness of nonperforming loans. We will adhere to four major principles. We will enhance our full coverage, full process and whole life cycle risk management capacity, making sure our NPL remains at a relatively lower level among peers. We will mobilize more resources and leverage those resources to increase our efficiency and effectiveness of daily operations. In terms of personnel development, we will try to maximize the potentials of our talent, making sure we have the best people, the right people to do the right things, and we will fully discharge our responsibilities and perform our duties, and we will invest more in our human resource development and particularly in those specialized areas. And we need to try to provide more developed training programs for our talents. So the year 2025 is the final year for the 45-year plan, and we are looking forward to doing a good job in all the above-mentioned areas and aspects, and we will continue to enhance and implement our ability to implement the policies and directions from central government so that we can provide better financial services and products to our customers and create more values to the society and making further contribution to our social development. Thank you.

Thank you, President Jianguang for your response. Now next question.

Well, thank you, President Zhang and other senior management. I am [ Yu Jing Chu ], Chief Analyst of Guangfa Securities Banking. Could you please elaborate on the management about BOC's credit extension strategy in 2025, especially what are the main growth opportunities for public credit extension?

Thank you. Mr. [indiscernible] and Vice President [indiscernible] will answer the question.

In 2025, BOC will continue to provide strong financial support to serve the real economy and improve the quality and effectiveness of credit business. On the whole, it's expected that the domestic RMB loan growth will remain steady and increase throughout the year. And among the new loans, corporate loans are still expected to dominate and efforts will be made to improve the contribution of consumer loans. We will step up credit support in key areas such as five major articles, two innovations, two innovations and private sectors to achieve a higher-than-average loan growth rate. We will support real estate companies in their reasonable financing needs increase the expansion of secondhand housing loans and achieve a positive growth in personal housing loans. We will seize the opportunity of the special action to boost consumption and realize the increase in non-housing consumption loans year-on-year. You're also concerned about the bank's public credit facilities. In this year's two sessions, the government work report card of GDP growth, about 5% was clearly proposed and a more active fiscal policy and a moderately loose monetary policy will be implemented. BOC will actively coordinate and line up with the above-mentioned policies and proposals. And we will stick to the principles for front-loading and station loading, and we will further increase credit extension around key areas and weak links in corporate loans and strive to achieve a year-on-year increase in domestic RMB corporate loans, especially in the following areas. First, in terms of the key areas on the basis of consolidating the last industries such as infrastructure and transportation, credit resources are inclined to new quality productive productivity and other related areas. And 2025 will be the end of the 14th 5-year plan, the completion of 102 major construction projects, the two innovations and two ones will be accelerated. And we will expect that demand potential for infrastructure-related investment will be released at an accelerated pace. The bank will strengthen our interface with local governments seize business opportunities in infrastructure. We will follow up on new government investment projects launched after the relief of local debt pressure, and we focus on the project reserves of 16 key branches with large scale and volume. At the same time, we will focus on technology and finance, strategic emerging industries and green development and actively serve the transformation and upgrading of traditional industries and development of expansion of emerging industries and prospective layout of further industries to help build a modern industrial system. Second, we will focus on key customers and manage customers in different levels and categories and increase the expansion of medium-sized customers. By the end of 2024, the number of medium-sized credit customers of the bank had nearly doubled in the past 2 years with loan growth rate higher than the average growth rate of the corporate loans and the contribution was outstanding. In 2025, BOC will give top priority to the transformation and development of the medium-sized credit customers by measures such as expansion and marketing of customers in peers such as technology and finance, key private enterprises in manufacturing, and we will increase the number of medium-sized credit customers. Third, in terms of key areas, we'll continue to enhance the comp capability and market competitiveness by focusing on the national strategic orientation and regional functional positioning in Beijing, Tianjin, Hebei, Yangtze River Delta, Guangdong, Hong Kong and Macau Greater Bay Area and other power source regions, we will focus on scientific and technological innovation, advance manufacturing and green industries to increase our support for regions with potential cultivation such as the central region, we will tap into structural opportunities such as infrastructure upgrading county transformation and development for regions such as West and the Northeast, we will grasp the industries with local according to local conditions. Thank you.

Thank you so much, Vice President, [indiscernible]. Today, many friends are joined from the A-shares investors are also attending the meeting online. The next question will be given to the online participants, please ask the conference assistant to process. Please identify yourself before you start asking questions.

I'm Xu Ran from Morgan Stanley. My question is related to the global out. And as we have noticed that in 2025, the global political and economic situation is more complicated and changing. Facing these challenges and opportunities, what are the new development directions and the measures of BOC.

Okay. Thank you so much. And let's give the floor to Vice President, Tai.

Thank you so much for your question, and thank you so much for your attention to the globalization of our bank. I would like to respond in the following three aspects. First, globalization has always been an important part of our operation. And also it's our differentiated advantage. compared with our peers. Over the past 1 year, in 2024, the financial efficiency of our overseas institutions grew steadily. The contribution to the group further enhanced. The distinctive advantage of globalization was fully reflected in our financial business dimension from the size of assets, the total overseas assets reached about USD 1.15 trillion, accounting for about 22.4%, an increase of 0.17% compared with the end of last year. In terms of financial returns, revenues, the overseas institutions has about $11.106 billion of pretax profit, contributing over 26.78% of to the group, up by 4.08% year-on-year. Faced with complicated external environment, BOC has always adhered to forward-looking analysis anticipation adjusted our business strategy in a timely manner and achieved continuous and stable operation and institutional and personnel safety. Secondly, we are with both opportunities and challenges in globalization. On the one hand, external challenges have deepened as global protectionism intensifies and a lot of uncertainties remain in geopolitics and the stability of the supply chain and the industrial chain have been greatly influenced. On the other hand, we have also some favorable factors in operating environment. We are confident in our future development because, firstly, the trend of going global by Chinese companies has intensified the demand for relevant financial services has increased. So definitely, we have a great prospects in growing our overseas business. Second, China's series of high-level opening up policy have continued to take effect, bringing and going global policies have been implemented in depth and BRI has been developed in depth. Internationalization of RMB has been steadily promoted. All these policies have provided real opportunity for our business development. Thirdly, we will always firmly serve as the vanguard of the new development pattern of double circulation and continue to expand our advantage in globalization for the next step. We will strengthen our overall planning, optimize resource allocation and further enrich the products and services of overseas institutions to enhance their competitiveness. In terms of key business efforts, we will consolidate and expand the advantage of traditional cross-border business and continue to expand in the field of settlement and the sales of foreign exchange, international settlement and trade financing. Secondly, we will build up advantages in emerging business areas, strengthen proactive services to new foreign trade formats such as cross-border e-commerce, overseas warehouse and intermediate goods trade and increase market share of all types of financial services. Thirdly, speed up the structural adjustment, optimize product deposit and loan debt and term structure, strengthen active distribution of personal finance, financial institutions, financial market assets custody and other business and reduce business and risk concentration. Fourthly, enhance RMB internationalization services and enrich the products and services RMB clearing business. In terms of key regions, we will continue to optimize our regional layout and accelerate development of key regions. First, we will continue to consolidate advantages of Hong Kong and Macau and promote transformation upgrading of BOC Hong Kong from the Citibank to a regional bank. Second, we will further promote business development with national financial centers enrich product lines such as interest rate and exchange rate and expand business of syndicate cross-border mergers and acquisitions, bond, cash management, et cetera. Thirdly, we will accelerate the cultivation of new growth posts for globalization in Central Asia, Latin America and the Middle East and expand the global financial services in an orderly manner. In terms of risk prevention and control, we'll continue to improve our ability to cope with changes in external environment and a solid job in risk prevention and control. Looking forward to 2025, the bank will continue to maintain a favorable environment for overseas interest rates to remain relatively high, maintain significant contribution of overseas business to the group. Thank you so much.

Thank you so much, Vice President [indiscernible]. Now let's invite the analysts on site to raise a question.

Thank you so much for this great opportunity. I'm [ Lin Ji ] from CICC. In 2024, the overall asset quality remained stable in 2025. So I'd like to ask the management to provide some specific information on the overdue and the new NPL, what are the major pressure on asset quality in 2025 and what proactive measures are in place, how to forecast the trend of preferential coverage and credit cost?

Thank you for your question. In 2024, China's economy was generally stable and has successfully hit our expected target of economic growth, creating favorable external condition for asset quality control. Meanwhile, the bank strengthened proactive management of credit risk, further improved refined control measures and improved quality of collection and disposal. Good results were achieved in asset quality control throughout the year. Previously, President Zhang Hui already introduced some indicators of asset quality. Specifically speaking, our new NPL remained generally stable. The number of NPL overseas decreased. Some key domestic areas were still under pressure in asset quality. On the corporate side, real estate industry is still the largest source of new NPLs, but the risk has been gradually decreased and the trend has been on a downward cycle. In terms of personal businesses, the new NPL for personal operational mortgage loans increased year-on-year, putting great pressure on asset quality affected by the increase in business risk. our bank focused loans and our -- also our overdue loans increased. Therefore, we have taken various measures and strengthened the control of asset quality. Second half of this year, our overdue increase has been restrained. Looking forward, the basic trend of our long-term economic growth will not change. However, external environment increasingly complicated. Effective demand is still insufficient. We believe that the pressure of risk control mainly comes from the following areas. The first one is the real estate market because it's still in the deep adjustment with the implementation of our national package of incremental policies, the real estate market is expected to gradually stop decreasing and return to stability. It is expected that the pressure on the quality of the development assets will continue the marginal improvement trend in 2024. Secondly, real estate markets continue to adjust and superimposed structural contradiction in employment and the quality of our assets such as personal mortgage and operation loans expected to remain under pressure. Third, the early U.S. dollar interest rate hike, the sluggish commercial real estate market in North America, Europe and other markets and spillover of internal housing risks have brought certain challenges to our overseas asset quality control. For the next step, we will continue to ordinate development and scaling for maintaining financial stability. Firstly, we will persist in solving problems in development, taking initiatives to integrate into the national development structure, focus on the five priorities in finance and optimize the financial supply structure. Secondly, strengthen full scope and full cycle active management of credit risk, enhance the coordinated provision control capabilities of the three lines of defense, accelerate transformation of intelligent risk management and strive to keep risk management ahead of the market said, we will continue to adhere to the early principles. On the one hand, we will strengthen forward-looking risk management and post loan management. While on the other hand, we will proactively address the challenges of NPL being diversified and small in size. We will strive to maximize cash collection, revitalize resources and free up space. Fourthly, continuously implement the new classification requirement actually reflect asset quality and fully assess the risks in key areas and make a full and prudent provision. All in all, we are confident to maintain the stability of our group's asset quality through 2025 and keep the credit cost within a reasonable range. Thank you.

Thank you so much Vice President, [indiscernible]. In the interest of time, that will be the end of the Q&A session from the investor analysts. If you have further questions and inquiries. Please contact our colleagues in the Investor Relations team after the meeting. Now I like to invite Ms. [indiscernible] spokesperson of the BOC to host the media reporters and Q&A session. Thank you.

Thank you, Mr. [indiscernible] . Good evening, esteemed colleagues and friends of the media. I'm [ Yu Ku ], spokesperson of BOC. Welcome to join us for today's press conference. Over the past year, you have chronic called our steady advancement and witnessed our commitment to integrity and innovation. We're grateful for your ongoing interest and support. As we say, having traveled the difficult rapid and we look forward to a smooth journey ahead, and we look forward to continuing our dialogue. Now the floor is open. The lady in the second row.

Thank you. I'm [indiscernible] from Security Times. The recent private enterprise symposium was emphasized that it is necessary to promote healthy and high-quality bottom for the private economy, and in last year, what can support BOC give to the private economy? And how will it exert its strength this year and what are its prospects?

Thank you for the questions. Now President Zhang Hui will respond to these questions.

Thank you for the questions. On February 17, President Xi Jinping gave a very important speech at the symposium of private enterprises, which fully reflected the commitment and priority placed by the central government for private enterprises and private economy and released a strong signal to promote healthy and high-quality private economy. And BOC has always adhered to the two unwavering principles and the concept of attaching great importance to it constantly and giving strong support is always treating it with sincerity without discrimination. And BOC's private enterprises exceeded RMB 4.42 trillion with a cumulative increase of 81% in the past 3 years, there were 1,686,800 private enterprises with a cumulative increase of 88% in the past 3 years. Specifically, based on the advantages of globalization and the integration of BOC, we pay attention to finding the focus of serving private enterprises and constantly improve the service quality and efficiency to private enterprises. First, we rely on the point access to global response mechanism. We made efforts to improve the facilitation of cross-border accounts and settlement services and open up first stop for private enterprises to go overseas, and we focus on improving the professionalism of cross-border financing and building a powerhouse for private enterprises to go globally. And we actively provide cross-border matching and docking services to provide more business cooperation opportunities for private enterprises. Second, we rely on the advantage of integrated operation. We support private enterprise open bond financing channels. We have continues to strengthen the industry research and deepen the field of science and technology segmentation, providing a total credit of RMB 150 million for the insurance and technology and [indiscernible] technology and the credit coverage of Hangzhou Six Little Dragons ranks first among all financial institutions. So ever since the 2.17 Private Enterprise Symposium, or the symposium on February 17. BOC has conducted a marketing research, invited customers to have a symposium and organize the compilation of excellent service cases for the 10 tech customers of the symposium and the top 500 private enterprises had a press conference during that event. The next step, BOC will fully implement the spirit of private enterprise symposium focused on the policy requirements of the CPC Central Committee, the State Council and the regulatory authorities, and we will grasp the business development needs of the private economy in the new era, and in the new situation, we will support the private economy to make good use of two markets and two resources by improving the multilevel financial supply system and do a good job in the four-part service of addition, substruction, multiplication and division for the private economy. First, we will increase financial support for private enterprises to participate in the joint construction of BRI, enhance the professionalism cross-border financing, international settlement and overseas investment services. We will help private enterprises going global strategy and we'll participate the major landmark projects in small but beautiful livelihood projects. And in 2025, we plan to support private enterprise projects with an international financing scale of over USD 5 billion. And the second is to reduce the financing cost of private enterprises, improve the global multicurrency exchange rate hedging scheme, tailor the global cash management service scheme, implement policies such as assistance and support fee reduction and exemption to help enterprises control risks and improve the intention operation level of funds. And the third is to release the technology and finance multiplier effect, promote the science and technology innovation equal partnership program, upgrade technology and finance credit services and create digital innovation products such as BOC science and technology innovation intelligence system to realize online mass access and demand docking of private enterprise customers. And the fourth is to break the pain point of financial services, put an end to unfair terms in service processes such as risk preference, credit policy and credit approval and comprehensively improve the quality and efficiency of all around financial services for entrepreneurs and enterprise employees and not only be a friend who meet the urgent needs of our partners, we will continue to strengthen our capacity in providing better services.

Now, next question, please. The gentleman in the first row.

I'm from [indiscernible]. My question is about digital transformation. At present, the accelerated innovation of the new generation of artificial intelligence technology in the world and explosive development of open source models such as DeepSeek have brought new opportunities and challenges to banking industry. So how can BOC speed up your improvement of digital financial service system and embrace the digital wave?

Thank you for the questions. In 2024, BOC took the initiative to integrate into and adapt into the new wave of scientific and technology revolution, firmly implemented the strategic development or deployment of five major articles on the overall national security concept. We coordinated the development and security. We further promoted the construction of digital finance, and we create -- accelerate the engine of scientific and technology innovation. We focus on the following achievements. And first, we lead upward and created new highland of financial technology. We embraced the wave of science and technology revolution. The large-scale model technology have been applied in more than 10 scenarios such as employee question and answer, intelligent R&D and reporting generation with over 3,600 users of intelligent R&D scenarios. We completed the internal deployment of DeepSeek R1 model. We opened it to employees in the bank, explore scenarios in different situations. We promote its application in marketing assistance, remote banking assistance, credit report generation and other scenarios. At the same time, Other than large-scale model technology, we actively promoted the application and promotion of other new technologies covering more than 3,000 application scenarios and reducing the cost of operation management, precision marketing, scientific research and development by over 80,000 person months and six achievements of the group have won the Financial Technology Development award of the bank. The second is to take route and build a solid foundation for the development of digital finance. We adhere to a self-reliance and in science and technology. We built a solid foundation for the development of digital finance, and we enable -- we use enabling technologies to improve the quality and efficiency of financial services. We strengthened computing power support. We further promote the new information infrastructure, construction of four places and multiple centers. In computing power scale of the group reached 62,700 servers and the overall scale of the cloud platform reached 38,000 servers, which consolidated the data foundation, accelerated the construction of the [indiscernible] for BOC and particle for warehouse. In storage scale of the data lake exceeded 29 PB and the promotion of the data vertical and horizontal platform achieved full coverage on the group with the user scale exceeding 240,000. And on the basis of consolidating computing power and data, we will continue to optimize model algorithms, promote business pilot applications and form an AI technology family, covering multiple subcapacities such as voice vision, knowledge base and robots. In the next -- in the following years, China BOC will respond to the call of the times. And we will continue to invest in innovation we will promote digital transformation and enhance the convenience and competitiveness of financial services. The first is to embrace AI and promote the development of intelligent construction. We will focus on building a mechanism, platform, collecting data, adjusting models, setting scenes and training teams. On the one hand, we will strengthen the construction of supporting mechanism, promoting the establishment of AI application governance architecture, promote the improvement of AI platform and model optimization, and we will smooth the use process of large model data. On the other hand, it is effective to promote the application and according to the strategy of first inside and then outside. It's driven by demand and by results. And we will give priority to high-value scenarios such as knowledge assisted and content generated so as to improve quality increase efficiency and reduce cost. And the second important thing we will do is to empower technology to help financial services to be better improved in terms of quality and efficiency, we will focus on strategic project construction, one line, one policy, one company, one policy using science and technology work plans, and we will have a fully aligned to the high-level opening up pattern.

Now the lady in the middle row.

I'm from Shanghai Securities, [indiscernible]. My question is about the new quality productive forces, particularly given the latest of AI technologies, so what would be the impact on the business of BOC? And what are the next goals and strategies?

And thank you very much for the question about new quality product forces and AI are the two buzzword recently. Now please President [indiscernible], you can have the floor.

In the past year, BOC took the development of new quality productive forces as an important starting point to serve the real economy. We optimized the financial supply structure by supporting the development of new quality productive forces. We achieved positive results in industrial upgrading, technology empowerment and mechanism innovation, et cetera. In terms of industrial upgrading and empowerment, we focused on advanced manufacturing, green transformation and digital empowerment, helping the balance of high-end transformation loans in traditional industries to increase by over 29% and digitally upgrading deep service enterprises. In terms of cultivating the kinetic energy of emerging industry, the system of gradient cultivation plus full cycle service was built and the loan balance of the industry was about RMB 2.47 trillion, an increase of about 26%. In terms of supporting future production development, we will provide customized services for scientific research institutions and scientific and technology talent, and we will build a whole process support system of basic research plus technical research plus achievement transformation, we simultaneously promote the mechanism. We form innovative statistical indicators for qualitative productivity and set up special economic capital allocation channels to stimulate innovation vitality of the whole bank. Now the rapid development of AI technologies profoundly reshaping the business layout and service model of our bank. We will continue to use AI technologies as an important access and we will try our best to cover upstream computing infrastructure, midstream technological innovation, downstream scenario application. And this layout will further promote the new development pattern of BOC in technology and finance. We will take the service AI industry chain as the breakthrough point to promote the product and service innovation and institutional mechanism upgrading in technology and finance. And by establishing a full cycle empowerment mechanism for one plus one plus and major science and technology projects, we will provide customized and one-stop services for the participants, support the core technology research in key areas of stick or technology and continuously, we will improve the service ability to national strategic scientific technology forces. We will give a full play to the advantages of the platform. And actually, we will support the construction for AI innovation in Thailand, focus on key tracks, build an integrated service system for commercial and investment banks and promote technical research application and capital empowerment. Up to now, BOC has provided credit support to enterprises in AI industry chain for RMB 30 billion. In the future, we will continue to invest in this regard. We will strengthen the integrated financial services for the upstream and downstream customers in the whole industry chain of core enterprises. We will promote the implementation of $5 trillion special comprehensive financial support plan for AI industry chain. [indiscernible] focus on the financial quality productivity focusing on major national strategies, we will increase resources in frontier areas such as AI, content technology and biomanufacturing and promote key core technology research and industry and upgrading. We will support intelligent and green transformation of traditional industries, enhance the competitiveness of the manufacturing industries intelligent change, digital conversion and network connection and increase support for advanced manufacturing in traditional industries. We will also look ahead to future industries, deepen the integrated services for commercial space flight, low altitude economy and other new tracks, embed financial services into new generation intelligent terminal scenarios and cultivate new growth. In terms of service model, we will take capital management plus M&A plus cross-border plus and other integrated products combination as the mainstay and open up the whole chain of services, including stock loan debt and insurance and leasing. We provide a full chain of equity loan, debt insurance and leasing services to help enterprises develop throughout the life cycle. Secondly, the company has been working on the five priorities to build a new quality productivity service ecosystem. In science and technology finance, we will upgrade the system of specialized mechanisms expand and upgrade products and service toolbox and improve services for the whole life cycle of businesses green finance will focus on strengthening support for industries related to carbon reduction, pollution reduction and green expansion and actively participate in the construction of the carbon market to help low carbon transformation. In terms of inclusive finance, we will continue to optimize business structure, increase financial supply in key areas and weak links and formulate differentiated regional industrial and customer group development strategies. While in pension finance, we will optimize pension trustee services enrich pension financial products do a good job in special refinancing for inclusive pension and create special pension financial services. Digital guidance, adhere to the importance of security and innovation, deepen digital transformation, consolidate the database and empower accurate services and risk prevention and control, deepen reform and innovation, cultivate the soil for high-quality development, optimize policy system and resource allocation, dynamically adjust credit policy, strengthen synergy between the front, middle and back office and enhance the integrated comprehensive service capabilities of business investment and banking. Bank of China will take more open stance, more innovative services and more efficient mechanism to inject live in financial water into the transformation, upgrading of the real economy contribute to high-quality development.

Thank you so much President [indiscernible]. In the interest of time, we have one last chance to ask your questions. Okay, we will invite the lady in the third row.

Thank you so much, moderator for giving me this opportunity. I'm from Xinhua Financial News. My question is related to the boosting consumption. As we may know that at the Central Economic Work meeting and also during the two sessions of this year, to vigorously boost consumption is a very important key task of expanding domestic demand. So how would BOC seize these opportunities to create new consumption scenarios and new service consumption models?

Thank you so much, the reporter with news agency. We will invite our Vice President, [indiscernible] Cai Zhao to answer your question.

Thank you so much for your question. Vigorously boost consumption is the first of the nine key economic tasks identified at the Central Economic Work Conference and the country has introduced policies one after another to boost consumption and expand domestic demand with greater strength and more precise measures. In accelerating consumption recovery, BOC has profoundly practiced the political and popular nature of financial work and actively assisted in expanding domestic demand and promoting consumption so that people have the money to consume -- also consume in a cost-effective manner and consume conveniently and safely. In 2025, we plan to invest more than RMB 1 trillion of loans and create RMB 100 billion of property income. In 2025, we plan to invest to cover over RMB 100 million. And so this is our plan to benefit hundreds of millions of domestic and overseas consumers and people will benefit and upgrade their consumption. We have already the policy, which is already very leading among the and we have also enhanced the quota and in particular, the quota of the independent payment and extend the loan duration and also to better facilitate large volume and long-term consumption demand and effectively boost consumption. We have multiple measures because we have also witnessed opportunities in this area. On the one hand, in terms of traditional consumption, housing consumption is one of the biggest contributor. We support residents rigid and improved housing demand and continuously increase mortgage investment provide the best mortgage down payment ratio and interest rate in accordance with our national policy and reduce the cost of financing for residents home purchase and support the development of trade-in, serve customers post purchase renovation, remodeling, smart home appliances and other comprehensive consumer demand and launched the BOC renewal program, BOC Renewable consumption loan and BOC home appliance installment. In terms of travel consumption, BOC has created 3-dimensional product matrix covering automobile installment, travel insurance and high-speed rail travel, cooperating with NEV enterprises to launch BOC automobile renewal installment and cooperating with National Railway to provide a railway e-card. In terms of pension consumption, our mobile banking has upgraded elderly friendly version and personal pensions have been tailored to meet the needs of the entire age group. In the area of campus consumption, we have built a whole process service system for enrollment to employment, providing student loans, college student cards and other services. In terms of cross-border consumption, we provide cash rebates for cross-border consumption, discounts at overseas merchants and one-stop service for expatriates consumption in China with the app online and integrated service centers at important ports offline enriching foreign exchange business channels. On the other hand, we strongly support emerging consumption and actively serves the new industrial models of consumption, deeply integrates the consumption scenes and supports innovative development of the economy. In terms of culture and tourism consumption, we have joined hands with culture and tourism organizations to carry out the activity, helping the development of culture and tourism economy in various spaces. In terms of national trade consumption, the company launched the national trade hall to help upgrade the brand industry. In terms of green consumption scenarios, we have launched a personal carbon account. In mobile banking to support customers in accumulating carbon energy values and the plans to launch a carbon energy exchange for WeChat cash reduction activities. In addition, we also focused on income plus fee reduction 2-wheel drive strengthen demand traction to enhance residents consumption capability around anti-fraud and consumer protection, double shield efforts has been made to create security guards all around and protect people's consumption safely and effectively transform the concept of financial services for all into the actual results. And the next step, we will actively respond to and effectively implement national policy and make our contribution to boosting consumption and expanding domestic demand.

Thank you so much, President Tai. In the interest of time, we cannot answer all the questions from the media that if you have further questions and feel free to contact us. Today's results release conference, we're not only releasing results, but also we have sent the invitation letter. I hope that you could and BOC, and come to us and also to give more support to BOC, and we will create greater value for the customers, shareholders and society. Thank you so much.