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

Respected investors, analysts and media friends, ladies and gentlemen, good afternoon. A warm welcome all of you to China Construction Bank's 2024 results press conference. Thank you all for your continued trust, care and support for CCB. This conference has two venues in Beijing and Hong Kong. So we can have online and off-line sessions. And it is also broadcasted to the investors and also shareholders and public. In Hong Kong venue, we have the President of CCB, Mr. Zhang Yi; CFO, Mr. Sheng Liurong. In Beijing venue, we have the Vice President of CCB, Mr. Ji; Mr. Li Yun; Mr. Li Min; and Mr. Li Jianjiang. And those present also includes the directors, independent directors and independent representatives and also the relative heads of departments. I'm Wang Bing, the Vice President. The interim results have already been broadcasted to the public at the end of August, uploaded to our website. And we will invite Mr. Zhang Yi to give us a speech, then we will have the Q&A session. Mr. Zhang Yi, please.

Dear investors, analysts, friends from the media, good afternoon. Welcome to CCB 2024 Interim Results Press Conference. Thank you for your continued care, trust and support to CCB. In October 2005, CCB was listed in Hong Kong Exchange. I was fortunate enough to be a member of the IPO team fully participating in the listing preparation and roadshows. I witnessed the historical moment when 0939 was officially listed. The IPO seen 19 years ago is still vivid in my mind. Over the past 19 years, our operational achievements have already been witnessed by all of you. At this moment, I'm very happy to report to you the first half of this year's results and also our next steps. I feel very dearly and happy to communicate with you face-to-face. Since the beginning of the year, CCB has adhered to the guidance of Xi Jinping's Thought on Socialism with the Chinese characteristics for a New Era, and we have also implemented the spirit of the 20th National Congress of the CCB, the various work conference of the CCB, and also the central government. We resolutely implement the decisions and deployment of the central government and the state council and also strive to make vigorous efforts, implement new initiatives and practices. Our development quality has continued to improve with operating performance being strong. Overall, our business development has been balanced and coordinated. Asset quality remains stable. At the end of June, the group's total assets reached RMB 40.29 trillion, up by 5.14% from the end of last year. Total liabilities, RMB 37.04 trillion, up by 5.37% from the end of last year. Net profit, RMB 165 billion, NPL ratio, 1.35%, down by 0.02% [Technical Difficulty] advantage among our peers. Net interest margin 1.54%, return on assets, 0.84%, return on equity, 10.82%, capital adequacy ratio of 19.25%, cost-to-income ratio 24.15%. These figures are leading in the industry and have also laid a solid foundation for more sustainable and secure high-quality development in the future. First, we've adhered to our main responsibility and core business, focusing on high-quality supply to serve as a main force to the real economy. We have taken several new steps and we're also focusing on the new quality productive forces, innovate evolutional tools, build the service system and create new models to the [Technical Difficulty] companies. And the balance of loans to high-tech companies reached RMB 1.8 trillion, increase by 12.31%. We also provide continuous support to tech companies through equity, bonds [Technical Difficulty] and other services. Green Finance will also focus on green loans [indiscernible] low carbon trend and the balance of green loans reached RMB 4.46 trillion, up by 14.93% from the end of last year. The bond investment portfolio directed is over RMB 200 billion to the green sectors. There were also comprehensive business such as green farms, futures and consultants, all are flourishing. In the inclusive finance, we also combined offline and online outlets [Technical Difficulty] and optimize our product system. The loan balance is RMB 3.29 trillion, [Audio Gap] 3.42 million customers, maintaining our position as [Audio Gap] financial institution with the market -- the largest market supply. We've also continuously improved comprehensive service system, extending our services [Audio Gap] RMB 3.38 trillion, up by 9.54%. In pension finance, we also [Audio Gap] coordinated development and [Audio Gap] various batch of pension [Technical Difficulty] we made progress in building integrated service system, covering pension fund, pension refinancing, [Technical Difficulty] CCB lines and platforms, externally we have increased the support for core digital economy industries, serving the digitalized [Technical Difficulty] and the industrial digital [indiscernible] The balance [Audio Gap] [ RMB 790 billion ] loan originations and [indiscernible] effective supply. The proportion [Audio Gap] BA and the Chengdu-Chongqing region was increased in our system, meeting the loan demands of these areas. And for the high-level opening up, we have new progress. We provided RMB 1.18 trillion in trade finance, cross-border RMB settlement, volume increased by 36.7% year-on-year, U.K. RMB clearing banks accumulative clearing volume. It also exceeded RMB 100 trillion maintaining our position as the largest RMB clearing bank outside Asia. We've also actively supported the construction of new model for real estate development, supporting the three major projects and actively promoting the implementation of real estate financing coordination mechanism. Second, we have adhered to the principal finance serving the people, focusing on professional dedication to effectively meet customers [Technical Difficulty] financial service needs. In Corporate Finance, we've deepened the integration of commercial and investment banking and domestic and foreign currency operations. We've also expanded our service radius through digital platform based comprehensive and ecosystem oriented operations. We've also created differentiated competitive advantages through product and the service innovation. We now have a 11.34 million corporate customers and 16 million corporate RMB settlement accounts. We've also upgraded product series such as network [Audio Gap] Cross border Quick Loan and multibank fund management system. In Personal Finance, we've deeply implemented the new retail 2.0 action to address customers' differentiated needs. We've built a service model of a direct operation in basic customer scenario, direct operation in private domain of a potential customer [Technical Difficulty] for high-volume customers, et cetera. We now have 762 million individual customers and entering -- and also manage our financial assets exceeding RMB 19.74 trillion. In the field of treasury and asset management, we've also built diversified product platform to meet the demands and now the total Asset Management business scale reached RMB 5.2 trillion. We have deepened the tiered and classified management of Interbank banks, and the CTS business number and the fund volume continued to lead the industry. We've continuously promoted the construction of a strong custody bank with total assets under custody exceeding RMB 23 trillion. Thirdly, we've adhered to endogenous high-quality development is seeking effectiveness in balanced coordination to achieve growth and improvement in quality. We've optimized our cost structure. We've accelerated the growth of core [Technical Difficulty] and increased support for key areas and weak wings, loan growth in strategic emerging industries, manufacturing, inclusive finance, green finance, [Technical Difficulty] enterprises have exceeded the average level. [ Non-credit RMB 0.9 billion ] from the end of last year. We've revitalized the existing resources and continuously reduce the proportion of inefficient assets to improve resources, utilization efficiency, we've improved liability quality by building an enterprise level, fund circulation [Technical Difficulty] focusing on source funds and vigorously expanding high-quality liabilities. The proportion of domestic deposits is 43.94% and the deposit interest payment rate has decreased by 5 basis points compared to the same period of last year. We have enhanced capital quality and efficiency, promoting the implementation of new capital regulation and the deep integration with business operations. We continuously improved capital use and capital return, all levels of capital adequacy ratio is improving compared to the end of 2023. We've improved income quality by reasonably arranging asset and liability allocation, strengthening price management on both ends and stabilizing the contribution of net interest income. We have adhered to creating value through service, expanding income growth points to high standards and accelerating emerging areas such as intermediary businesses, wealth management, consumer finance, et cetera. We increased investment in strategy priorities in technological innovation and reducing general expenses, operating expenses decreased by 1.67% compared to the same period of last year, and the cost income ratio continues to maintain a good market level. Fourth, with adhere to lean management focusing on quality and efficiency improvement with notable results in integrated and intensive operations. With refined group management responsibilities, improving coordination between the head office and subsidiaries as well as domestic and overseas and enhancing vertical and look through management the group's operational synergy has continued to strengthen with overseas and comprehensive operating subsidiaries showing overall positive performance. We built a self-reliant and controllable digital tech innovation system, accelerated the digital infrastructure development, increasing the application of AI and continuously build the CCB Cloud brand, We enriched -- enhanced our multilevel computing power, maintaining an industry-leading position in computing power and service capabilities. We promoted cloud-native and unit-based architecture transformation forming a multicenter and multi-active layout. We use technology to reduce burdens and empowering employees. In the first half of the year, intensive operations expanded to 308 items with over 98% of RMB accounting and foreign exchange remittance businesses being handled intensively significantly improving operational efficiency and user experience. We've deepened ESG management, fully integrating ESG factors into governance, business operations and risk management. We've continuously optimized management climate risk and expanded the actability of financial services protected the rights of financial customers and strictly guarded the bottom line of data privacy security and guard -- and built a broad platform for employee growth and management. Our sustainable development achievements have been widely recognized our MSCI ESG rating is AA with our rating score ranking among the top major banks. Fifthly, we adhere to bottom line thinking addressing both symptoms and root causes and relatively serve as a stabilizer for financial stability. We improved the comprehensive financing management system, strengthened group-wide integrated risk management, fully leveraged intelligent risk control capabilities and prudently and orderly resolved key risks, total has improved in both quality and quantity. The group's nonperforming loan ratio has decreased steadily. The coverage ratio is 238.75% indicating good asset quality and risk composition ability. Our comprehensive risk management system has been improved. We've optimized end-to-end group risk management process with effective checks and balances and coordination. The three lines of defense collaborative risk control mechanism has become more mature. We've promoted the construction of an enterprise level risk management platform improving the risk panorama and continuously enrich management means and tools enhancing our management capability levels. Compliance has continuously strengthened with reductions in regulatory finance and operational risk loss incidents. Digital compliance system is maturing. The employee behavior management, anti-money laundering and sanctions risk control are solid and effective. In the second half of the year, we will continuously focus on high-quality development, enhancing our risk awareness, overall perspective, develop mindset, customer focused, collaborative approach and competitive edge, we will adhere to maintaining integrated and innovation, focusing on main responsibilities in core business. We will integrate all aspects of working to a broader context of deepening reform, identify the focal points, and following the path of financial development for Chinese characteristics. We will focus on those following three areas: We would demonstrate stronger commitment and action in serving high-quality development re-economy, we will strive to meet the reasonable financing needs of the re-economy, increasing support for major strategies, areas and weak links and more precisely serve high-quality opening up and coordinated recent development. We will provide good support in financial services for ensuring housing delivery and three major projects. We will focus on supporting the development of new productive forces, putting all effort into five major areas of finance. We will accelerate the development of tech finance and empower the cultivation of new product [Technical Difficulty] also finance to maintain [Audio Gap] improve the service system for pension finance enhanced product competitiveness and further enhance our digital operations and ability to serve the development of the digital economy. We will pay more attention to overall coordination and comprehensive promote five major actions, credit risk at retail credit action to create more multi-point business advantages and further consolidate our market leading position, fund stabilization we will optimize liability structure and provide more abundant and stable funding sources to serve the real economy. Intermediary business, quality improvement, we will enhance comprehensive professional service capabilities, providing customers with more and better integrated smart services. We will reduce cost and improve efficiency to strengthen cost and expense management, deepening capital intensive transformation and seek benefits through comprehensive cost management. Customer cultivation, we will focus on both new customer management and existing customer cultivation, strengthening group-wide multi-dimensional collaboration and deepen comprehensive customer management. We will promote better operational management to ensure a steady and far-reaching business development with optimized subsidiary management to enhance group strategic synergy. We will improve the management efficiency of overseas institutions to enhance international capabilities. We will strengthen group technology resource allocation and optimize data empowerment to further solidify technological support. We will improve online and offline channels, continues to reduce the burden at the grassroot level, aiming at better customer experience. We will adhere to the principle that operational development is bounded by risk control capabilities. We will take powerful measures to ensure stable asset quality. We will strengthen compliance management to effectively internalize external regulations, enhanced regulatory compliance, strengthen operational resilience and consolidate the foundation for high-quality development. This year marks the 75th anniversary of the founding of the People's Republic of China, and also the 70th anniversary of China Construction Bank. Standing at the new historical starting point, we will write the east wind of Chinese style modernization, firmly maintain confidence and work diligently as we take actions to achieve high-quality development. We will continuously create better value and returns for our shareholders and stakeholders. Thank you all.

Thank you, Mr. Zhang. Now we enter into the Q&A session. The press conference has two venues in Beijing and Hong Kong, and we also take questions from both sides. So please name -- please tell your name and also organization before you reach your question. First is from Hong Kong venue.

Thank you, management, for the question. I'm from JPMorgan, I'm Lei. My first question is, I would like to thank you for your very detailed introduction. You have enjoyed a stable performance. The core indicators also have good results. I want to ask the management what kind of strategy do you have in these very sophisticated and ever-changing environment? As an analyst, how can we give a prospect to the whole year?

Thank you for your question. This question will be answered by Mr. Zhang.

Thank you, Mr. Lei, for your care and support to CCB. For the first half of this year, we have seriously implemented the decisions by the central government and the state counsel to be a foundation -- a solid foundation for the finance industry. And we also take the resolutions on linear management and high-quality development. We emphasize our quantitative and qualitative development. So overall speaking, in the first half of this year, our total assets and also liability is developing very steadily, and the performance is quite stable. Just now we mentioned this is, the core indicators, ROA, ROE, the gear ratio and also cost-to-income ratio and the net interest margins. These core indicators we all enjoyed a very stable development and also keep a very leading position in the industry. So we have to deepen the needs and also to reduce cost and also increase the efficiency. And we also have to pursue quality development in terms of risk management. First, the quantitative and the qualitative development, we have to ensure the net interest margin be keeping stable and also serving the real economy. And we also should focus on the core -- the weak links and also the real economy. And the daily balance of interest income is RMB 3.86 billion with a Y-o-Y increase of 9.1%. And we also want to improve [Technical Difficulty] and we have a better [Audio Gap] more flexibility to the pricing system. In the first half, our NIM is around 1.54%, and it is also decreasing because we have a better circulation system, and we also expand the [Audio Gap] interest is around 1.72%, down by 5 percentage points. So it returns to the level of 2022 and even lower than that time. And for the personnel savings, there is a down -- a decrease of 12 percentage points, and it is also the lowest since 2019. We also try to reduce the low return assets and also increase the high quality asset and increased by 1.5%, and now it is taking up 88% of our total assets, and we continue to improve the product for the personal loans, it increased 14% and 13.9%, respectively. And secondly, we also have to find the impetus of income increase. And we want to push forward deeper transformation of the income structure. The income with interest takes up 21% of the total income, up by 1.4%. And while we reduce the cost, we also try to push the impetus of new and other types of services. And for the income, we also had volume of RMB 62.7 billion are also keeping -- leading way in industry. And in terms of equities and securities and bond structure, we will continue to improve. Other assets also increased very notably and it increased by 199.4%. We also [Audio Gap] efficiency run our bank in economic way. We also try to improve the fee system and have a better control of the cost system. In the first half, the operational income reduced by 1.7% Y-o-Y. And also there is some -- the rate is [Audio Gap] in the industry, where we keep the income and cost control, we also improve the service to the accounts. And the accounts exceeded 11 million, and inclusive finance accounts also increased -- is numbered at 342 million. And we also have the bottom line mindset and the extremity [Audio Gap] might improve the risk management system, focusing on core industries and [Audio Gap] and our risk management system is quite solid. The NPL ratio is 1.35%, and it is also reduced compared with the previous year. The decrease in risks and various other risks have also been under controlled. Overall, the macro economy is improving and there are more and more [Audio Gap] we nurture the new quality productivity for us. And we're also doing a better drop in integration of a commercial bank and investment bank. We are faced with many opportunities. In the future, we will continue to have a linear management and also enhance our risk management, comprehensive management system and serving the customer mindsets, where we are restructuring -- our restructure, we should take a more preemptive and proactive role to push forward high-quality development. Thank you.

Thank you, Mr. Zhang. The next question comes from Beijing.

[Audio Gap] The increased rate of loan was lower than last year. What are the key areas of loan investment?

Thank you for the question. Since the beginning of the year, we've resolutely implemented the regulatory instructions, and we have achieved a stable increase in credit. We support the real economy. In the first half, our loans and advances increased by RMB 1.5 trillion, increasing by 1.6%. This is higher than the industry level. We continuously to consolidate our leading position in loans with [Audio Gap] and price. Personal loans, especially personal mortgage, consumer and credit loans have seen market-leading levels in its balances. But [Audio Gap] amount leading the market, we've been doing a good job in inclusive finance. In cost of loans, [Audio Gap] In the first half, we invested RMB 2.5 trillion leading the market. Personal loans and inclusive loans have seen a relatively good position in its interest rate. This is also stabilized to our NIM income. Our corporate loans have increased very fast. Key areas have increased percentage. We support the economy transformation and upgrade. We [Audio Gap] Green economies and manufacturing, tech innovations have seen increases. We support the green transformation of the society. The green loans have seen a balance of RMB 4.4 trillion, increasing by RMB 57 million. And our manufacturing loans are RMB 3 trillion, increasing by RMB 300 billion, increasing by 12.8%. The strategic new industries have seen a balance of RMB 2.72 trillion, increasing by RMB 474 billion. And the -- we have issued RMB 1.8 trillion to tech enterprises increasing by RMB 197 billion or 23%. Secondly, we consolidated our credit to traditional areas. In power generation and thermal generation, we have seen an increase of 2 digits. Other areas have seen the same levels. In property management, we have implemented coordination in urban real estate market. We have focused on three major areas. Our new real estate loans were the same level as last year. Looking at the next year, our country will see positive factors in macroeconomy with previous policy instructions, [Audio Gap] see a favorable trend leading to increasing loan demand. We will also tap into the potential demand [Audio Gap] convert our pipeline projects into real projects, maintaining a good speed in loan investments, we will advance the development of personal and retail loans. We will strengthen our advantage in personal mortgage loans and consumer loans. And we will also tap into the potential SMEs and small merchandisers, and we will strengthen our efforts to target the weak links in real economy with financial support focusing on the five major areas and continue to solidify our pipeline projects for corporate loans and with strengthening efforts to develop key areas like Green finance and technology and innovation, we will continue to optimize our loan structure for corporate loans.

Now we will come back to Hong Kong for more questions.

I'm from Phoenix TV. I'm [ Shu Yang. ] I want to ask -- we noticed your net interest margin has been maintaining a leading edge. What are the measures effective to you? And for the provision reduction and various policies, what about their impact to the reduction of net interest ratio? Can you also give us a future anticipation of the change?

Actually, this net interest ratio is -- margin is carried by many people. For the first half, it is 1.54%, for CCB. And we have released the various data recently. You can see that our net interest margin has been keeping a leading way in the industry, especially our Q2 reduction is very obvious. So faced with the current market status, we continue to optimize our business structure and improve the product structure. It's a maturity structure et cetera. So we have five structure optimization. So these are all laying good foundation for the results. We have taken the various measures. First, to continue to adjust the debt ratio -- asset debt ratio, we continue to reduce the low return asset like the high return ratio shares also increased by 1.4%. And we also provide differentiated loans and with different pricing, we also improve our competitiveness in terms of pricing, especially on the risk pricing. This is our core competitiveness. So our interest ratio of RMB is also leading in the industry. And we also try to optimize the maturity structure and also control the ratio of the long term savings. And also we -- the -- we expect that the net interest margin is seeing a new turning point. Just now you also mentioned various policies and its impact. So you can see that they are actually positive under some pressure [Audio Gap] also decreased by 25 GP. And compared with the previous changes, actually, it also helped us to reduce the net interest margin. On the other hand, in terms of savings, saving can help the market to adjust. And last year, we could see that there is a 3 deduction of the savings ratio. So actually, the savings ratio is also reducing. It also helped to mitigate the pressure this February, the Central Bank also decreased the provision ratio by 0.25%. It also helped us to improve the net interest margin. And this year, in July, the 1-year and 5-year PR also reduced by 10 bps. And various banks also reduced the interest rate of savings. These savings interest rate adjustments can hedge against LPR reductions, negative impact. So its impact on the net interest margin is very minute. So in the future, with the savings interest rate reduction, it can help to improve the structure of the savings, the reduction may be slowing down. Our bank will continue to optimize the asset liability ratio, improve the structure and try to maintain the stability and our competitiveness of net interest margin.

Now we will take one more question from Beijing.

Thank you from Financial Times. In 2022, your bank started building your pension services called 1314 and you have launched your own pension services brand. So we would like to learn more about your new strategies in risk management and pension finance. Mr. Ji, the Vice President, will take the question.

Thank you for the question. Thank you very much for your continuous attention to the development of our pension finance services. Pension finance is also one of the five major areas in the [Audio Gap] and at the third appointment, it is said that we need to develop multilayer, multi-pillar pension finance and we need to increase the coverage of annuity schemes. We need to promote personal pension services, et cetera. This provide very good guidance to CCB. As you mentioned, on 29th of February, our bank launched the integrated brand, Jian Yang An, for our pension financial services. We have laid out 10 actions covering the number of branches and detailed services. So I'd like to report to you the following aspects. First, we will build a good branch structure. In March, we have 60 branches opened under the new pension services brand. We have integrated service, including micro finance, investment education, et cetera. This have helped us build a very good advantage. For example, we allow pensioners to pay their service fees by month, and we have launched new wealth management products targeted at the pensioners. Going forward, we will expand the network of our pension finance outlet. So our advantage as a bank can be integrated with our advantages in community-based services and pension finance bring more warm services to our elderly friends. We need to increase the supply of our pension financial services product. And these are key to maintaining the value of the wealth management product. Our bank has built a portfolio of different products, including fund and wealth management, insurance, annuity trust, et cetera. We have increased the competitiveness of these products. We have put together good resources and create a number of products with stable returns and with high market recognition. These are hero products. For example, by the end of July, the return rate of one of our funds ranked the first among similar products on the market. In this way, we are getting ourselves ready for providing good services under the so-called third line of defense. Thirdly, we will launch more innovative [Audio Gap] the product offering under the Jian Xing brand, so we can build integrated solutions. We're the first bank to launch added value services to the annuity schemes that to combine the employee fringe benefits with their pension products, and we have also launched trust products as an added services. We also helped companies contribute to the community. This is a corporate product, a charity-based product as an added value service, and these are the new products under development. Fourthly, we will expand the coverage of annuity. CCB relies on our very unique CCB pension subsidiary and serves our corporate customers. At the same time, we leverage on our professional services to expand the coverage of annuity products. We have [Audio Gap] enterprise is based in technology parts. And we also offer annuity products to migrant workers and also expatriates. In the first half, we have [Audio Gap] increase in new annuity customers. To silver economy, we have a platform for shared services, deepening the collaboration with enterprises needing pension services, and we continuously optimize internal management procedure. So elderly care is one of the industries is providing -- that we provide a priority support. And we also offer special loans for pensioners. And so we can divert [Audio Gap] for economy, the increase of relevant loans is leading the market. We have a very diversified needs from the pension market. It shows great potential, and it's also one of the important drivers to high-quality development financial institutions. Going forward, we will build a better brand for our pension services and we will strengthen the system of the whole portfolio of products. So we can be a trustworthy professional bank for pension services. So in this way, we can contribute to building the pension system with Chinese characteristics. Thank you.

Now we will invite another question from Hong Kong.

I'm from Huatai Securities. I'm Juan Shen. I want to ask about the interest -- of your income from air -- aviation industry, and we want to know about your [Audio Gap] from aviation business. And also, there is some fluctuation of the business. So for the second half, what are your strategies? The non-interest income -- and also some other non-interest income is also slowing down. So we want to know your [Audio Gap] the interest income increase.

Thank you for your question. So you have two questions. So that is the income from non-interest income. First is as you have mentioned, for the first half of the year, our CCB's reduction actually has been enlarging compared with the previous term, the intermediary income, that is contributed to various factors like the custody of assets and also insurance, et cetera, the income has been decreasing. And it is also impacted by the relevant policy. The whole banking industry is faced with the same problem. So these are the core areas that have been influenced and well, the income increase is slowing down. We also noticed that in recent years, we have been [Audio Gap] the businesses. And we also have had some positive results. In recent years, we also want to put forward the intermediary business, and we want to pursue high-quality development in terms -- instead of volume development. And in terms of our customer base, income structure optimization and also management efficiency, we have, all seen some noticeable results. In terms of customer base, we have the Phase 1 business developments and also we have solid foundation, just as we report. [Audio Gap] Our settlement accounts also exceeded 16 million and we also increased -- have a new increase of 900,000 accounts. In recent years, we also emphasized our wealth management business. And for the customers of these ag sector, the customer exceeded 4 million, and there is a new increase of around 500,000. And for our [Audio Gap] maintained very stable growth and its transaction activity has also been improved. So the customer base is a strong foundation despite some fluctuation of intermediary income changes. We always say that customer is our core foundation for development. And in terms of income structure in recent years, we have also been promoting the business -- the intermediary business to be a light asset and also high efficiency. There is also some good results. For the first half of the year, there were two indicators that worth your attention. First, is our first non-interest income share, also takes up more than 16% of the total income. So compared with our peers, we are also leading the way in terms of credit business, the online payment and also custody services and also other guaranteed [Audio Gap] we are also leading the way. Secondly, we are also trying to explore the new impetus of intermediary businesses and increased its share. For the first half of the year, just now, Mr. Zhang also reported, [Technical Difficulty] management consuming finance and investment banking and also, the income from new industries also are taking up more than 6% of our total structure. So the new impetus are still improving. And in terms of the lean management, we try to control our cost, and we try to explore new growth engine. The results are good for the first half. We also emphasize on the merchants. We know that actually, the orders payment for these merchants are also in high volume. So we try to differentiate the management of different types of the merchants. And for our services, the fees and also the contribution from these merchants are all [Audio Gap] This is a very noticeable and very satisfactory changes. We have a new impetus and new transformation direction. And we also have effective measures such as lean management, the [Audio Gap] solid development. For the second half prospects, as the economy is stabilizing and [Audio Gap] -- and on the capital market, we have various government meetings like the economy work meeting by the central government. We also emphasize the internal stability of the capital market. So there were some opportunities [Audio Gap] industry opportunities. The central government also mentioned that we should have a tailor-made development. In terms of information technology, AI and biometrics. Biometrics, we also see new opportunities. And also in the central people -- the central government's meeting, we also [Audio Gap] in terms of consuming finance, there is also abundant opportunities. And for the issuance of local bonds, it will be accelerated in the second half. We have some unique advantages that is the consultants business on the summer projects. And from our reservation from the recent months, we have some of our subsidiaries like the trust or finance management and asset management companies, their development is better as compared with the first half. So overall speaking, we are faced with a more positive and optimistic environment. And for your second question about the -- about non-interest income, we actually have a new increase of RMB 10.7 million. That is thanks to our [Audio Gap] we have several tools like the funds and also the ForEx interest returns are all seeing positive growth. And in terms of cost, we also enhanced the control, for example, insurance fee and also other costs, we have also had some several reductions. So this also contributes to the increase of the non-interest income. So our positive experts are accumulating. So for -- therefore, for the second half of the year, non-interest income will maintain a positive momentum. There may be some fluctuations affected by various factors. In recent years, we also enhanced our deployment of investment assets and optimization of the financial assets, and we have also been enhancing the [Audio Gap] and also better management, we can further improve the development of non-interest income.

Another question from Beijing.

Thank you, management from Guangfa Securities. In the first half, we saw very positive growth in deposit in CCB. What measures did you take to achieve that? Recently, the numbers show the changes of M1 and state-owned enterprises. So can you please talk about the trend of deposit in the future? Going forward, what measures will you take to maintain the growth of deposits?

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

You asked three questions. The first thing measures we've taken to support the deposit growth. Indeed, in the first half, we've maintained a very good level in deposit growth. The incremental value of our deposits was RMB 1.05 trillion. Personal deposit is leading in the industry. So we have taken three measures. The first is to focus on customer foundation. CCB has been always committed to high-quality development of our customers. We've been always committed to [Audio Gap] to expand the customer base and increase its [Audio Gap] June, our corporate and private customers reached [Audio Gap] million customers and with 2.72 million high-value customers, personal customers reached 762 million. And those customers with RMB 200,000 or above increased by 1.4 million in the first half. And this increased rate is also leading the industry. Secondly, we focus on a so-called close loop [Audio Gap] fiscal, LGFV and consumer finances. We are focused on settlement and payment services, among other services in these areas. So we can improve our capability of a closed-loop operation. And we have also boosted the development of current deposits. By the end of June, current deposits accounted for 43.94% in our domestic deposits. This is higher than our industry peers. Thirdly, we focus on digital operation of key customer groups. For example, to key customers, including small merchants, pensioners, et cetera, we focused on the [Audio Gap] and we made a big effort to improve our digital insight and our digital access and ecosystem services to these key customer groups, we strengthened the building of the service teams. So there was a higher contribution in funding from these customer groups. In the first half, the daily increased deposit from some key customer groups saw an increase of 3%. Personal merchants, small merchants have seen a balance of their daily average loans by the end of June. It saw an increase of 7.6%. So based on the reasons above [Audio Gap] in deposit growth. And on top of that, our interest paying ratio has also decreased. Last year, it was 172%, 5 basis points lower. As for personal customers, there was a decrease of 12 basis points. This is rather significant if you compare that with other industry peers. To your second question on the long-term trend of deposits, given the current situation, the trend of our deposits with the interest rate being stabilized will continue. And as for term deposits, there is slowing down in the trend of getting more long term. Among the new deposits, term deposits with a 3 years term or more, the percentage decreased by 4 basis points compared with last year. So long-term term deposits are becoming less. And the third question is about our measures to boost deposit growth in the future. Going forward, we will focus on quality of liabilities. We will stabilize and increase deposits. We have special actions to be taken to foster the high-quality development of liabilities. We will deepen customer operation. We will increase the product coverage of our customers and improve customer loyalty to be the stronger base. Secondly, we will deepen the all cycle services for funds. And we will focus on digital operation ecosystem. So we can maintain our advantages in serving customers through their life cycle. We will also optimize our deposit structure. We will optimize the term structure of deposits. So the interest paying costs will be maintained at a reasonable level. So our deposit business can maintain its high-quality development.

Okay. Questions from Hong Kong venue continue.

I'm from Hong Kong Commercial Daily. I want to -- about ESG, there were higher and higher attention to ESG. There are also various [Audio Gap] CCB is doing a good job on ESG development. Do you have anything to share with us for your next step?

Thank you for your question. I will answer this question. In recent years, CCB has fully implemented the new philosophy of development of the ESG. And also we implement ESG in all our management system to coordinate the social, economic and ecological benefits, and we also try to add long sustainable development. It has been acknowledged by the whole society. Thank you for your question. And [Audio Gap] Mr. Jha, our ESG [Audio Gap] rating is a leading in the global banks, and we are also leading in the sustainable banks in the world. We have several practices to share with you. First is we stick to the Chinese characteristics. And combining with the global best practice, ESG is -- has the people-centered philosophy, and we also have the Chinese culture elements that is well benefiting ourselves. We should also benefit others. So we should also put people at the center and we should explore our own ESG way. So we can structure that combines the Board of Directors, the council members and the various other committees actively enhance ESG communication, education and to also carry forward the Chinese characteristic ESG management. These all paid -- laid a solid foundation for our ESG work. Second, we also integrate ESG elements in our operation and the risk management system. We fully give place to ESG elements to prevent the risks and also play a positive role. We also trying to push forward the low-carbon transformational change. We also have over RMB 4.46 trillion of the transformative economy. We also construct a leading corporate customer ESG rating assessment system. We also have the automatic assessment system. And we will also cover all the branches in terms of the low carbon management system, so that the green outlets and green data centers are also promoted -- promote the paperless operation in our whole bank. We also try to expand the coverage to reach more remote and the vulnerable areas. We have the balance of the loan at RMB 3.38 trillion, so that we can better guarantee the benefits of the financial customers. And we also try to nurture the employees to serve the high quality and the sustainable development of our bank. Thirdly, so in terms of ESG disclosure, we try to use it as a starting point to leverage the whole linear management in our bank. ESG has also become assessment, very key assessment factor for investors. So actually, our share of institutional investors is also very high. So we attach high importance to sharing of these ESG disclosure to the investors. We use market language and present the ESG work with several dimensions. We also try to reflect the feedbacks of various regulators and also present the improvement measures. We're getting their acknowledgment. We also improved our own sustainable high-quality development so that there is a very virtuous cycle formed. The HKEX and the Shanghai Exchange also disclosed various regulations on ESG. And it also posed a very clear and higher requirements for us. So in the future, we will fully implement the working spirit of the CPC Congress and various meetings of the central government. We also will leverage on the 5 chapters requirements and various other policies, lay solid foundation of ESG and also the carbon emission system, revitalize the rural economy and the various other new emerging economy development. So that will further improve our ESG effectiveness in the future work.

Now we will invite one more question from Beijing.

Thank you management for the opportunity. From 21st century economic, I have a question regarding digital operation. We know that digital finance is one of the five major areas, and it's also an important aspect in the deployment of national policies. We know that CCB has a advantage in it. So in digital operation using digital technology to enhance our capability, what have you done? And what are your plans?

Mr. Li Ming will take the questions. Thank you.

Digital finance for the commercial banks is an innovative measure to adapt itself to the development of digitalization. It's both digital technology and financial technology. It concerns the transformation of its own services, but also its support went to other economic sectors. As for ourselves, through years of practice and exploration, we have built the initial capability for digital operation, we have built our plan for digital operation through practical actions in operation, consumer services and reducing the burdens for our employees, our measures have paid off. [Audio Gap] Given that our traditional service model was unable to cover the large size of customers, we started the integration of online operation, offline operation. At present, we can get access to long-tail customers, and there are 40 million of these customers, and we have seen efficiency in these customers. Regarding online customers, which is one of our focuses. Mr. Zhang Yi also mentioned that our binary star platform. So over 500 million registrants. Going forward, every day, we have around 30 million new customers using our online digital finance platform. Most customers using our online forms exceeded 192 million. These online financial services improved our operational efficiency. Now we have being among the top in the industry in the number of users using online financial services through digital [Audio Gap] to reduce the burden of our employees through the intelligent digital identification, machine learning and other new technologies. As for deals, foreign exchange and other services, we have replaced menu work with artificial intelligence. 60% of menu work was replaced through this digital technologies. We can optimize the account opening process of corporate customers reducing the time needed for opening an account. Now the time for opening an account, it decreased from 45 to 20 minutes. We've talked about our initiatives in [Audio Gap] technology. But at the same time, we are also using these technologies to serve the wider digital economy with leverage on our advantages, through comprehensive financial services we've improved our ability to serve a digital economy. In the first half of this year, the loan balances to digital economy reached to [Audio Gap] These are some initial achievements that we've had in digital economy, digital finance. Digital finance is one of the five major areas in finance. We need to improve the capability in this regard as required but at the same time, to Green finance inclusive finance and pension finances, digital finance can also lend some support. So we have always been attaching great importance to digital finance. That's why we are going to work on that continuously. And through continuous efforts to developing digital finance, we can increase our capability and better serve the development of digital economy.

Okay. The lady on the fifth line.

I'm from Citibank. I'm Zhang [indiscernible]. I want to ask about the asset quality in terms of the revenue pressure and the external environment, it is especially important to maintain a good asset. CCB has always been robust and solid in this aspect. So NPL has been decreasing. So can you share with us what is your prospect project outlook on the second half of NPL ratio?

Thank you for your question. For quality of assets is closely related to real economy and also the risk control capacity of the bank. CCB has always adhered to very stable management and we try to reduce the risks proactively, control the risks to guarantee stable asset management to support [Audio Ga] Mr. Zhang Yi also introduced that for the second half -- for the first half, our NPL ratio is only 1.35%, down by 0.02 percentage points compared with the end of last year. Overall, we have a very stable status. We anticipate that for the second half, it will still be stable. In terms of macro economy status, the overall economic operation is stable for the first half. The GDP for China maintains a growth of 5%. So now the operation is faced with various challenges with the policy implementation and the measures taken, we continue to push forward a stable, high-quality development. We still believe that NPL ratio will be stable. In terms of key industries, in terms of real estate industry, the effectiveness of various measures and the policies have been releasing and there is a positive [Audio Gap] increase our risks and [Audio Gap] guarantee the effectiveness. For the first half, the NPL ratio from real estate has been reduced. The NPL ratio reduced by 0.04 percentage points and the NPL exposure has also been decreasing. For the local government [Audio Gap] implemented, the pressure has been alleviated and with the physical and the taxation reform, the long-term system of control has also been established. All these will be benefiting -- beneficial to the control of measures and control of risks. We will also try to control and also eliminate the risks to reduce the NPL ratio. From our own operations, our risk control measures have had a very solid foundation. We can face the new challenges and the new changes. In terms of business operation, we have always adhered to serving the real economy to do a good drop in the five chapters serving the real economy and the key industries. For the first half, green finance, inclusive finance has also seen stable growth. And we also keep a leading way in terms of retail finance. And we also had a linear management and economy of scale development. And we also remain prudent to implement the integration of our management. Our risk control measures are effective. By the end of June, our provision coverage ratio maintained at 238% and we also try to guarantee the second bottom line. I emphasize on the importance of a penetration practice, control the NPL ratio. The corporate loan asset has been stable. The -- the personal loan NPL is also stable. And for the second half, we will continue to accelerate our risk control mindset, strengthen our measures and guarantee the stable development so that we can have a very solid and robust foundation for future development.

We published our press release on the results, and we collected the interest -- the questions of interest from investors. This press conference is also live streamed. We have investors asking in the online platform. Most of the questions were also answered. But now we will take some time to answer question from the online investors regarding the capital market new regulations. The new regulations have increased your capital adequacy ratio given the lower increase rate in loans, would that mean that you have less pressure in capital? Will you go for refinancing through placement or additional shares? Will you try to keep the same [Audio Gap] as you previously did? Mr. Sheng will take the question.

Thank you to the question from online investors. There are two questions. One is about capital adequacy ratio, [Audio Gap] I'd like to first of all answer the first question. CCB has been committed to robust and prudent principles in capital management. In recent years, given the implementation of Basel III, we deeply advanced the implementation of new capital accounting rules. [Audio Gap] Capital adequacy [Audio Gap] Combined adequacy ratio [Technical Difficulty] compared with the last. This stat published press release and [Audio Gap] indicators put us among the top. In the second quarter, all the banks [Audio Gap] but in the second half, capital adequacy ratio will rise again. As a systematically important bank as other support [Audio Gap] the total loss absorption level, our TLAC will reach 20% in 2025 and [Audio Gap] 2028. As the first half, the capital adequacy ratio or CAR was leading the market meaning that we have a very solid foundation in July [Audio Gap] capital and TLAC debts amounting to [Audio Gap] the target in 2025 because our capital adequacy ratio is close to 20%. We are making plans for meeting the requirement in 2028. There are two assets. As for denominator, we need to keep a stable operational level so we can increase the capability of intrinsic capital. [Audio Gap] And the level of intensive utilization of capital, we had a very good foundation already in implementing Basel III, leading with the leadership of Mr. Wang, all the business units of CCB, including front-end bank offices, including overseas and domestic institutions were all involved in training on the new capital regulations. We have a deep understanding of the new capital regulations and we have a deep understanding of all the risk management measures for the efficient control and management of capital. This was a very valuable in our understanding of the new capital regulation. Also, it lays a good foundation for the high-quality development and capital management in the future. And as we mentioned, there was a question about the supplementary external capital. In recent years, as you said, we've been committing to the combination of internal and external capital. We will also [Audio Gap] to the supplement to boost our capital. The level, the size, the scale of new issuers will be depending on demand and supply, external environment and national policies as well as our strategies. But we have very limited pressure in capital replenishment. We have abundant capital at the present, laying a good foundation for our future. Well, as for dividends, this is something that we take very seriously, because our operation cannot be realized without the support of investors. That's why we've been taking it very seriously. We are committed to long-term stable cash dividends as a return to [Audio Gap] with maintained a 30% dividend ratio. Since 2020, despite the COVID pandemic, despite the COVID pandemic as a disruptor to the economy from 2020 to 2023, the dividend ratio was higher than 5% for each year and 6% for each share. And it's first time for this year for us to see a higher than 7% in each share. So this is where the good return. And going forward, we will also keep a close eye on regulatory initiatives, and we will also look at the impact of dividends on our sustainable operations so we can maintain the dividend ratio at a reasonable level. Well, for your information, CSRC encouraged all listed companies to give [Audio Gap] so that's why we want to be a model and set an example by issuing interim dividends. In mid-August, we approved a 30% interim dividend. We've released relevant steps. According to our governance procedures, we plan to start interim dividend in the -- after the Chinese New Year of 2025. Anyway, thank you very much to all the investors for your long-term support to CCB. We will serve the real economy and community. But at the same time, we will also improve our value creation capabilities. So we can [Audio Gap]

Okay. Because of time, the Q&A session is ended. Thank you all for your participation. Just now the senior management has answered in a candid way to your questions. I hope that [Audio Gap] help you to understand the strategies, the operation policy and also the outlook of CCB. If you still have any questions, please contact our Board of Directors' Office and Investors Relations department. I hope you good health and everything is going well to all of you.