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

Ladies and gentlemen, welcome to the presentation of the Interim Results of China Construction Bank for 2021. Next, please welcome our host.

Dear shareholders, analysts, fund managers, friends from the media, ladies and gentlemen, good afternoon. We're very pleased to welcome you all to CCB's 2021 Interim Results Announcement, and thank you very much for your continued interest and trust and support for CCB. Because of the need for normalized pandemic prevention and control, we are conducting this meeting by telephone as well as webcast. The attendees of this conference, we have Mr. Wang Jiang, President of CCB; Mr. Ji Zhihong, Vice President; Mr. Wang Hao; Ms. Zhang Min, Vice President; Mr. Cheng Yuanguo, Chief Risk Officer; and Mr. Zhang Yi, Chief Financial Officer. I'm Hu Changmiao, Board Secretary. The bank's 2021 interim results were officially announced to the public last Friday evening and the presentation materials related to the results were also released on the company's official website in advance today for your reference. Before we move on to the Q&A session, I would like to invite President, Mr. Wang Jiang, to briefly introduce to you the operating results of our bank for the first half of the year. Please welcome Mr. Wang.

Good afternoon, investors, analysts and friends from the media. Good afternoon. First of all, I would like to extend a warm welcome to all of you on behalf of my colleagues at CCB, and I would like to express my sincere gratitude to our customers and friends from all walks of life for their long-standing concern and support for the development of Construction Bank. In the face of the complex business environment and the fierce market competition, in the first half of this year, CCB resolutely implemented the decision and deployment of the State Council as well as the Central Party Committee, and based on the new development stage, implemented the new development concept to build a new development pattern, deeply practice the new financial actions and continue to promote the 3 major strategies: deepen digital management, strengthen comprehensive risk control and strongly support the new development pattern of domestic and international dual circulation and high-quality economic and social development. At the same time, we have also achieved good business performance and improved our business development and market competitiveness. By end of June, the China Construction Bank total asset of RMB 29.8 trillion, an increase of 6% over the beginning of the year. We have achieved a net profit RMB 154.1 billion, an increase of 10.9%; ROA 1.06%; ROE 13.1%. Asset quality remains stable. Nonperforming loan ratio is 1.53% first half of this year. And our strategy implementation highlights as the result of our expansion. First of all, inclusive finance continues to lead the market. CCB relies on its first-mover advantage, further improve the digital inclusive program. The comprehensive benefits continue to highlight and the social impact continues to expand. We have effectively achieved the organic unity of fulfilling social responsibility and commercial sustainability. The bank's inclusive finance loan balance at the end of the first half of this year was RMB 1.71 trillion, an increase of RMB 280.84 billion from the beginning of the year. CCB Huidongni certified enterprises exceeded 5.56 million, with a credit balance of more than RMB 700 billion, creating a risk control system of full process control, and at the enterprise level, maintaining stable asset quality and carrying our inclusive financial services in 14,000 outlets across the bank, realizing the effectiveness of both online and offline services. Second, the financial technology empowerment effect is prominent. As of the above, for our AI cumulative production and location scenario is applied in more than 500 scenarios at CCB Cloud for more than 400 projects in 9 fields to provide support. IoT platform access for millions of various business and relying on technology empowerment to enhance the service capabilities, Construction Bank customers, making sure that our insight is sharper and more efficient. In addition, we have more accurate marketing services and more functional risk control. At the same time, the effectiveness of CCB's financial technology to empower society is also continuing to show. The smart service platform has 160 million registered users, with a cumulative business processing volume of more than 17 billion and providing overall system solutions for a number of banks and exporting intelligence risk control products to more than 900 small- and medium-sized financial institutions. Thirdly, the housing leasing social impact fund CCB resolutely implements the national policy on housing compensation sufficiently for the sound development of real estate development and continues to increase its support for development of policy-oriented rental housing, which has achieved good results. At the moment, CCB's comprehensive service platform for housing leasing has covered 96% of the country's prefecture level as well as above administrative districts, providing transparent transaction services for 37 million individual landlords and tenants. The nationwide CCB housing resident communities reached 323 housing subsidy operates and manages more than 300,000 housing units; support more than 140 guaranteed rental housing projects in pilot cities nationwide; helps supply small, low rent housing units; and has a balance of RMB 105.6 billion in loans for public housing leasing, up RMB 22.1 billion from the beginning of the year. Fourthly, the penetrating service for rural revitalization. CCB insists on combining the service strategy for rural revitalization with the penetrated services with the center of state-owned banks, promoting the opening of 3 major strategies in the field of agriculture, helping to consolidate and expand achievements of poverty eradication effectively, connecting with rural revitalization, promoting high-quality and high efficiency of agricultural residents in 1 industry in rural areas and affluent and rich farmers' lives. By end of June, the balance of private loans of the bank was RMB 2.31 trillion, increase of 4.752% from beginning of the year. In addition, we have covered nearly 80% of villages nationwide. The spillover effect of green finance has deepened. CCB insists on focusing on the country's 2030-2060 targets, set up the carbon neutral and carbon peak working group, continue to improve the top-level design and organizational structure. We continue to nurture various green industries and cultivate through green credit, green bonds, green leasing, green trust and other financial tools. By end of June, the bank's green loan balance was RMB 1.57 trillion, up 16.7% from beginning of the year and the loan ratio of the too high emission industries continue to decline. Sixth, the normalization of digital operation has been steadily promoted in response to the trend of development of the digital economy. CCB continued to explore the digital business model and achieved the results of the industry workers. In the first half of the year, CCB accelerated the construction of 3 central decks around building ecology and expanding users; continued to enhance digital operation capabilities, focused on building a complete operational closed loop from ecology to finance; created CCB Life app, mobile banking and highlighted our business and continued to improve online ecological services and operational channels. CCB, as the first batch of designated operators of digital RMB, steadily promotes the pilot scheme and this expansion of digital RMB in traffic and travel life vehicle payments, education and medical care to stimulate the use of retail in other areas; achieved the promotion of digital RMB indicators, that is promoted by the PBOC and we rank #1 in all these indicators. First, a solid contribution to the high-quality development of the real economy, accurate support for key areas of economic development. The total amount of loans increased by RMB 1.32 trillion from beginning of the year. Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area, in these 3 key regions, the new loans to the public sector accounted for more than half of the business. In addition, for manufacturing industry, as well as emerging industries, private enterprise loans continue to increase. Diverse financing support bond investment growth RMB 281.3 billion, investment banking business to provide direct financing for enterprises more than RMB 400 billion, increased support for foreign trade customers, the cumulative transaction amount of paid goods over RMB 370 billion. Cross-border express loan series products have supported nearly 10,000 customers in total. Second, strengthen the financial needs of serving people's good life, build more than 340 special scenarios in the field of leasing, pension, automotive, community, cross-border, et cetera, and continue to upgrade the cloud studio plus enterprise retail services system, providing more comprehensive, convenient and secure financial services for business and individual customers. And we continue to support the reasonable need of residential household living livelihoods. Personal housing loans and consumer credit loan business continue to develop in a healthy fashion. We continue to accelerate the construction of a mega wealth system focusing on transformation and upgrading of wealth management and private banking, including the CCB and agricultural wealth platform and helping customers preserve and increase the value of their assets through a full range of wealth management funds, insurance, trust, et cetera. By end of June, the bank's personal customer financial assets have exceeded CNY 14 trillion. But the full implantation of corporate social responsibility and solid promotion of continuous support given to small and micro enterprises and fully supports the normalized pandemic prevention and control as well as flood control and relief, the issuance of preferential interest rate loans for related enterprises, RMB 145 billion. And we have donated RMB 20 million to Hunan province, which is affected by the flood. For the whole bank, our 14,000 outlets remain open. The workers' harbor and continue to expand the scope of convenient life services. CCB University continue to educate our coverage of financial inclusion education to people with a total of 48,000 people receiving the training and 3.87 million people benefiting from this. In the first half of this year, CCB continued to strengthen its risk and internal control and its asset quality was stable and improving. In addition, we have improved the comprehensive active and modernized risk control system, incorporated environmental and climate change, fraud risk and model risk into the comprehensive risk management system; continue to optimize risk control as well as enhance digitization and intelligence in risk control capabilities. Although the functions of the risk control platform has been highlighted and the promotion of small business loans and personal loans cloud approval has been accelerated, the risk management system and the investment transaction business has been further improved. The risk screening of financial market transaction business has been strengthened, post investment management of credit bonds has been optimized and the rectification and transformation of the wealth management business has been carried out in an orderly manner. Second, the initiative to strengthen credit control nonperforming loan expectations to achieve double reduction. In CCB, we have always insisted on the importance of credit risk. And for the first half of this year, the bank's nonperforming rate as well as the overdue, they have both reduced and with CNY 82 billion negative scissors, price scissors, of both NPL and overdue, maintaining the best level in the industry. Asset qualities continue to improve. The current global pandemic continues to evolve and the momentum of the world economic recovery is uneven. Although China's economy has continued to recover steadily so far this year, uncertainties in the economic operation are still prominent. In the next step, CCB will continue to adhere to the general keynote of seeking progress in a stable motion, practice the new financial concept, promote these 3 strategies in depth, continue to promote the normalization of digital operation, increase the construction of mega health management system focused on improving the group's comprehensive financial services capabilities, actively fulfill its social responsibility, achieve its own high-quality development in serving the development of the economy and society and giving back to the majority of the investor. Finally, I would like to thank the shareholders and analysts and media friends from all walks of life for their concern and support. Thank you very much.

Thank you, Mr. Wang. Now we will start the Q&A session. [Operator Instructions].

Ladies and gentlemen, we will now start the Q&A session. [Operator Instructions]

The first question comes from Ms. [indiscernible] from Xinhua News Agency.

I have a question regarding the loans under inclusive finance. You have the highest loan size among other banks. The national policy is to require other banks to keep their inclusive finance loans for SMEs to be above 30%. So are you faced with any pressure of marketing and asset quality? With this pressure, will you further reduce the price of loans to benefit SMEs?

Thank you for the question. As for CCB, first of all, to support SME and inclusive finance is our task to put into practice the decisions and deployment of the state council and CPC Party Central Committee. And it's also an important initiative for us to fulfill our responsibility. SMEs are really faced with problems, especially with the uncertainty of the pandemic and the disasters earlier this year. These factors combined have made it very difficult for SMEs. It inevitably has brought some impact on inclusive finance as well as the asset quality. But it should be noted that in the first half of this year, we saw an additional 4 million market players. SMEs have played a dynamic role in the economic development. So to support the development of small and micro enterprises, especially strengthen our support to inclusive finance. This is important because it brought to CCB many opportunities. As you mentioned, in the first half, we had a very high base of inclusive finance, RMB 1.7 trillion. Against that backdrop, we are faced with huge challenges in inclusive finance. In the first half, the daily average loans amounted to RMB 8.1 billion. And every day, we need to collect RMB 6.7 billion loans. So with the high base to support the momentum of inclusive finance and to implement the decisions and deployment of CPC Central Committee and the State Council, this is inevitably a huge challenge for CCB in terms of inclusive finance. But with years of experience, we have set up a digital strategy for inclusive finance, laying a very solid foundation for the next stage of inclusive finance. What's more, looking at the current asset quality of inclusive finance, the risk is under control. In the first half, the NPL ratio is 1.1%. SMEs NPL ratio is under 1%. In terms of due diligence, in the very first half, the pricing of asset loans, as for small and micro enterprises, it's 1.47%. This represents our increased efforts to support small and micro enterprises and our initiative to cut fees and benefit SMEs. We will further enhance our support to SMEs in line with the policy of central government. As for our management strategies regarding financing and risk control, it should be said that currently, micro and small enterprises, the price is far lower than those of our new loans. In the very first half, the pricing was 4.3% for SMEs. While overall, the average rate was 4.68%. Well, there is an issue of covering risks with benefit. But we have enjoyed the policy of targeted RRR cuts and tax benefits. So we can cover risks with benefit. In the next stage, we will implement the central government's policy to cut fees and lower taxes. We will strengthen our efforts to support SMEs. In terms of poverty alleviation, although we are faced with huge challenges, CCB has a smart risk management system. The risk of small and micro enterprises is under control. We expect that by the end of the year, NPL ratio would not be higher than 1.5%. It will range from 1.3% to 1.5%. Thank you again for the question.

Next question comes from Ms. [indiscernible] from CCIC.

We noticed that, recently, the central government has tightened the policies regarding LGFV. So will your corporate credit products be affected? And what's the key priorities for your credit products going forward?

Mr. Wang will take the question.

Thank you for the question. Recently, the central government's initiatives to tighten LGFV-related finance policy is to rectify the irregular local government debt and increase the operability of tax policies. In recent years, we have conducted our credit loan business in accordance with the laws and regulations. Up to now, by the end of the first half of this year, the corporate credit products amounted to RMB 6.6 trillion. Currently, our credit products have been very stable, with abundant products in the pipeline. We are a huge bank in terms of infrastructure, support retail financing as well as inclusive credit loans. We have -- give full play to our advantage in fundamental areas. We have enhanced our inclusive finance business and provide very good guarantee to small and medium enterprises. We also support green development, smart manufacturing and other key areas by putting in more credit loans. In the first half, SME loans increased by 23%. Private business increased by 11.5%. Green loans increased by 16.7%. All higher than corporate loans in general. In the second half, CCB will continue to enhance the adjustment of credit structure in corporate loans, and we will put an end to substandard credit loans to local government debt. We will give priorities to inclusive finance, advanced manufacturing, new energy, strategic new industries and rural rejuvenation. We will maintain a stable growth of credit loans with continuous optimization of credit structure. Besides, to address floods and pandemic situation in some areas, we strengthened our efforts to support relevant regions and enterprises by helping them resume production and business. Thank you again for your attention.

Next question comes from Hong Kong Commercial Daily.

This year, due to the pandemic, we are still meeting online and we have had this results announcement conferences for -- in virtual manner for 2 years. I look forward to an in-person meeting next time. This year, you have regained a 2-digit growth and you have huge increase in profitability in the second quarter. What's the reason? And do you expect to maintain that momentum going forward?

Thank you for the question from a friend from Hong Kong. You may have noticed that after the major banks released their business results that CCB has reached 2-digit growth. I think there are a few reasons behind that. First of all, Chinese economy has remained stable, laying very solid foundation for the development of the banking industry. China has successfully contained the pandemic and allowed enterprises and market players to resume production in the business. The fundamentals of Chinese economy has been stabilized, leading to a huge demand for credit service from banks. As we mentioned, the new credit loans were CNY 1.32 trillion. The increase in credit loans have surpassed the growth of asset. So this helps us effectively expand our NIM income and improve our profitability. As for CCB, we seriously put into practice the decisions and deployment of the CCP Central Committee and State Council, especially in our efforts to put into practice the so-called new finance and the 3 major strategies. We have consolidated our traditional advantages. The first curve and value creation have been enhanced. At the same time, the second curve has gained momentum, opening a new path for the development of our bank. In the first half, the overall interest income has risen by 5.2%. Noninterest income, fees and commissions have increased by 6.8%. That's why we have maintained a healthy growth of net profit. Thirdly, we have further enhanced our risk control capabilities, and we have maintained good asset quality. In the first half, impairment loss was down 2.7%. At the same time, in the first half, we strengthened our efforts to dispose of nonperforming assets. The size of disposal amounted to CNY 87 billion, a record high. We effectively exposed risks. So those listed as nonperforming loans, some of them have very good quality. So in the first half, our cash collection rate amounted to [ CNY 27 billion ], increasing by 114%. Disposal of nonperforming loans, the recoup of profit also contributed to the increase in profit. The second reason, as you know very well, is that in the first half, due to the impact of the pandemic, commercial banks have made coordinated efforts considering the pandemic. To prevent the pandemic from affecting our business, we took a prudent approach and enhanced our efforts to release credit. So the base in the first half was very low. The increase of net profit, 4.92%, was based on a low base of last year. So that was only a high point, a cyclical high point. So that was probably the highest point in this year. As for the whole year, we believe that this year's momentum would be making progress amidst stability. And in the future, the bank's development will be in line with the Chinese economy. All indicators, including financial indicators, will maintain a balanced manner. As for the whole year, we will not reach the growth rate of 10.9%. It might not be that high, but it will be in line with the macro economic development, and that is expected and I think that is realistic.

Next question comes from Financial Times.

Good afternoon, management. Here is my question. Recently, the government tightened policies related to Internet companies. Will that bring any challenge? What differentiates CCB from other Internet companies in terms of fintech? And what are your advantages?

Ms. Zhang Min will answer the question.

Thank you for the question. Fintech is one of the drivers -- engines that boosted our growth. In the results press conference in March, we elaborated our fintech strategies. Mr. Wang also talked about our progress in fintech in the first half. Fintech is in itself finance. So to serve people's welfare is the purpose of fintech technology. Since 2018, we have initiated our Top+ fintech strategies. To expand the market, we opened a fintech ecosystem. We have strengthened our support with technology and we have made progress in digital operations. For example, inclusive finance. Our inclusive loans have been ahead of the curve for many years with very good asset quality. That also shows how we can make use of technology and digital operation to reconstruct small and micro enterprises. The next example is smart governance. We have reached strategic agreement with more than 100 municipalities in China. In helping them building governance platforms, we have to rely on fintech technologies, which is quickly responsive and agile. Prudent management and supervision has become the trend. That also provides us a huge opportunity in settlement and payment and other areas. We have many advantages. First, we are always people-oriented. We serve the country and serve the demands of people for better life. We have a huge customer base. Second, we have a huge amount of data. We can quickly respond to customers' demand and changing demand, especially in different user scenarios. Thirdly, we have online and offline channels, offering financial services in different scenarios. So we can support inclusive finance, house rental, rural rejuvenation and smart governance. At the same time, we're also relying on CCB Life as a platform. We are going deeper in life-related scenarios to support the ecosystems surrounding the bank's branches. We have realized the 2021-2025 fintech strategies recorded top 8 -- Top+ 2.0, laying out the major tasks for the next 5 years. In the future, CCB will elaborate on its strategies in fintech. We will build ecosystems based on a new finance system. We will do a better job in enabling financial services and enabling our customers with fintech. Thank you.

Next question comes from Ms. [ Gan ] from Taiping Asset Management.

I have a question regarding NIM. We saw that in the first half, CCB's NIM was down to some extent. Could you please help us understand what the reasons are? And what is your outlook for NIM going forward? When will we expect to see the NIM to turn around and resume growth?

Mr. Zhang Yi, our CFO, will take that question.

Thank you, Ms. [ Gan ], for the question, and thank you for your attention to our indicator of value creation. It should be said that over the last 2 years, NIM across the banking industry has been contracting. One reason is that the potential economic growth is contracting globally. That is coupled with the pandemic. Different countries have taken accommodative monetary and fiscal policies, and that is compounded by China's efforts to marketize interest rate, so that will surely lead to lower interest rate. If you look at CCB, since the start -- onset of the pandemic, as Mr. Jiang said, CCB strengthened its efforts to support real economy. And we also implemented central government policies to cut fees and benefit enterprises. So our earnings from private banks in inclusive finance has gone down and the interest cost has gone up. That's why our NIM contracted. In the first half, our NIM was 2.13%, 7 percentage points down year-on-year and 6 percentage points down compared with the end of last year. But you may have noticed that in Q1 and Q2, the NIM has remained at the same level. So the impact of LPR was prominent in Q1. However, in Q2, the return of our major assets, loans, debt have remained stable, and that offset the impact from rising interest costs. Ms. [ Gan ] also asked about our outlook for NIM going forward for the rest of this year. Personally, I think the contraction of NIM will stabilize in the end of this year and the beginning of next year. We will strengthen efforts to adjust our structure, especially in loans, deposits and risk pricing of major products. We believe that, overall, in this year, our NIM will remain at a stable level.

Next question comes from Mr. [indiscernible] from CICC.

This is [indiscernible] from CICC. Earlier, we have heard the discussion about the NIM and I'll continue on this line. And I can see that for Q1, actually, we have seen very good results and for the speed increasing. And for the first half of this year, actually, the speed slowed down. And what is the reason behind this? And I would also like to ask in terms of the whole year increase of the income, what is your outlook and expectation?

Thank you. I'll have Mr. Zhang Yi, our CFO, to answer this question.

Thank you, Mr. [indiscernible] for your question. Yes, indeed, for our intermediary business, and this reflects the bank's capability of serving their customers as well as their capabilities. The end for CCB, we continue to pay attention to intermediary. For first half of this year, we have realized intermediary business of CNY 69 billion, and up by 8%. Compared with Q1, this is down by 2 percentage points. So overall speaking, the trajectory is still at a very healthy level. And actually, for intermediary business and for the whole year, if we look at the data and for Q1, because there is the Chinese New Year, and we know that Chinese New Year, this is a peak season for people to carry out their investment and various activities. So for the whole of the first half of this year, with respect to some our payment business and trust business, we continue to see fast growth in terms of wealth management products because of the transformation in this regard and we continue to see the improvement in this regard. And we have also seen the growth speed by 6.8%. And for the whole year, for intermediary business, I think that we would be able to keep it growing at a healthy level, because you can see that for our intermediary business, on one hand, it is on the payment and settlement and they account for over half of the business of intermediary business segment. And this is based on our very rich and diversified customer base, especially in recent years. And we have seen a large scale of fintech empowerment and this is the area whereby it's very stable. And secondly, for our large-scale asset management business and in addition, we have also built the CCB [ Jianrong ] brand. And in addition, with the fintech business, it has enabled us to empower our customers. And this part of the business is also very stable. And thirdly, for our corporate business as well as the comprehensive business, including, for instance, the building of the supply chain platform and for our business, and we have the upstream and downstream. So this you would see that, for instance, undertaking business and the bond business, et cetera, securitization business and all these capabilities are improving and which, therefore, helps us with the payment settlement business. And therefore, for the whole year growth, I'm very positive and confident. Thank you.

Next question comes from [indiscernible]

For the disposal of existing assets and the issuance of new asset management products, can you please elaborate on that.

Mr. Ji, our Vice President, will take the question.

Thank you for the question. The asset management services reform is a topic of great interest. I believe it improves commercial bank's healthy development. We have been actively pushing forward the transformation of assets wealth management products. As for the progress of the disposal of existing assets, it's up to expectation, even higher than expected, in the first half CNY 11.23 trillion. Fixed interest products increasing by 241%. Nonstandard product over CNY 160 billion. I believe the own balance sheet asset is still under control with good asset quality and provision is in line with on-balance sheet assets. Sources of transformation, we've been actively setting up a new system for asset management systems, including different lines of works from [ usage ] to asset management. In the first half, wealth management products have recorded an income of CNY 9.1 billion, increasing by 6.8%. Our subsidiary of wealth management, since its opening 2 years ago, has seen fast growth of asset size with stronger capability, strong profitability. By the end of first half, they have managed over 700 products, all in accordance with the new rules and the total size is over CNY 960 billion, increasing by CNY 240 billion. In the first half, the net profit is RMB 530 million. Going forward, we will work closely with regulators and move forward with the disposal of existing assets in an orderly manner. And also in the 14th Five-Year period, our bank has listed big wealth management as our major strategies, we will continue to pull in the good resources of wealth managing products so we can make sure that our products complement each other in a more diversified portfolio, we will strengthen our capability of individual investments, and we will satisfy our customers' demands for investments in the wealth management in all rounds. We will take full efforts to protect investors, individual investors so we'll create more value for customers. We will help customers realize the asset preservation and appreciation.

Next question comes from UBS, Mr. Yan Meizhi.

This is Yan Meizhi from UBS. I would like to ask one question with respect to asset quality. And we noticed that for CCB asset quality for first half of this year, we see that it is very stable or actually improving in terms of NPL, as well as the overall NPL, special mention loans, et cetera, it is all decreasing. In addition, we also noticed that mainly due to the recovery of the pandemic as well as the support from the government, so for instance, once these policies, they expire, and once these policies exit, will this cause the decreasing of the asset quality? We also see that for first half of this year, for example, rental as well as the property business, the NPL has increased. So can I please ask the management team to help us understand about the second half of the year of the asset quality trajectory as well as the provision, et cetera.

Thanks for your question. We'll have our CRO, Chief Risk Officer, Mr. Cheng Yuanguo, to answer this question.

Thank you, Ms. Yan, for your question. At the moment, people pay great attention to the impact of the pandemic on asset quality. During the pandemic, with respect to the policies that was implemented as well as the pandemic recovery in control, we have seen that it has really improved the society's economy, et cetera. And in addition, for CCB, we have implemented all the requirements by CBRC and continue to optimize our structure and to enhance anti-cycle regulations as well as the prudent running of the business. For the first half of this year, we have realized NPL and overdue loans, both the reduction for NPL, 1.06% compared with the beginning of the year, down by 3 bps. And for overdue loans, 0.8%, down by 1 bp. In terms of the quality, we can see that we have a solid foundation. In terms of our coverage ratio, is 222.39%, up by 8.8%. Overall speaking, in terms of the impact of these policies on our asset quality is limited. It's because for all these requirements from the regulators, we have always adhered to them and always implemented them and we have divided them very strictly. In addition, we have not had this impact our risk categorization. For last year, we have already done work in the control of risk and through the differentiation as well as enhancing the disposal work that we carry out. And we believe that in terms of the risk, we have already released a lot of them. And for this year, we'll continue to work on this basis and continue to enhance the asset quality. And for the next step, we will work hard on the stabilization of the quality as well as the prevention of risk and continue to be very prudent with respect to the international environment and to carry out our risk prevention work well. And for the second half of this year, we still continue to see risks and uncertainties and we need to see that. For China, we can see that our economy is recovering and we're seeing very good momentum. In addition, our asset quality is very good. In terms of our capability of shouldering risks, it is still very stable. Thank you.

The next question comes from Guangfa Securities.

I'm from Guangfa Securities. I have a question regarding deposits. In the first half, the bank saw an 8% increase in deposits. Why is that? What measures did you take to boost that growth? Recently, we have observed some new policies regarding deposit mechanism. Can you please elaborate on your outlook for the reform of deposit-related policies?

Mr. Zhang Yi, our CFO, will take the question.

Thank you, Mr. [indiscernible], for the question. In the first half, CCB worked very well in deposits, with an increase of 8.3%. The first half, a bit with the contraction of the margin effect of the monetary policies. Our banks have taken a lot of measures to expand the deposits. I believe it all comes down to our customer base. In the first half, as you can see, our corporate customers have exceeded 7.5 million and accounts have exceeded 9 million. Individual customers have exceeded 700 million. Through digital transformation, we continue to build new user scenarios in an ecosystem. In the first half, corporate, individual, retail and institutional customers have all seen very stable growth. And secondly, we were able to see the opportunities from the stable macro economy growth. And we focused on key sectors, key customers and key areas where the money flows into. So we worked on these areas, and we were able to maintain a stable level of debt ratio. In the first half, as you can see, we have maintained the balance of different types of deposits. And we have strengthened our coordination between the types of deposits and their duration. In the second quarter, we have done a very good job in controlling the interest-paying rate of our deposits, meeting our expectations. In the first half, the total deposits are RMB 22.3 trillion. Our domestic personal loans -- deposit increased by 9.7%. Interest paying ratio in Q2 is very stable, recording a 1.67% growth compared with the first quarter. You've also asked about the reform of pricing strategies. And now the policy is to add percentage points on the benchmark interest rate. Second, the upper limit of benchmark rate has been adjusted. The interest rates at the long end are increasing while decreasing at the shorter end. So I believe this is reasonable. And we can maintain a reasonable and healthy, competitive environment, and this will help us optimize the structure of deposits duration. And this is in line with the national policy to control interest paying ratio of the deposit. So as for the whole year, I believe the interest paying out ratio will be stable for the full year.

Next question from [indiscernible], coming from Xinhua News.

This is [indiscernible] from Xinhua Agency. And I'd pay attention to green financing. I'd like to ask, what about your green financing development for first half of this year? We can see that the regulators continue to strengthen the development of green financing. And in which areas would you work harder on this area in the second half of this year?

Thank you. We'll have Mr. Ji Zhihong to take this question.

Thank you. Thank you for your attention given to this very important issue. In September 2020, in the United Nations Conference, Mr. Xi Jinping has announced the carbon neutral target in China, and this shows that our commitment to the development of carbon neutral and carbon reduction. CCB, as a major bank, we are very dedicated to implementing all these policies of the government. And in recent years with respect to the implementation of green finance, we have done a lot of exploration work in this regard. In addition, we have also achieved great results. We will continue to enhance the development of green finance to help our country to realize the dual carbon targets. And in terms of the 14th Five-Year plan for our bank, we have further clarified this in our pathway and in the following areas. We will be doing well in our work. And first of all, we will continue to strengthen the overall architecture for the Board as well as the management team with respect to their overall management. And coordination will further enhance this. As we have heard, we have established the carbon neutral task force committee. And we will also -- we also have implemented and come up with the action plan to really guide us in this area of work. Secondly, we continue to enrich our green financing products. We have innovated to come up with saving energy loans, green loans, et cetera. And based on our very diversified advantages in the bond area, we continue to have a green rental, green financing, green trust, et cetera, for various green products in the system. In addition, in total, we have launched CNY 2.4 billion loan -- green loans as well as the transformation loans. We have undertaken for the first batch of carbon-neutral loans as well as development loans. By end of the first half of this year, for green loans, we have CNY 1.5 trillion, up by 16.7%. We continue to see the improvement in its mix. And in addition, with respect to the strengthening in terms of the resource allocation assessment as well as flow chart, et cetera. And we have a very targeted plan to continue to work on the transformation of green finance and low carbon. We continue to support new energy as well as green industries' development and continue to enhance the management of these high-emission industries. And we hope that these high-emission industries will continue to see their carbon reduction being reduced. In addition, we continue to put the environmental risks into our portfolio, and we continue to monitor the process and to manage the relevant customers. And we pay great attention to the consumption of energies as well as carbon emission as well as its impact on the manufacturing environment. In terms of the credit rating of companies for environment as well as the risks, we'll have a more diversified assessment in terms of the approval process and we have a veto mechanism. And we have enhanced on the management of environmental risks and to enhance our capability of screening the clients and to launch as well as work with relevant departments to push forward the assessment for climate risks.

Question comes from Ms. [ Chao ] from the Banking and Insurance Newspaper.

China has fought a choice battle against poverty. So as a bank, how do you solidify your achievement in poverty alleviation and serve the national strategy to renovate rural areas?

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

Thank you for the question. CCB has paid very high attention to poverty alleviation. With China's achievements in lifting its population out of poverty, to solidify the achievement of poverty alleviation and move forward with the national strategy to invigorate the rural development, we will help rural areas work on key areas, from food security to agriculture missionary. We will continue to strengthen our support to those areas that were just out of poverty. And we will solidify the achievement of poverty alleviation in combination with agriculture renovation. By the end of the first half, we have launched a large number of branches, covering 80% of the villages in China, offering financial services to over 10 million rural villages. And by using e-commerce, we help grass root government do their governance work properly. And we have launched both online and off-line rural services platform. And we also set up smart governance platforms. We offered over 600 items of online services. By the end of the first half, the platform has granted RMB 2.1 billion online loans. Third, we will strengthen our efforts to grant social inclusive loans. We will make sure that we support rural development with its agricultural products and infrastructure. By the end of the first half, our loans balance was RMB 2.31 trillion. We will use Internet Plus and Big data to enable our rural and social inclusive financial services. So we have a whole range of online loan product. We will combine financial and nonfinancial resources on dairy industry in Mongolia, in -- [ who are our key ] industry. In [ Yunan ], we have started our exploration. Going forward, with the new finance concept, we will enable more open platform and convenient user scenarios to explore the potential in this big industry.

Ms. [ Diane Q ] from China Securities paper.

I'd like to ask with respect to the requirement of mortgages from the regulator and how big of an impact do we have? And how would the CCB cope with this?

Thank you, Ms. [ Diane ] for your question. We'll have our CRO, Mr. Cheng, to answer this question.

Thank you, Ms. [ Diane ] for your question. Since this year, for CCB, we continue to adhere to the policies of stabilizing the land price as well as the housing price and the houses are for living, not for speculation and to participate very strictly with all these policies. And with respect to mortgages, we have seen the mortgages has grown in a stable fashion. And in terms of percentage in the total loan size, it has continued to reduce. For the first half of this year, it is CNY 6.1 trillion. And it has grown by 7% compared to the beginning of the year and from the short term. And I believe that this will affect the newly increased mortgage portion of CCB. However, because we have already planned for enough of a buffer time period and for the overall impact on this year, it is something that is controllable. And for the long term, it is -- the new regulations can help the property market to become more optimized and to make sure the relevant business can grow at a healthy fashion. And the next step, we'll continue to launch our mortgage services in an orderly fashion and to continue to help the growth of this part of the business. In the meantime, in terms of personal loans and credit card business, we'll continue to work hard and utilize the advantage of the fintech to further enhance our scenario planning, and in addition to help us with our growth of the retail loans. In addition, CCB, utilizing our traditional mortgage advantages and we continue to launch the leasing business, and we have seen very good results in the society. And in terms of our rental business, we have covered 96% of all the local county level, cities and locations and we continue to support about 114 projects. In terms of public leasing business, we already have reached CNY 160 billion. In the meantime, we can also see in terms of customer acquisition as well as monthly active users, we'll continue to see our capabilities improving in this regard.

Next question comes from Goldman Sachs.

My question is regarding capital adequacy ratio, or CAR. Your CAR decreased compared with the beginning of the year. Will you issue more financial instruments to replenish assets to boost your CAR ratio or CAR ratio? And what's the outlook for your CAR ratio for the rest of the year?

Mr. Zhang, our CFO, will take the question.

Thank you for your interest in this issue. As we know, CAR is the benchmark for a bank regarding its ability to fend off risks. We've paid a high attention to our CAR ratio. In the first half, our CAR ratio was 15.5%, down 8% compared with the beginning of the year. I believe this is the low point, relatively speaking, as for the whole year. In the first half, net asset is up 3.31% due to our dividend payout of CNY 81.5 billion. I believe we have included in our consolidated balance sheet in the first half. In terms of weighted risk assets, in the first half, weighted risk assets is up 6.27% because we have sped up our granting of loans. Loans and expenses have increased by 7.9% for the first half. So that was the result of our strategy to grant loans and make profit as early as possible. So I believe CAR reached a low level in the first half and we'll expect a rebound in the second half. Among major banks in China, CCB is ahead of the curve in terms of CAR ratio. Our CAR ratio has been very robust. We have been committed to both intrinsic capital accumulation and external capital replenishment. So we've been consolidating our intrinsic capability of asset creation. And we will, with intrinsic asset replenishment and that will be coupled by external asset replenishment. For example, in early August, we issued a secondary capital bond worth CNY 80 billion which received very good feedback. And through transformation of asset-related strategies, we will push forward the development of light-asset business so we can improve our management of CAR ratio and other indicators.

Our next question comes from Mr. [indiscernible] from CSA.

I'd like to ask with respect to the digital currency. And we know that on the 16th of July, that the Central Bank has published a white paper and they talked about the development framework. I noticed that the CCB is also the first batch of these banks that have participated in the pilot scheme. And how has the progress been in this pilot scheme?

Thank you, Mr. [indiscernible], for your interest in digital currency. And for this question, we would like to invite Ms. Zhang Min, our Vice President, to answer this question.

Thank you, Mr. [indiscernible]. And yes, indeed, the digital currency in terms of our payment system, it is great, meaningful. It has the Fiat currency status. In addition, it also meets the demand of the convenience that is required by the customers. And you can see that in the white paper, it has also mentioned that for CCB, actually starting from 2017, under the unified organization of the PBOC, we have participated in this work already. And we have done 3 areas of work. And the first one is to iterate the digital currency work in CCB as well as e-wallets to facilitate the flow of digital currency. And second, we also adhere to the principle of stable and security and safe, et cetera. So in -- last year, we have already started our pilot scheme and the #3. And we have worked hard on some of the innovation work in terms of smart transactions as well as its transactions with hard wallet, and this is to provide the community and society with a more convenient way of making payments. And so far, in terms of the digital wallet, and we already have about 7 million individual wallet as well 120 corporate wallets, totaling about 1.8 billion transaction in total. And we can see that it is already covering every aspect of our life in terms of dine-in services, the transport as well as a lot of smart businesses. So going forward, for the next step and for CCB, we will continue to follow PBOC's guidance, especially with our advantage in terms of services to our customers as well as fintech. We'll continue to carry out our research in the area of fintech as well as the digital currency. And we'll continue to make our support and contribution in this regard of the development of digital currency.

Thank you, Mr. [indiscernible], for your question. I would like to thank Mr. [indiscernible], for your question in the early stage. And we have already made the announcement for our presentation of our interim result announcement, and we have also collected all the questions that investors were interested in. And at this time, we have also opened up the online [indiscernible] and we have compared these questions that we have collected versus the questions that were posed. And I believe that most of these investors' questions online, we have covered them all. And if you have any further questions, we welcome you all to get in touch with us either by e-mail or by telephone. And we will try our best to respond to your questions as soon as possible. The management team just now have already shared and had an in-depth communication with everyone, and we hope that we would be able to help everyone to better understand the strategic moves that CCB is carrying out as well as development of our business. If you have any further questions, we welcome you all to get in touch with IR department or our office. And I would like to thank you again for the attention and care you give to CCB. I also wish you all great health and smooth work. And this is the end of the interim result announcement of CCB. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]