China Construction Bank Corporation (939) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to China Construction Bank 2020 Interim Results Announcement Conference Call. The moderator, please.

Dear friends from the media, analysts, investors, ladies and gentlemen, good afternoon. Welcome to China Construction Bank 2020 interim results announcement conference. In accordance with the pandemic prevention control measures, the conference will be conducted in video conference and conference call. On behalf of the management and the Board, I would like to make, first, my sincere gratitude to those friends who have supported the bank for a long time. My name is Liu Guiping, the President of the bank. Today, the management that is with us are Mr. Lyu Jiajin, the Vice President; Mr. Ji Zhihong, the Vice President; Mr. Wang Hao, Member of the Policy Committee; Chief Risk Officer, Jin Yanmin; and Hu Changmiao, Secretary of the Board. The conference today will have 2 parts. First of all, I will make a presentation on the business performance of the bank, and it would be followed by a Q&A session. The total conference will last for 1.25 hours. The presentations for interim results has been published on our website. First of all, I'd like to walk you through the business performance of our bank in the first half. In the first half, amid the impact from the coronavirus pandemic and the complex and challenging domestic international environment, CCB fulfilled its responsibility as a major state-owned bank by earnestly implementing government policies. It helped fight the coronavirus and supported economic and social development with targeted and direct financial services. Strived to serve the double cycles and serving the real economy and innovatively export digital operation mode. We have sped up in dealing with nonperformance loans and strengthening our foundation for long-term development. We support the real economy with increasing asset size, and the asset is up by 8.7%; liabilities up by 9.3%. We have reduced the cost for financing and the expectation. Earnings were in line with expectations. We have recorded good profit in key indicators. The ROE is 12.6%. Capital adequacy ratio, 12.62%. And we have taken a proactive measure to expose our risks. NPL ratio is 1.49%, and the scissor difference is CNY 58.9 billion. Provision and provision ratio is 3.34%. We have adequate capability in risk prevention. Risk prevention, pandemic control and high-quality development of assets are the major works of the first half. We have supported pandemic control measures very well. After the coronavirus break, we have promoted 10 measures in prevention control and 20 measures for care for employees at outlets. We have started a remote working mode. We have maintained the health of our employees. At the same time, we maintained the smooth operation of all services. According to the measures of the central government, we have timely conducted 30 measures for pandemic prevention and resumption of work, and 14 measures to strengthen the financial services for medium and small micro (sic) [ small and micro ] enterprises; 26 special measures for supporting Hubei region; and 29 measures to support -- to keep the foreign trade and foreign investments stable. All together, we have served over 10,000 enterprises with over CNY 100 billion of supporting funds. Second, we have helped the financial services to clients with stabilizing measures. We have targeted the weak links of the sectors related to the national economy. And we have helped industrial chain and supply chain in coordinated resumption. In the first half, we have invested in over CNY 200 billion of supply chain finance. And we have supported customer consumption with total increase in personal loans of 13.4%. At the same time, we have strengthened the support to local bonds and stimulus bonds. In the first half, we have increased the investment for local bonds of over CNY 300 billion and stimulus national bonds of over CNY 200 billion. We have met the requirement for reducing the fees and -- for small and medium enterprises. Through different measures, we have benefited the enterprises in nationals. We have strengthened our support to inclusive finance. In the first half, we have seen an additional inclusive finance of over CNY 278 billion. And the interest has been down by 63% (sic) [ 63 bps ]. We have benefited over 150,000 enterprises, and we have increased the quality of inclusive finance. We have tried different measures to make it online and through different multimedia measures. We have certified over 3.4 million enterprises. In the first half in line with the digital economy, we have been exploring different modes of operation, embedding data in the old process of operation. We have established the ecosystem and expand our customer base. Since the first comprehensive economy campaign, we have shown different characteristics, including comprehensiveness and agility and accuracy, laid a very good foundation for the long-term development of the bank. In major business, we have made historical breakthroughs. We have increased the customers in different sectors. In the first half, we have seen new deposit of CNY 2.01 trillion. And we have over 300,000 corporate loan -- new customers. As for personal deposit, we have seen very good performance, and there is bigger contribution from retail customers. The proportion of profit from this part has been over 50%, and we have been strengthening our position as a big bank. In retail banking, we have built a very comprehensive digital banking system. We have strengthened the digitalization system, including 3 middle offices, including the digital offices and bank offices. And we have established a team, covering different sectors, focusing on digital financing. Through digital operation, we have been very responsive to the market demand. In the second quarter, we had over 129 digital campaigns, and we have optimized 201 models. We have over 600 scenarios. Third, we have improved our risk control system. We have been targeting risk control as the margin of our bank. We have been prudent and comprehensive and proactive in risk control. In NPL, credit approval and other sectors, we have strengthened our concentrated risk, and we have been increasing our application through our system and the Smart Risk Control system and improving the contingent system for major risks. So this is to fight the victorious battle against major risks. In the first half, we have been very proactive in risk control and laying a good foundation for assets. We have been normalizing our measures and reacting to these risks timely and make sure that we are ahead of the market. At the end of the first half, we have CNY 548 billion of provision and the provision ratio has been increasing. In the first half, in total, the business performance of our bank can be summarized by 1-3-2-6. These numbers will reflect our business performance. 1, means that this year, we have encountered a huge black swan, which is the coronavirus pandemic. That event, without any doubt, has created major risks to the global financial system, and the risk is ongoing. CCB, as one of the systematically important banks, has been affected as well. This is a huge challenge. It's a huge public health event. It was very uncertain, especially when it broke out. As a commercial bank, CCB has to operate amid these uncertainties, and we need to seek certainty out of uncertainties. And 3, means that we have 3 commitments in our operation philosophy. First of all, we are committed to customers -- serving customers, and we are committed to serving the real economy as our mission. Only when the economy grows can we have a very prosperous financial system. So at a macroeconomic level, when commercial banks are required to give up profit, we have been doing that adequately. But we believe that in the short term, these measures will take a toll on our profit. But in the long term, we will, of course, contribute to the resumption and growth of the real economy. And in the end, we can realize a benign circle of financial systems and the real economy. Third, we have been always committed to the principles of the commercial bank. First of all, we need to create value and improve our capabilities; second, we must improve our capability to control risks; third, we have been committed to altruism culture, and we have been sharing social responsibilities. No matter it's for the pandemic control or fraud control. No matter it's for giving up profit or using our operation philosophy to promote green finance business, or when it comes to using different measures to promote the poverty alleviation campaigns, we have always been committed to the principles and social responsibilities that a major commercial bank should be accustomed to. The number 2 in the 3 numbers is that we have 2 key indicators. First of all, we have very good growth in the main business because we have been digitalizing our business, and this has started at the beginning of the year. And it was reflected fully in the jump-start business. And throughout the bank, our employees have been feeling more confident of digital business. So this has been reflected in the numbers as well. Second, the key indicator is sustainability. Sustainability is not only for growth but also for those indicators which have seen some year-on-year decrease, but still within a reasonable range. More importantly, to the future, when it comes to business operation, we think that there are 6 things that we need to refer to, to observe what our future will be like. The future will be very stable and sustainable. So as for the 6 aspects, I can elaborate on these points. First of all, the party committee of the CCB rolled out 3 strategies in 2018: inclusive finance, house leasing and fintech. These 3 major strategies have paid off very obviously in this year. To our business and our customers as well, it has played a very important role. Second, in the main indicators, especially in the liability business, our core deposit has seen its proportion reaching 85%, 1.3% year-on-year increase. And our balances of core deposit is CNY 11 trillion and 50.6%. And there is a bigger contribution from retail business. Personal deposit is up CNY 12 trillion and 49.7% and 0.4% more than last year. And we have been strengthening our position as the biggest retail bank, and we have personal loans balances of CNY 6.67 trillion. What is more encouraging is that in the first half, our bank -- our retail business is over 55% in its profit contribution, a record high, and it's up 12.5%. And we have a better foundation for personal customers. Asset quality in personal finance has been excellent. Personal housing loans has seen an NPL ratio of only 0.5% and only 0.85% for personal consumption loans. Our intermediary services, despite our measures to give a profit, in the interim results announcement, it's over 6 percentage points down compared with last year. So we have seen 4% -- percentage points increase because we have a digital business and better capabilities of the bank. We have third-party settlement, we have international settlement, and we have a very good growth in liquidation business internationally. Number 5, our capital is sufficient, even if we have 16.6% at the moment. Year-on-year, there is a decrease. However, we continue to replenish our capital, and it mainly comes from within. This year, we have a reasonable share of profit. Our profit has come down. So we have a supplement from within and that is a supplemental. This year, by 30th of June, we have only issued about USD 2 billion bond, and this is number 5. Number 6, in our focus areas. Our asset quality is stable, which means -- includes our [ Puhoi ] loans, even if our customers have grown, the numbers of growing is quite big. By end of June, the number of our customers for SME companies, we have 1.9 million. In terms of the loans, the bad loans is down by 0.25%. For private companies, the bad loan percentage is down by 0.49%. For manufacturing, bad loans is down by 0.56%. For retail, bad loan is down by 1.22%. So apart from what I have told you earlier in terms of my operation -- our operation figures using 1-3-2-6, this concept, perhaps for our half year interim result announcement can help you look at it in more detail. At the moment, the pandemic is still going and the world economy's growth is lackluster, and the Chinese economy has bounced back with a positive growth. First, however, with the uncertainties going on in the world, the pandemic trend is, again, still the biggest uncertainty for the further development of the economy. Next step, CCB will continue to adhere to creating value and focus on the prevention of the pandemic and to try our best to find opportunities in the crisis and to further promote our strategies and create digital economy and to maintain our robust growth and to continue to invest in our long-term value.

And now we go into the Q&A session. We welcome questions. [Operator Instructions] We now pass the floor to the audience.

[Operator Instructions] The first question comes from Ms. Yan Meizhi from UBS.

I'm Yan Meizhi from UBS. My question is related to our future profit growth and your prediction. First of all, I'd like to congratulate CCB for obtaining such a great operation performance and great profit prior to provision. So I'd like to ask, we can see second half of this year, provision is quite a lot, and so -- which means that the profit is down quite a bit. And is the provision going to continue? And based on what Mr. Gui said and you want to achieve a target of impaired loans. And do you think that the speed of handling the impaired loans will continue to be very fast? And will we still continue to see negative growth for the second half of this year?

Thank you. We have our Chief Risk Officer, Mr. Jin, to answer this question. Thank you.

Thank you for your question and your attention to the company for our growth. And with regards to the information disclosed in our interim result, it is very clear, and we can see from the media report, our growth has been affected by the asset quality as well as the growth of the provision made for the Chinese financials, and this is in line with the whole industry. And again, with the whole world trend in this financial industry, it is also in line. For Q1, the pandemic in China was kept under control effectively. At that time, our provision did not really respond as aggressively as the European and U.S. counterparts. However, with the global pandemic's further development, we continued to increase our provision, which is reflected in our Q2. And we have also noticed that it is the same for the European and U.S. counterparts. And some of these banks, they have increased their provisions for Q2 versus Q1. So this is the biggest impact for us. And at the moment, the global economy is still in a period of adjustment. And there's still a long way to go from being -- becoming stable. So going forward, there's a lot of uncertainties. And in terms of releasing of the provision, et cetera, whether there is still a lot of room. In my personal opinion, I don't think that there will be a lot of aggressive increase, but I think that it won't be gradually increased. Because various countries have taken measures to try and put it onto the right track. And especially China, we can see that the economy has come back onto the right track relatively quickly. However, we need to pay attention and notice that when the policy comes to the maturity date and when it's time to exit, perhaps that there will still be some volatility, and this will be reflected next year, early next year. So when all these various policies expire, and we'll be able to see the result. However, overall speaking, we believe that it is all within our ability. And our coverage ratio is still quite strong. So our impaired loans as well as the volume of the impaired loans would be kept stable or slightly go up. There will be an impact on our business. However, in terms of the percentage, I think that we can keep an eye on it. I don't think that there will be a lot of changes. Thank you.

Next question comes from [ Mr. Zhang ] from Sina Finance.

I'm [ Zhang Inchu ] from Sina Finance. My question is regarding the Second Development Curve of CCB. So how about the progress in the second curve? And what are the traditional business sectors connected with the second curve?

The Board Secretary will take the question.

Thank you for the question. Our bank proposed the second curve last year. And it's to respond to some current trends, including technology and modern finance, especially when the western world is moving towards financial system away from the real economy. And the Chinese banking industry will get away from that and shifting towards the real economy, and we should be serving the real economy and people's better lives. CCB has been promoting the 3 strategies, and we have been updating the industry of the progress. We have seen very -- progress in the first half in digitalization, real economy and pandemic control. We have seen very good progress in all these aspects. I'm sure the information is available to the public. Actually, our bank is coordinating the first and the second curve. On the one hand, we have been doing a good job in the first curve, traditional cost of business, loans, advances, et cetera. The second curve is coordinated with the first curve, and we have seen very good progress in that. The measures have all paid off. In the future, we will apply more fintechs to different business sectors, including inclusive finance, house leasing and other sectors related to people's livelihood, so we can play a better role as a major bank of China. So we will not only build a very good foundation with the basic services, including loans and deposits, we will also look into new sectors so our business will be stable and sustainable. So the first curve and the second curve will be coordinated for long-term development.

As for the question, I'd like to add one more point. You were asking about the relationship between traditional business and the second curve. We would like to use digital services to enable the first curve and the second curve as well. Thank you.

Next question. It comes from Dorris Chen from Pacific Insurance.

Actually, I come from America PIMCO Investment, not from Pacific. Anyway, I'd like to ask about your arrangement, and we can see that the profit is coming down, and we can also see that your core capital and the Tier 1 capital, you face some downward pressure. We have also heard from the management that you haven't issued any capital bonds. So I'd like to ask in this new backdrop for your core Tier 1 capital, do you have any relaxation on this target. If you want to continue to maintain the same target, would you announce new capital plans? If yes, any rules -- any tools that you can share with us in terms of various different bonds, et cetera?

Well, regarding this question, first of all, CCB for capital adequacy ratio, not only that we're going to -- not only that we are not going to relax, and we will also further enhance it. And for our business, we focus on the organic growth from within. In the meantime, in terms of issuing some Tier 2 capital tools, instruments, we also have some further plans for bond issuance and apart from the USD 20 billion that's already issued. And next year, we will have plan of issuing USD 660 billion in terms of capital instruments.

Next question comes from Xinhua News Agency, [ Ms. Yi ].

I have 2 quick questions. First, in the interim results announcement press release, noninterest revenue has been very good in the first half with 10.43% year-on-year increase, 31.51% in operation income. Noninterest income is 12.04%. So how did you achieve that? The second question is NPL ratio is 1.49%, but the default NPL ratio is even lower. So could you please explain the trends of NPL in that regard?

The first question will be taken by the Vice President and the second question by Mr. Ji (sic) [ Mr. Jin ], the Chief Risk Officer.

Regarding the first question, you asked about the growth in intermediary business. In the first half, we have been reducing fees and conceding profits. So that's why the growth has been slowing down. I believe the figures you cited were because of a few reasons. First of all, revenue from intermediary business, including online business, has seen faster growth. For example, online payment and credit cards, these business sectors have seen very fast growth.

Mr. Jin, can you please take the second question?

Our bank over the last few years has been committed [ to strict ] categorization of risks. Our NPL ratio is always higher than the late loan ratio, and the negative scissor difference has been always there. This year, the scissor difference is enlarging, but there are a few different reasons. First of all, as the President said, we have issued an additional loan of CNY 690 billion, and the new loans have kept very good quality. And we've been strengthening our efforts to support the real economy. NPL ratio and late payment have been affected by that. Second, we have taken very strict control of asset quality. Third, there are some policy factors. Companies affected by the pandemic outbreak can negotiate with the bank if they view -- if they really have difficulty repaying the loan, so we can adjust the repayment period. Fourth, we have sped up our efforts in dealing with the bad loans and late payments, so that also contributed to that factor. Thank you.

What you were talking about was our intermediary business. And in trusting business and commission income from that regard have also been growing very fast because we have strengthened our innovative measures. That's why there is fast growth. Apart from that, when it comes to technology, we use technology to enable matchmaking services and comprehensive solutions, especially the design of comprehensive financial solutions so we can offer customers some large-scale, targeted consultancy services. That's why we have more revenue from that source as well. These are all very innovative sectors. Of course, there are some sectors which haven't seen very significant growth due to the pandemic outbreak. For example, the agent business for insurance companies, these services have seen rather slow growth. But that is for the first quarter. In the second quarter, we strengthened our efforts to support the resumption of work of foreign trade companies, especially with trade financing and international settlement business, which have been growing fast. In the near future, we will also look at how the market competition landscape goes and the trends of the pandemic so we will probably see some pressure on the intermediary business, and we will respond to these pressures very proactively, and we will be committed to digital products and grasping the opportunity of consumer business. We will also look at the opportunities in corporate customer business, and we will strengthen the foundation of customership in that regard, especially strengthening our efforts to be more innovate especially supporting fee income and other income of intermediary business in supporting their healthy growth.

Next question comes from Mr. Yang Shuo from Goldman Sachs.

This is Yang Shuo from Goldman Sachs. I would like to ask about your strategy for digital finance. And we can see that recently, a lot of Internet companies have gone into this fintech area, and perhaps they will become your competitors in the future. So may I ask about your investment into technology? And what is your plan for commercialization going forward. And we have also noticed that you have issued digital currency in this digital currency or digital wallet. And how is that going to impact your business as a whole?

Well, thank you. We have Mr. Zhihong to answer this question.

Well, I'll answer from the last question first. And recently, we have been participating in the pilot scheme for digital RMB recently in our mobile phones, and we have also carried out testings. And we can make an announcement and say that the testing is already completed, and some of the stuff that you read online is simply some of the issues that we have encountered during the testing. It is not actually the ones about that, which will be implemented. With regard to the digital RMB pilot scheme, I think that we need to wait for the official news from the PBOC. With respect to fintech and in terms of our competition with large Internet companies, overall speaking, we believe that there is competition as well as a cooperation. In the early stage, perhaps it is reflected more in a way of competition. Looking at the recent developments, I believe that it is a relationship of both competition and collaboration for commercial banks. In terms of our maintenance and operation of our accounts, it's different from Internet companies, and we have different foundations. In a lot of areas, we have competitions. For example, the large Internet companies, they could provide with fintech services in terms of payment, insurance, asset management, et cetera. So it is also an all-around service package. So we believe that CCB should exert the advantage of our long-acquired trust from our customers as well as our comprehensive advantage as well as our recently acquired advantages in the fintech sphere, especially that we emphasize tech security, information security, et cetera. And we will work hard to further strengthen the above areas. Looking at the annual result and interim result, CCB in terms of R&D and investment, we invest heavily in those areas. In addition, Mr. Liu had also mentioned that we will focus on the building of the digital technology, and we emphasize the technology empowerment of the bank and to help us in the banking world, and so that the fintech could grow in a more healthy and stable way to respond to the need of our customers and to connect better with our customers and to build a fintech that is a new biological environment for a large-scale commercial bank. And we also have a new tech company, and which helps us to realize a fintech engine, so to speak, and to help us resolve the pain points that we have and to better support the fintech in our livelihood and in our business. And for these fintech companies, we believe that they have dedicated expert team, and we believe that this team will be able to support the business need of the headquarter. And in this backdrop, we have built our connection with the government side and working with our peers to share and to empower the companies together. In the meantime, we reach the customers directly to improve our capability of digital operation. I believe that compared with these new Internet companies, the traditional commercial banks, their digital -- or our digital business also have our own features. And we believe that we are also very deeply invested in these areas, and I believe that we will perform well in those new areas. And I won't go into details.

Next question come from [ Ms. Sun Lulu ] of the Securities Daily.

I'm a journalist from the Securities Daily. I have a question regarding the net interest margin. It's down 13 basis points this year. But this March, at the 2019 annual results announcement meeting, your CFO said if the decrease will be within 10 basis points, it will be good. So can you please analyze the reasons for the decrease in NIM and as you're shifting from the real economy? So what are these factors? And how will they impact the NIM in the second half of the year?

Regarding the change of NIM. As you can see, there is a decrease of 13 basis points, but it's not much more than what we expected. Because we are talking about a seismic change of what we are going through. China is in the midst of interest rate marketization, and also, these factors coupled with the pandemic outbreak. To be more specific, there are these factors. First of all, in the first half of the year to respond to the pandemic, the central bank has taken countercyclic measures, which leads to much lower return in bond and securities market, and this is the reason why NIM has been down by 8 basis points. Second, loan returns have been going down as well. LPR is going downwards, and we took proactive measures to strengthen the real economy, reducing costs for companies to finance. And with all these factors combined, loan return rate is down 9 basis points compared with the last year, which reduced NIM by 5 basis points. And another factor is that we have seen more deposits. And that's better than what we expected because the newly added deposit is seldom very orderly and the impact on NIM has been always around 3 basis points. So in general, although NIM is going downwards, and in the long run, the pressure will last for some time. But we believe the situation is still under control. Through lean management, digitalized operation, we will be able to keep NIM at a reasonable level. And we will keep it at a very competitive level in the industry as well. So the reasons are both regarding the macroeconomy and micro reasons as well. The regulators are resorting to strong regulation, and customers have seen a different mindset in managing their wealth, and we are also shifting to the third pillar, wealth management product, guiding our customers in raising their awareness of risk control, especially in the diversification of assets. So they will not rely on deposit with high return. And apart from that, we can also offer good returns to the customer with good services and product. At the same time, we are keeping close eye on the change of interest rates in the external developed environment so we can maintain the coordinated growth of both liabilities and assets. So in the future, there will be not too much pressure on NIM. So we have to strike a balance between micro and macro reasons. Second, we will create more value by seizing the business opportunities in main areas and strengthening our capability in setting prices differently. So we can increase the proportion of the contribution from individual customers. And at the same time, we will be more detail-oriented in management and risk control. So through different and comprehensive measures, we will be able to ensure that NIM will be kept within a very reasonable range in the industry.

Next question comes from Mr. Wang Yaoping from CICC.

I'm Wang Yaoping from CICC. My original question was related to NIM. Actually, we have already heard a very detailed answer from the management. I just want to have a follow-up question. If the current market and the interest environment maintained the same for our duration of our asset in the industry is relatively long, so when would the NIM touch the bottom? And what level would that be? In addition, I would also like to ask about the dividend. We have heard that in China, in terms of the financing structure going forward, it could go to more on the route of direct financing. So for the banks, the indirect financing proportion decreasing, which means that in terms of the credit assets and our risks are lowering, which means that we no longer need to reserve so much free cash to support the credit asset. So from this perspective, is it possible that our dividend ratio might go up?

Thank you for your question. In terms of the NIM further going down, and I think that we need to take into consideration of the overall Chinese system and its complexity. Looking at it from a loss perspective, just now, I emphasized on a few factors. In the meantime, we can also see that with the Chinese economy recovering relatively earlier and the pandemic being under control. In terms of the profitability on the banking side, perhaps it would be able to maintain at a stable level. This is because the market expectation is also changing. And this change, perhaps, recently, you will have -- be able to see that more clearly. Looking at it from personal mortgage rate, we also need to implement the policy that properties are not for speculation. And this mortgage rate is also, by and large, can be maintained at a stable level. Therefore, we say, even if the NIM could face further downward-trend pressure, but we don't think that it will go down by much. Overall speaking, NIM would be kept at a reasonable level. So this is to answer your first question. Second question, I didn't quite actually hear that clearly. Regarding dividend, in my personal opinion, overall dividend policy, I don't think that there will be a lot of changes. The whole asset structure and the adjustment, there will be a process. In the meantime, the Chinese economy and system has one feature. Banks, in terms of the whole asset management scheme -- system takes up a huge percentage. So in this perspective, I believe that commercial banks could have more room for us to play a role. And for example, if I go into details, there will be a lot of examples. For example, for trust and other businesses and commercial banks could all play a role and could all enjoy the potential for growth. And I don't know whether I have answered your question. Thank you.

Next question comes from [ Ms. Li ] of Hong Kong Economic Daily.

[ Ms. Li Zhao Ying ] from Hong Kong Economic Journal. This is the third time that we have an online conference. Last time, we said we would be able to meet at the interim results announcement conference, but it looks like we have to wait until next year. Just now, the Chief Risk Officer looked into some trends in the second half. We just want to learn if the annual results will be able to resume positive growth or will it be very challenging. If it's challenging, will you change your dividend payout measures because there is -- we haven't seen this situation before, negative growth in banking industry. My second question is regarding your overseas business. Any change in your policy towards overseas markets?

Let me take your first question. I'm very glad to hear your question, again. At the annual results announcement conference, I did say that we hope we would be able to meet in person next time. But we didn't expect such a severe level of this public health crisis. And now we have over 800,000 deaths due to the pandemic. So it's so severe, and for that reason, we have to meet you virtually online. And also, thank you very much, [ Ms. Li ], for your support and attention to our bank. Regarding the business performance of the bank, I believe one keyword that we should remember is sustainability. Overall, our business structure and growth are within our expectation and under control. But when it comes to practice, we have to be true to what is going on, on the ground. And what I can tell you is that we will be committed to the 3 aspects that I talked about and care about our own business. You asked 3 questions actually. Your second question was regarding dividend payout. So what I can tell you is that at this time, at present, we don't have the intention to change our payment -- dividend payout policies. And as for your third question regarding overseas business, I would like to defer the question to Mr. Wang.

In the first half of the year, the bank has been granted the license for our branch in Hungary. Up to now, we have over 200 branches in countries and regions around the world. Despite the situation this year, our overseas branches have been rising to challenges and actively supporting pandemic prevention measures. Over 22 overseas branches donated 2 million pieces of protective gears. And for us, for ourselves, we will make sure that all the employees are safe and all the channels are smooth. Risk control has been always our objective in overseas branches. In the first half, apart from traditional overseas business, very quickly, we launched an online business matchmaking platform, and in health care, a special area for health care. In the first half, we have facilitated the export of over 1.3 trillion pieces of health care and pandemic control gears. We have been building up our foundation of clientele overseas with a very stable asset quality. We've been committed to the national policies of stabilizing foreign trade. Our key products have seen very good growth. We continue to invest more in manufacturing industry and foreign trade industry, increasing the level of finance. Well, we have over CNY 7.5 billion of overseas and cross-border financing products. We have been committed to the internationalization of RMB and Belt and Road Initiative. We've been serving Belt and Road companies with financial services, including factoring services, overseas loans, et cetera. So your question is more about our development strategy and that is to serve the so-called 2 cycles. And that is to stabilize the real economy, and we will play our role in supporting the real economy of China. In the first half, the net profit of overseas branches have totaled CNY 2.5 billion. It's down by 35%, and that's mainly due to the pandemic. So looking into the near future, we will be actively reshaping the industrial chain and supply chain globally with customer at the core. We will reduce commission fees and giving up profit, and we will accelerate the digital finance platform. That is the second curve. So we will make progress in the midst of stability, and we will look at the changes of the global financial market and improve the stable development of overseas financial business.

Next question comes from [ Konfa Security ], [ Mr. Yi Ching ].

I'm [ Yi Ching ] from [ Konfa Security ]. I'd like to ask about asset allocation. We can see that for first half of this year, we can see the high interest-bearing liability as well as the supply from the government and the conflicts between those. For example, we can see that the mortgage rate is still coming down and the interbank treasury bond rate is going up. So for the second half of this year, in terms of your asset allocation, will there be any changes? For example, will the credit speed change? Will the credit change speeds? And second, for next year, with the current change of the profit for your ROE and the organic growth coming from within as lackluster, and will this effect from last -- next year? And with the risks going up, in the next year, will you adapt or change your asset allocation direction? Can you please let us know about your strategy for the asset allocation for second half of this year and next year?

We have our Chief Risk Officer to answer this question.

Regarding asset allocation, it can be said that the whole asset portfolio and CCB's strategy and advantages and the development direction of the economy must be in line with one another. So for CCB, in terms of asset allocation, asset structure, for the past 2 years, we have been very stable. Coming into first half of this year, perhaps you will have noticed that in terms of corporate credit business, we have seen a very obvious increase. This is what we said. Whilst solidifying our traditional retail business advantage, we have increased our allocation in the corporate business side. This is to meet our demand of business growth and to meet the demand of prevention of the pandemic. Since the beneficial for all finance policy, we continue to lead in the market, we have innovated some of our development models and we have created new routes for development. These advantages, we will continue to keep them. For the credit side, to solidify our advantage in the retail business and for the corporate business in terms of green finance, in terms of some of our traditional areas and credit business as well as real estate, we will continue to maintain our advantage in terms of the local government debt area. I believe that, again, we are ahead of our peers in the market, and the quantity in this regard is kept very well. We haven't really been affected by any of the issues encountered in the markets such as major bad loans, et cetera. So going forward, we'll continue on this correct trajectory.

The next question comes from 21st Century Economic Daily. [ Ms. Lee ], please?

Question from 21st Economic Journal. CCB is the largest retail bank, even bigger than ICBC. So in the future, will you strengthen your levers to develop a better corporate business? Your NPL ratio is very low and some other banks have seen very high credit cards NPL ratio. So how did you do that?

Vice President, Mr. Lyu, will take the question.

Thank you for your attention to our bank. When it comes to retail business, our bank has formed the largest retail credit finance bank in China. And that cannot be realized without the efforts of the past generations. But this year, we've been faced with unprecedented challenges globally. In China, retail business, among all other business lines, has created opportunities out of uncertainties and crisis. We've been committed to digital bliss and the 3 major strategies. So the retail business has seen very good performance, and we are leading the industry with that. We are confident with our corporate business as well because we have good strategies and a good and professional team and advanced technologies. These will enable us to have very good corporate business, but we need to work hard as well. Globally, ICBC is the largest and leading bank in size and business. It's a respectable bank. And in our course of development, we need to learn from these banks, peer banks, so we can do a better job in serving the real economy as well as the mass public of China so we can increase our value contribution to this country. Regarding credit card business, credit card business is one of our advantages. It's one of our leading business among all the sectors. At present, the -- there are over 100 million customers in our credit card business. Well, we're leading the industry with that size. According to the public information on credit card quality, our NPL ratio is as low as 1.17%, and we are leading industry with that. Despite the impact of COVID-19, we have still seen healthy development of credit card business in the first half of the year. That's reflected in the number of credit cards issued, the size of loans and the size of settlement. We've seen growth in all these aspects, and we are leading the industry in these indicators. So you were asking what the reasons are. I'm not sure we can attribute the success of the business to a single factor because it's related to the strategies of the overall bank. Over the last few years, our credit card business has been committed to the policies of the national government, and we've been doing a very good job in innovative product. And also, we give the front row seat to digital finance. And we can, by doing that, enable ourselves to acquire more customers and keep them in our loop. And we are also reducing the commissioned fees, so we can always put our customers at the heart. So these factors are all contributing to the success story of credit card business. At the same time, we observed that there are some aspects that some improvement is still needed. For example, young customers or the percentage of young customers is far from desirable. Of course, there has been some stable growth, steady growth, but it's far from enough. Now we are in the era of Internet and our customers are largely from the Z generation, so we need to expand the product line. In the near future, apart from existing strategies, we will work on customer structures, product design and other aspects. So that will be my answer to your question.

Thank you. In the interest of time, I think time passes very quickly. The conference will be only 1.25 hours, but it's a bit overrunning now. I know you still have many questions that you would like to discuss about with us, but due to the interest -- due to the limited time, I'm very sorry to let you know that the Q&A session, both on-site and online, will be concluded here. Of course, if you have any further questions, you're always welcome to contact our PR department. We will release our information available and have a very candid discussion with you. Thank you, again, for your support and attention to our bank. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]