BOC Hong Kong (Holdings) Limited (2388) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. Welcome to 2024 Interim Results Briefing of BOC Hong Kong Holdings Limited. I'm Sophie Huang, Company Secretary of BOCHK. To begin the meeting, I would like to introduce the senior management joining us today. Mr. Sun Yu, Chief Executive; Mr. Liu Chenggang, Deputy Chief Executive and Chief Financial Officer; Mr. Xu Haifeng, Deputy Chief Executive and Chief Risk Officer; Mr. Xing Guiwei, Deputy Chief Executive; Mr. Wang Huabin, Deputy Chief Executive; Mr. Chan Man, Deputy Chief Executive; Madam Li Tong, Deputy Chief Executive. Today's meeting consists of 3 parts. First, CEO Yu Sun will update the implementation of our strategy during the first half of the year. Then our DCE and CFO, Mr. Liu, will provide a brief on our financial results. Finally, Mr. Sun will share with us the outlook and key priorities for the second half before our Q&A session. Now I would like to hand over to CEO Sun. Mr. Sun, please.

Thank you. Ladies and gentlemen, good afternoon. Since the beginning of the year, the global economy has gradually emerged from a challenging period, and the Hong Kong's economy has achieved moderate growth. However, there is still much uncertainty in the future monetary policies of major economies faced with a complex and ever-changing business environment. We upheld the principle of pursue progress while ensuring stability. And I'm pleased to report that our major businesses outperformed the market, and our operating results grew steadily. In the first half of attributable profit totaled HKD 20 billion, up 17.9% year-on-year. ROE improved by 1.58 percentage points to 12.39%. The Board has declared an interim dividend of HKD 0.57 per share, up 8.2%. We continuously enhanced the quality and efficiency of our services to meet the customers' diverse needs and cement of business advantages in the local market. We secured market leadership in the residential mortgage, syndicated loan and RMB bond underwriting businesses. We also further increased the scale and quality of our cross-border business of individual customer base for cross-border business expanded by over 20% year-on-year, of which more than 60% were mid- to high-end customers. The number of cash pools for corporate customers increased by more than 20%. We also achieved solid progress in our wealth management and treasury businesses recording 10% growth in our high-end customer base, doubling of market share in fund sales and growing payroll accounts by 12% year-on-year. Our trust and the customer services and institutional treasury business also continued to perform well. We made great efforts to boost our integrated service capabilities. In the first quarter, BOC Life rose to second place in the market in terms of new standard premium. BOCI Prudential continued to lead its peers in terms of MPF assets scale during the first half, where BOCHK asset management increased its AUM by 20% year-on-year. As a result, we achieved double-digit income growth across our integrated service platform. To consolidate our business advantages in the GBA, we proactively served our customers' cross-border financial demand and deeply engaged in developing the infrastructure of the neutral market access scheme capturing opportunities for financial collaboration. We launched cross-boundary Wealth Management Connect 2.0, growing the number of Northbound and Southbound customer accounts by more than 50% from the end of last year with total remittance amount multiplied continuing to lead the market. We sustained our market leadership in Stock Connect and the Bond Connect businesses while gradually increasing the skill of our swap connect business of compelling products recorded solid growth. Our GBA account opening service recorded a 10% year-to-date growth in cumulative customer numbers while the volumes of BoC Pay and the credit card transactions in the Mainland rose by 2.2x and 26%, respectively. We closely follow the development plan for the Northern Metropolis and proactively capture the related business opportunities. We launched brand-new services tailored to the innovative technology enterprises in the GBA. With the number of loans granted under the innovation, technology and talent financing incentive scheme increasing by 54% from the end of last year. We received a strategic plan for our Southeast Asian business and deepened the implementation of our differentiated management approach with a view to developing the Southeast Asian market into an important resource for the group. We are helping our regional entities to become the leading Chinese banks in their respective domestic markets. We seize the opportunities arising from China's new development paradigm with a continued focus on belt and road cooperation. Going global projects and the large customers in the region, we actively developed regional syndicated loan projects and the green finance business. We further optimized the service of our regional wealth management brand as well as online transaction experience for domestic customers by leveraging digital innovation and deploying a diverse array of mobile banking functionalities. In addition, we strengthened our innovation and business capabilities in treasury services, resulting double-digit growth in treasury business transaction volume. During the first half, the deposits and the loans of our Southeast Asian entities grew by 17.4% and 8.6%, respectively, while net operating income increased by 30.8%, outpacing the corresponding growth rates of the group as a whole. We constantly strengthened the foundations of our RMB business and facilitated the construction of offshore RMB markets to support the steady and prudent development of RMB internationalization. By leveraging of RMB business strength, we achieved 32% growth in RMB customer loans and 17% growth in RMB deposits. BOC Hong Kong, BOC Malaysia and the Manila branch saw fast growth in RMB clearing volumes. We maintained a market-leading position in RMB businesses such as cross-border cash pooling and the mutual market access schemes and topped the market in terms of RMB new standard premium for the 12th consecutive year. We innovated and enriched of RMB products and services. We are also promoting the use of e-CNY with an e-CNY Zone introduced on the BoC pay app. We proactively participated in Hong Kong MA and HKAB's RMB promotion activities in Southeast Asia, taking advantage of our expertise in RMB business. Adhering to our customer-centric philosophy, we enhanced our data utilization capabilities and took our digital financial services to new heights. We deepened the development of scenario ecosystems based on customers' needs in home purchasing, education and health at the peak of open APIs exceeding 400,000 daily usages. In addition, the customer base of BoC Pay and the settlement volume of BoC Bill increased by 9% and 7%, respectively. We stepped up in the optimization of online services. During the period, the number of active mobile banking personal customers grew by 8%. The mobile banking penetration rate in Southeast Asia reached 76%, and the transaction volume on the iGTB platform surged by 63%. We accelerated the development of our intelligent operations and smart risk control capabilities while expanding the capacity of our Regional Operating Center in Nanning. We actively fostered an innovative culture. We engaged deeply in the e-Hong Kong Pilot Programme under the Hong Kong MA. Became a founding member of the Project Ensemble Architecture Community and vigorously promoted the implementation of cross-border central bank digital currency projects. We continue to refine our diversified products and services, supporting society to adopt new carbon lifestyles while nurturing new growth drivers for sustainable development. During the first half, we increased our green and sustainable loan balance by 18%. ESG funds for sale by 38%, and the banking ESG bond investment by 18%. Once again, we assisted the Hong Kong SAR government in using a multicurrency digital green bond as well as being appointed as a custodian bank for its digital green bond issuance for the second consecutive year. We introduced Hong Kong's first carbon footprint tracking function in our mobile banking to encourage the citizens to leave low-carbon lifestyles. We were also honored to receive carbon neutrality certification for BOC Tower and the Bank of China building in Hong Kong, making us the first bank in the city to be certified as carbon neutral for owned premises. We continue to demonstrate our care for society. In the first half, we carried out more than 13 charitable projects and recorded a total of more than 12,300 voluntary service hours. We dedicated ourselves in supporting the real economy and responding to social issues through implementation of Hong Kong MA's 9 measures to support SMEs development. We are utilizing our advantages in both online and off-line channels to meet home purchase demand of our customers and all in all, contribute to the high-quality sustainable development of Hong Kong society and economy. This concludes a strategic review for the first half. Next, of DC and CFO, Mr. Liu will walk you through our financial and business performance.

Thank you, Yu Sun. Since the start of the year, we have constantly grown our core businesses and proactively managed our assets and liabilities in order to cope with market interest rate fluctuations while seizing opportunities from the recovery in capital markets to improve our fee income and other noninterest income. At the same time, we prudently controlled operating expenses and strengthen risk management. As a result, our after-tax profit in the first half grew 13% year-on-year to HKD 20.5 billion. In response to market competition and the continued time deposit migration, we strictly controlled funding costs and deepened customer relationships by expanding our cross-border and payroll businesses while also [ typing ] customer demand in clearing, custody and treasury business. At the end of June, our customer deposits grew by 5.8% to HKD 2.65 trillion, taking our local market share up to 15.7%. CASA ratio was 45.5%, up 1.3 percentage points from end of March. We actively respond to market challenges, capture the opportunities in the Hong Kong, GBA, Southeast Asia and other key overseas markets and further enhanced the intragroup collaboration to provide a diversified financing solutions such as syndicated and project financing, green loans and mortgages. Customer loans reached HKD 1.7 trillion, with our local market share increasing to 16.5%. Within this, loans for use in Hong Kong remained stable, while trade finance increased by 8.3%. In response to volatile market interest rates, we proactively managed our assets and liabilities, secure the performance of loans and deposits, sensibly adjusted our bond investments to increase yield levels. Adjusted for swap impact, NIM expanded by 5 basis points year-on-year to 1.61%. Net interest income grew by 15% to HKD 28.8 billion. Within this, second quarter NIM was 1.62%, up 1 basis point from the previous quarter. During the first half, net fee income rebounded by 1.8% year-on-year and 17.6% half-on-half. We captured the opportunities in wealth management and enhanced the product and service suite for funds and insurance, resulting in 27.2% and 10.1% year-on-year growth in commission income from funds distribution and insurance. Commission income from currency exchange rose 43.5%. Income from credit card business remained stable with retail cardholder spending and merchant acquiring volume in Hong Kong increasing by 9.8% and 7%, respectively. With a constant focus on the group's strategic development priorities, we optimized results allocation, strengthen the cost control and uphold the concept of low carbon operations. Our operating expenses increased by 3.4% to HKD 8.1 billion. Our cost-to-income ratio improved by 2.5 percentage points to 23%, outperforming local peers. We depend comprehensive risk management by dynamically adjust credit strategies and the refining credit risk management mechanism and measures. We successfully maintained our asset quality at a solid level. At the end of June, our NPL ratio headed up 1 basis point from the end of last year to 1.06%, continuing to outperform the market average. Annualized credit cost was 0.25%, up 11 bps year-on-year but down 36 basis points half-on-half. Total impairment allowances increased by 9 basis points to 0.96% of total loans further consolidating our capability to withstand the potential risks. We continue to strengthen capital management. As at the end of June, our total capital ratio increased to 22.17%, but our CET1 capital ratio stood at 20.05% mainly due to continued earnings growth. At the same time, we reasonably controlled our RWA, which grew by only 0.6%. Liquidity was abundant with our average first half LCR and NSFR standing at 237% and 141%, respectively. This concludes our interim results review. Xi Sun will now share the group's outlook and the priorities for the second half of the year. Thank you.

Thank you, DCE Liu. Looking to the second half, the global political and economic landscape is expected to undergo fresh changes. Uncertainties will persist regarding the direction of monetary policies, changes among major economies, banks will face ongoing challenges in balancing business growth with effective risk management. On a positive note, the Chinese mainland will continue to cultivate new quality productive forces and a deep and high-level opening up. Further consolidating and strengthening its economic growth momentum by proactively aligning with national development strategies and measures that benefit the city, the Hong Kong SAR government will attract key enterprises, talent and capital and enhanced regional collaboration to reinforce its status as an international financial center. In addition, other promising initiatives such as Belt and Road Corporation and RCEP will continue to present new development opportunities for the banking industry in Hong Kong. In the second half, we will focus on sharpening risk management and control, achieving fundamental breakthroughs and maintaining solid profitability. We remain committed to consolidating and enhancing the quality and efficiency of our regional integrated and digital financial services while upholding our risk bottom line and diligently pushing forward key tasks. Our goal is to constantly outperform the market in our core businesses, continually expand the scale of diversified income sources maintain highly cost-efficient operations and strengthen control over asset quality while striving for solid business growth and financial results. We will be fully dedicated to supporting high-quality economic and social development thus creating value for shareholders, customers, employees and all sectors of the society. This concludes my presentation. Thank you. You are now very welcome to ask any questions you may have. Thank you.

Thanks for the presentation by Yu Sun and DCE Liu. It is the time to answer questions from our analysts. [Operator Instructions] Shall we have the first question, please? On the right-hand side, Derek.

[Interpreted] This is Gary from HSBC. I have a couple of questions. The first question, if we look at our RMB business, it's been growing very rapidly in the second half of the year, there will be more counters open for RMB business. So how do you see RMB business accelerating in the second half? And with the accelerating of RMB business, how would it help us in terms of lower cost funding or in terms of opportunities or allocation of the funds, what are some of the opportunities? And how would it affect our performance? Now on CET1 ratio, I see the smiling at the time when this was mentioned. So if we see it as capital ratio of 20%. And we also have a dividend payout in the interim, which is an increase. So in terms of capital usage, will you be looking proactively for usage, for example, increasing dividend, buying back or maybe 10 years ago, you have considered some M&A assets in the region? Will you be considering that?

[Interpreted] Well, thank you for the questions. First of all, on the RMB business, I'll answer the question. As mentioned just now, for the first half, if we look at RMB internationalization, it was steadily promoting and we have maintained fourth position for RMB as a global payment currency and the function as a cross-border financing currency had been further improved. And the Hong Kong RMB market has become active, reflecting progress in various business indicators. For the first half, the funding pool hit a new high and RMB deposits and loans both increased by 13% and 24%, and the clearing for RMB via Hong Kong grew by 95% accounting for about 80% of global offshore. And as you know, we have the BOC Malaysia and Manila branches in Southeast Asia and the strengthened clearing capability, 71% and 25% growth. And also, we have some LCS plus clearing and Indonesia market and also with Vietnam currencies as well. And as mentioned just now, we have been doing well. And so -- this is a very attractive business for us. And for the past 5 years, we have been #1 ranking. So RMB\ business will continue to be strong. And as a #1 clearing bank in RMB capabilities, we will continue to make full use of opportunities in the market. And as you know, the U.S. dollar in terms of rates and currency costs have been changing, and we will continue to adjust the situation to provide services and products that are suitable for our customers to maintain our #1 ranking.

[Interpreted] Next question, the DCE. Thank you so much for our dividend payout and our capital. I know you are very concerned about that. And as our capital adequacy continues to increase because of our profit accumulation. As mentioned just now, because of our profitability and our good liquidity, and we want to share the fruits of our operations with our shareholders. So for the interim dividends, it is an increase of 8.2% to HKD 0.57 per share. And you would notice that this is a rather high or the highest interim DPS amount in the last 10 years. Now for Hong Kong, we have always had a very good policy in terms of our balance between shareholders' returns and dividends payout. As for shareholders, we will continue to meet with the demand at the same time, monitor policy changes. And as you know, we are a regional bank and we will use these opportunities, as you have mentioned just now in terms of assets, in terms of business opportunities and also about our new business deployment, we will use our capital base well to provide an even better return for our shareholders. We will look at all possible methods. In terms of dividend payout policy, we will continue to, as in this year, we have increased our dividend payout ratio. As for the range is still 40% to 60% for our payout ratio. We will be considering the returns for shareholders, business development, regulatory requirement. And at the end, it is about raising our profitability to raise the returns to our investors.

Well, thank you both for the questions. Next question, please.

We would like to invest the next questions from the second row, please.

[Interpreted] My first question is about Hong Kong's real estate market. In the interim result, you mentioned your business. However, your peers has reached a 10% of NPL. However, it is only 0.1% in your portfolio, it's quite good. So let's look at the developers loans within the interim reporting period is at contraction of 10%. So in terms of rental income, in terms of real estate and also the retail real estate, it is not performing well. So I would like to understand what are your indicators that you are following and also in terms of your exposure. Will you continuing to narrow your exposure in this sector to mitigate risk? And also, would you expect any jump of NPL ratio, just like your peers becoming 5% or 10%. This is the market's concern because your number is quite low at the moment. And the second question is in terms of loan growth. In the first half, you have flat loan growth. In addition to the contraction of property market and the improvement of IT. In terms of security brokerage, we can see some growth. So what are drivers here? Will it sustain? So I would like to understand the drivers of loan growth, please.

[Interpreted] Thank you very much. NPL goes to DC Liu and then DC Wang.

[Interpreted] Thank you very much for your questions. I believe that you pay attention to the real estate loan asset quality. I want to give you a report in general, and also the market in Hong Kong. In the high interest rate environment, indeed, we see that the Hong Kong real estate market is under pressure. So Hong Kong developer has higher liquidity pressure because in the high interest rate environment, the interest expenses are high. So we are following the market update, and we are adjusting ourselves based on local conditions, including the revisit of credit rating of our customers and of our lending. However, generally speaking, our risk profile is controllable. I want to give you some details. First, in terms of business number. By the end of June, it's a 4% of decrease of the market number, of course, our asset quality remains good. However, in terms of structure, the 83% are for loan use in Hong Kong, more than 60% among them is in construction. And by loan categories, we can see that construction takes up about 18% while secured loans ticked up 29%. And the collaterals are mainly in Hong Kong. So in general, if we look at the average LTV, it is less no more than 45%. Despite a slight increase compared to the end of last year. However, it is still within the healthy range. In addition to that, our NPL ratio remains high in general, partly because of our customer mix. Our real estate customers are mainly local blue chip companies. So their financial profile is stable. And you mentioned about our peers in Hong Kong, the NPL ratio in this sector is relatively high. Let's look at the structure. In Hong Kong real estate market, our -- we have real estate developer and real estate investment. In general, we have about 60%, meaning 64% for development. In terms of real estate investment, it is about 36%. So this is the opposite of the industry peers. If you look at our peers, their developers may takes up a less percent. However, for investment, it is higher in terms of percentage. This is due to the different clientele mix. For us, the risk profile is controllable. In the second half, we expect that the high interest rate will continue to subdue the loan demand of the market. And the loan growth, as we mentioned, in the industry is coming down. That is due to the lack of demand. And we can also see that in the short term that new supply of homes and offices will continue to increase. That put pressure on the market in this cycle. However, Hong Kong SAR government has been actively promoting economic development, taking [ useful ] measures, including the real estate market measures to boost market. We also expect the fact with the U.S Fed will cut rate, which will help our customers to increase their repayment capabilities. We think that real estate market will continue to be an important part of the economy will continue to provide diversified comprehensive financial services to our -- services to our customers. We'll also stick to the prudent measures and make sure that our asset quality is in a good level. Thank you very much for your questions.

[Interpreted] Thank you very much for your questions about loan. In 2024, global economy to face uncertainties. Hong Kong's loan demand is still weak. The banking industry loan in general, dropped by 1.9%. We capitalized on our solid clientele mix and diversified structure to capture opportunities. At the end of June, our loan was recorded at HKD 1.7 trillion, which is flat compared with last year and 1.8% better compared to the market and local market share was brought up to 16.5%. In the second half, the global economy recovery is expected to improve, but uncertainties remain. From the perspective of the 3 major markets, we primarily serve, China Mainland, Hong Kong and Southeast Asia, we still expect uncertainties. However, we continue to observe our risk bottom line and seek steady growth. We will capture market opportunities to promote the high-quality growth of our lending loan business. First, we'll seize business opportunities brought by development of new productive forces and enhance industrial layout. On the basis of consolidating and deepening existing customers will closely followed National modern industry system focused on strategic and emerging industries and advanced such as [indiscernible] energy, advanced manufacturing and et cetera. We'll continue to optimize in tech finance service model. We'll also work with specialized and sophisticated Enterprise is a leading technologies and provide comprehensive financial services tailored to our customers. And second, we'll also strengthen regional coordination and seized opportunities arising from closer economic and trade exchanges between China and ASEAN. Hong Kong headquarters will continue to strengthen our leading role coordinating with ASEAN entities and proactively serve large domestic clients and growing global Chinese enterprises will provide comprehensive financial support for enterprises. We're also strengthened cooperation with BOC branches in Singapore, Sydney, Tokyo, Seoul and other Asia Pacific locations to seize business opportunities in syndicated loans and M&A financing. And thirdly, we'll capture the opportunity of RMB internationalization currently with the inverted interest rate between RMB, HKD and USD. We will fully leverage the advantage of offshore RMB business in rich application scenarios, so RMB in trade and capital market and meet the overseas RMB financing need of enterprises. And now we'll focus on our Hong Kong cross-border GBA, Southeast Asian and overseas market, focus on customer need to improve quality and practically search -- serve the real economy. We will balance scale, efficiency and risk so as to achieve solid development in loan businesses.

Thank you both for the answers. The next question in the middle of the second row, please.

[Interpreted] Thank you very much for this opportunity. I am from CICC, Hou Dekai. Question about the NIM. In the first half of the year, particularly in the second quarter, the HIBOR has been lowering. And our NIM, we see that it has been improving by a small extent. And also, we see that we have a pretty good situation. But if you can look at, let's say, securities and also the maturity dates and also what are some of the space for future adjustments in this area. And for nonbank risks, the macro environment is that RMB interest rates and foreign exchange interest rate seems to be low. So for nonbank risk exposure, we see that there may be a lowering in terms of the overall exposure. Is it because of demand reasons or because of risk management reasons?

For the NIM question, we will have the DC Liu answer this question first.

[Interpreted] Thank you for the question, and thank you for your positive recognition just now. Now let us look at the structure of the -- our net interest income. The NIM had been continuing. And as CE had mentioned, it had been promoting our businesses in areas, which have been rising. And also in this fluctuation interest rate market, we have to manage well our assets and liabilities. And also compared to the previous period, our NIM is good areas. First of all, in terms of our deposit and our deposits have been rising 5.8%. And is a flat loan growth, which is outperforming the market by 2.6 and 1.8 percentage points. And secondly, we -- because we see that there is a lowering of interest trend. And therefore, we have actively managed our assets and liabilities, strictly controlling our fixed deposit costs and stabilize CASA ratio. And third, as you have also mentioned, we dynamically manage our bond investment in the banking book and our book -- our bond investment yields rose by 95 basis points year-on-year. And I think this is something that is very important in balancing the situation. And at the same time, fourthly, we advanced steadily our Southeast Asia business and NIM for Southeast Asia increased by 37 basis year-on-year in the first half, very positively contributing to the group's NIM. Now for all banks in this kind of interest rate environment, there will be certain deployment. And at the same time, we have extended our maturity dates as well that it is all within our risk management targets. So at present, what we can see is that we will be able to combat some of the pressures brought on by lower interest rates. And also our exposure is manageable. Now our company has very good liquidity. Our LCR and our HIBOR both in very high rates. And also our capital adequacy is also very strong. All these support us in securities investment in -- to combat the next period of pressure in NIM. As for your second question, can you repeat your second question, please?

[Interpreted] The second question is about the Mainland risk exposure that is nonbank related, and some of it is off balance sheet. So for example, for property development and our overall RMB exchange rate, there are some less demand for financing. What is the situation?

[Interpreted] Overall speaking, for this year, for interest rates is very obvious. The Hong Kong interest rate is relatively high and domestic interest rate is relatively low. So on this basis, from the customers' demand, it has reflected the situation. For mainland demand, it is increasing for Hong Kong, even though for certain products, there is demand. But at the same time, there has been some customer changes. And so there were adjustments. And further, overall speaking, for exposure management, there are certain requirements for exposure. And overall, we will manage well our risk exposure. So I'm going to answer those questions that way.

Thank you. We would like to invite the next question. The second row from the back, Alten, please.

[Interpreted] I have 2 questions. First, I'd like to follow up on Gary's questions. the CET1 is now above 20%. Do you consider M&A opportunities? And the second question goes Southeast Asian business after assessment from the revenues perspective, it's about 70% of the group's business. So in the mid- to long run, how do you want that percentage to go?

[Interpreted] Thank you very much to your questions. In terms of capital, I would like to invite DC Liu and then DC Tong, please.

[Interpreted] You are talking about M&A, right?

[Interpreted] Yes, M&A.

[Interpreted] Right. BOCHK is a regional bank. So in terms of capital and asset, we have an opened attitude. It takes time and some effort to move around the complicated authority approval. However, just like our CC mentioned, we look at our core business and enhance efficiency of our capital. Currently, this is our main business. Thank you very much.

Okay. For Southeast Asian business, DC Liu, please.

[Interpreted] Thank you very much to the question. Indeed, people have high interest of SEA business. This earlier in the first half benefited from export and consumption. Southeast Asian countries saw strong economic recovery. And if you look at specific countries, for example, Indonesia, Vietnam, Philippines, Indonesia, the GDP growth is over 5%. It is expected that for the next 10 years, Southeast Asian countries will grow very well and affected by the macro environment by the end of the -- during the period, our deposit increased by 17.4%, loan increased by 8.4%. Our operating income grew by 30.8% year-on-year. The NIM also has very positive contribution, which is higher than the group's average as we previously mentioned. And this result comes from several measures. First, we have integrated policy, and we also have One bank, One policy. First, we continue to improve regional integration. We also work closely with headquarters and to focus on one belt one road and the ASEAN countries, our banks and branches participate in syndicated loans and green loans in the local areas. We also improved RMB business several people mentioned this. So in terms of RMB business, we have been improving. In Malaysia, Malaysia and Manila, our clearing volume also improved Phnom Penh branch in Cambodia, we have now become their clearing bank, our RMB treasury business has doubled. And thirdly, we boosted the wealth management and expand the mutual recognition of wealth management, but among BOC's mainland branch, BOC overseas institutions and BOCHK as well as Southeast Asian entities. We have also have multiple online and offline activities organized to introduce global economic situations and latest talent and family offices policy of Hong Kong government, building integrated brand and regional collaborations. In terms of future development, we are very positive. In the second half of the year, we will focus on several priorities. First, we will seize the opportunities brought by the transfer of industrial train and new development patterns. We're focused on major projects and key customers and strengthened product and services. We'll fully support customers' financial need. And secondly, we'll actively leverage offshore RMB business capability and fully support the use of RMB in the region, silently and prudently promote RMB internationalization. And thirdly, will closely follow dual carbon plans for Southeast Asian countries and enhance the level of green financial services. And we also promote digital transformation, focused on mobile bank, mobile payment and iGTB platform. This is very fast in terms of it's growth in Southeast Asian regions. We'll also improve our functions optimization and service promotion. Under the premise of hearing to respond line, we'll pursue the study development of our Southeast Asian business.

[Interpreted] Thank you very much to both DCEs. We want to invite the next question. The second row, Michael.

[Interpreted] Thank you, management. I am Michael. I have 2 questions to ask. First of all, for noninterest income. For loan-related income, it is on the decrease. If there is interest rate increase and the cut in the second half, how do you see this trend? And also in the wealth management business, how do you see it? And compared to the peers, what are our competitive edges? Can you talk about that? The second question for you. I want to follow up on the question of risks of credit risks. And in particular, is for the second half, do you see it is mainland property or is it Hong Kong property? What are some of the risk points do you see?

[Interpreted] Thank you, Michael, for the questions. For wealth management, I will ask DCE Chan to answer the question. As for credit risks, DCE XU will answer the question.

[Interpreted] Thank you, Michael, for your question. First of all, on commission income, and I will also talk about the next half. It is true that in the first half of the year, whether it is industry and commercial, it had been challenging. And given that we have been grasping opportunities grasping the wealth succession opportunity southbound northbound and also wealth management products. Overall speaking, for the first half for our commission, it is HKD 5 billion. It is 1.8% increase. As for investment and insurance, it is 7.8%. And for noncredit income, it is a growth of 6.9%. And at the same time, we can see that it is 10% and 27% for insurance and fund commission income. And in terms of credit cards, there is an increase as well. And it is a segment that has been increasing. As for other Institutional income, it has been increasing as well in terms of tourism and also other areas, including the total value of corporate institution custody assets has grown 44% from end of last year. And we captured the opportunity of the recovery for inbound visitors and outbound tourism and the exchange income increased 44% year-on-year. And also in the second half for the outlook, the -- it continues to improve. The government is committed to certain tourism boosting developments to drive local consumption, and it's expected to improve the investment sentiment and also the service income from a number of areas, including securities, brokerage, credit card, et cetera. And loan commission income will remain weak, though. But overall speaking, we will achieve a stable fee income for the full year. Now for wealth management in 2023 for our AUM, it is HKD 31 trillion. And for the entire year, there had been a net inflow for our wealth management. And also we have been promoting or offering some products for customers, including for our Mainland customers and our Southeast Asian customers. We have been coordinating with our group entities so that our overseas customers, we have been growing that for our high-end customers, it's grown 10%. And of that, the number of individual costs, cross-border customers increased by more than 20% year-on-year. And for private banking AUM that had also been increasing stably. And further, the number of private wealth customers increased by 17.8% year-on-year. Young customers opening accounts for wealth management '22 increased by nearly 50% year-on-year and the number of new individual border customers increased by more than 20% year-on-year, up 10% from the end of last year, and in particular, for growth contribution of mid- to high-end customers, it exceeded 60%. So this is the integrated service that we provide and also the Southeast Asian contribution. So -- and also our young customers. So these are some of the factors that have been fueling our growth. And also in securities and funds and also insurance, these have been important to us, especially as the interest rate trend. We continue to have more opportunities in wealth management and also insurance. We'll continue to optimize our customer service in these areas. And in the past few years, we have been putting in efforts for IT-related service. For big data analysis and for each of the customer, we have an online and off-line tracking of their behavior and their needs. So whether these are high-end customers or other customers, we will be able to give them very customized service. As for the quality of our assets, for quality of assets as of end of June. It is the NPL is 1.06%, up 1 basis point from end of last year. So basically level, and this is better than the Hong Kong market. The Hong Kong market for the period has been 1.79%. So for the quality of our assets, it is good, and there is no systematic risk to speak of. In the first half, while ensuring high-quality development of our loan business, we continue to strengthen the monitoring of our high-risk loan portfolios and also we timely reviewed our customer internal ratings and loan increase provisions to mitigate any potential risks. For total loan impairment allowances, it was HKD 2.07 billion, up HKD 0.84 billion year-on-year. Annualized credit cost was 25 basis points, up 11 basis points year-on-year. As of the end of June, NPL provision coverage ratio was 90.4%, up 7.5 percentage points. Total loan provision ratio was 0.96%, an increase of 0.09% and provisions remain sufficient. For the second half, in terms of outlook, the economies of Chinese Mainland and Hong Kong are expect to continue to improve. Hong Kong overall goods exports will increase steadily, and the government has come up with a number of measures to promote the property market development, removed property market cooling measures, et cetera. And we believe that this will continue for a while for the high interest rate environment. And overall speaking, risk management in the industry remains challenging. So we will strive to balance between business development and asset security while proactively supporting the real economy, and we'll continue to improve risk control mechanisms and measures prevent new nonperforming loans and dispose of existing nonperforming loans. We will strive to maintain a relatively stable NPL ratio for the full year, and we're confident in continuing to outperform the market average. We will adhere to our long-standing prudent strategy to make sufficient provisions and endeavor to keep credit costs relatively stable in the second half compared with the first half.

[Interpreted] So Jemmy, in the second row.

[Interpreted] Thank you very much for giving me the opportunity. I'm from -- I'm Jemmy from JPMorgan. Two questions. The first question is by 2025, if we look at the Basel III execution, what is a positive or negative impact to BOCHK. And the second question goes for CRE business, you have disclosed a lot of useful information. However, I would like to follow up. LTV on average, it's 45%, I understand. However, do we have any customers with high LTV? And also, when you segment your client. In the segmentation, which one do you think that has higher risk? And how do you strengthen your risk management mechanism/ Do you have any customers in fact has already negotiated with the bank for rearrangement of their payment?

[Interpreted] Thank you very much. I would like to invite CFO.

[Interpreted] First, in terms of Basel III implementation, for its execution implementation, we have time table by January 1 of 2025, it will have the final reform package. We have made sufficient preparation in this regard, and Relatively speaking, its impact to the assessment of our asset quality and this risk has some positive impact. It helps us to reduce the risk weighted asset assessment. And in terms of the future evaluations and assessment, we will make relevant preparations to welcome its implementation. This is a simple answer to your first question. To your second question in relation to Hong Kong real estate loans and CRE market, as we have presented before, on average, our LTV is less -- no more than 45%. And generally speaking, we think the risk profile is controllable. And by our customer segmentations, we are mainly serving local blue-chip companies. So our overall risk profile is under control. In addition to that we have collateral in the secured loan as well as some customers guarantee. So in general, we think the risk is within the range of -- it's controllable.

[Interpreted] Thank you very much to the answer. This is the end of the result announcement conference. Thank you, and see you next time. Thank you very much.