China Merchants Bank Co., Ltd. (600036) Earnings Call Transcript & Summary

Dear investors, analysts, good morning. CMB 2020 Interim Results announcement will now begin. I am Executive Vice President, Secretary of the Board of Directors, Liu Jianjun, also the host of today's conference. Due to the current situation of COVID-19, we're hosting today's event entirely online. Now I would like to introduce the bank's management who are present today. They are Mr. Tian Huiyu, President and CEO; Mr. Wang Liang, Executive Vice President and CFO; Mr. Wang Jianzhong, Executive Vice President; Ms. Liu Hui, Executive Assistant President; Mr. Zhang Tao Yang, Chief Information Officer; Mr. Zhu Jiangtao, Chief Risk Officer; and our general managers from related departments. Joining us online today are investors and analysts from China and overseas, totaling 363. On behalf of China Merchants Bank, I would like to welcome you all to the event. Thank you for your interest and investment in China Merchants Bank. In today's announcement, there will be 2 sessions. Mr. Tian Huiyu will review the financial highlights and the operational performance of the first half of 2020, taking around 30 minutes. The second session will be Q&A to answer your question, taking around 1.5 hours. The event will end by 11:30. There will be simultaneous interpretations in English for both sessions. Now I would like to pass the floor to President Tian.

About our 2020 interim results announcement, time for us to hand in our paper. Welcome to our interim results announcement. Would like to focus on 3 aspects for today's presentation. First, performance review; and then operational information; and then outlook and strategy. For the first half, faced the impact brought by COVID-19, global economic recession and all kinds of rising risk and challenges in the first half of this year, we are faced with unprecedented challenges. CMB adheres to the strategic direction of Light-operation Bank and One Body with Two Wings position and steadily develop various business in the following 6 aspects. Firstly, our asset quality was stable, relatively with the impact of the pandemic. We insist on classifying assets strictly, expose risks with NPL balance of RMB 55.33 billion increased by RMB 3.05 billion. NPL ratio, 1.14%, down by 0.2 percentage points from the end of the previous year. Special-mentioned loan was CNY 48.09 billion, down by RMB 4.5 billion from the end of the previous year. Special management low end ratio, 0.99%, down by 0.18 percentage point from the end of the previous year. With the ratio of NPL to the loans overdue for more than 90 days, up by 0.07 percentage point to 1.25% from the end of the previous year. Allowance coverage ratio was 440.81% representing an increase of 14.03 percentage point from the end of the previous year. Loan allowance ratio, 5.03%, an increase of 0.06 percentage point from the end of the previous year. Steady growth in operating income, with slight decline in profits after tax. Net operating income was RMB 148.16 billion, representing a year-on-year increase of 7.1%. Net profit attributable to shareholders of the bank was CNY 49.79 billion, representing a year-on-year decline of 1.63%. ROAA and ROAE were 1.29% and 16.94%, respectively. Both declined a bit. We continue to optimize asset and liability structure, improve funding cost management. Q2 interest-bearing liability cost was 1.4 -- 1.75%, down by 12 bps, partially offset the downward pressure on NIM. 2.5% was our net NIM, net interest margin. Net noninterest income was RMB 57.29 billion, representing a year-over-year increase of 12.49%. Net fee and commission income increased by 8.46% year-on-year. And other net noninterest income complied 25.59% year-on-year. Cost-to-income ratio, 28.25%, increased by 0.67 percentage points year-on-year. Sound business scale expansion with sufficient capital position. Total asset were RMB 8.03 trillion, up by 8.29% from the end of the previous year. Total liabilities, RMB 7.39 trillion, up by 8.73%. Growth rate were 1.66 percentage points and 2.01 percentage points higher than that of the same period of the previous year. Gross loans and advances, RMB 4.85 trillion, up by 8.04%. Customer deposits, RMB 5.44 trillion, up by 12.3% from the end of the previous year, which has recorded the highest first half growth in the last 6 years. Core Tier 1 capital adequacy ratio, Tier 1 CAR, CAR under both advanced approach and weighted approach have declined, mainly because -- but to offset the slowing down retail loan growth amid the outbreak of COVID-19. We grant more corporate loans under precondition of risk being manageable. RWA's increase has speeded. Second, the growth in equity was effected by year-on-year decline in net profit. In July, we issued RMB 50 billion perpetual bonds, which replenished our Tier 1 capital position. Overall, we have maintained a sufficient capital position, which is higher than both regulatory requirements and our internal targets. Fourthly, we increased investment in technology innovation-driven transformation. We invested RMB 3.92 billion in information technology, up by 7.95% year-on-year, representing 2.87% of our net operating income. Bank wise has declared a total of 2,451 fintech innovation projects with 1,733 projects approved of which 1,098 projects have been launched and put in use, provide a solid support for exploration digital operations. Fifthly, we fulfill social responsibility and support enterprises to combat with the pandemic. After the outbreak, we donate RMB 200 million to Wuhan Charity Federation immediately. We follow the funding behavior of the enterprise, make breakthrough in the credit mindset and start from the new perspective of FPA to serve real economy from wealth management funds and also direct equity investment to help enterprises to obtain financial support with lower costs. Balance of nontraditional financing accounted 45.86% of the total. Balance of inclusive corporate small finance loan was RMB 486.92 billion, up by 7.41% year-on-year. Amongst newly granted loan were RMB 278.92 billion, up by 12.99% year-on-year, higher than that of total loans. Interest rates of such loan was 4.62%, down by 68 bps year-on-year. We effectively carry out national relief policy, allowing eligible enterprises to defer their repayment of principal and interest totaling RMB 133.21 billion. With the alleviation of the pandemic, production and operation of the companies gradually recovered and normal repayment has been resumed. As at the end of June, the balance of loans granted to customers who are still at the current stage, was RMB 69.53 billion. We have leading market valuation and enhanced brand reputation in the fixed aspect. As of the end of June, our total market cap rose to RMB 845.1 billion, ranked seventh among global banks and fifth among major listed domestic banks. In addition, we will rank 17 by Tier 1 capital among top 1,000 world banks by the Banker Magazine, up by 2 places from the previous year. We remain ninth among top 500 banking brands. We were awarded the best bank in China, again, at Euromoney's Awards for Excellence 2020. In Institutional Investor's 2020 All-Asia Executive Team ranking, we won many awards such as Most Honored Company in Asia banking sector. Second part, key operational information. Also 6 aspects. For the -- we are back to the origin and enhance our strength in customer base and funding. We have achieved a retail value customer growth rapidly. Number of retail customers reached 151 million, increase of 4.86% year-on-year. With acceleration of resumption of work and production, our retail customer acquisition has been improved in the second quarter due to our continued digital transformation support. Retail value customer base has grown at a faster pace. Sunflower-level and above customers reached 200 -- 2.92 million, increase of 10.21 percentage points. Number of private banking clients exceed 91,000, representing an increase of 11.746 (sic) [ 11.46% ]. Second, corporate value customer base grew to expand. Total number of corporate customer reached 2.18 million, up by 4.03%. Number of newly acquired corporate depositors was 195,800. Number of institutional customer was 39,100, up by 10.45% as compared with the end of previous year. There were 26,000 customers of change. And the coverage rate of special funding -- fund raising accounts for domestic listed company was 37.93% of which the coverage rate of fund raising special accounts for listed companies on the STAR Board was 45.65%. Thirdly, the expansion of customer base provides strong support for our funding with growing quality of customer deposits and enhanced funding strengths. Balance of corporate deposits reached RMB 3.35 trillion, representing an increase of 13.45% as compared with the end of the previous year, the highest growth in the past 6 year. Balance of retail deposits reached RMB 1.84 trillion, representing an increase of 9.96% as compared with the end of the previous year. Growth of customer deposit was mainly driven by low-cost deposits. High-cost structured deposits and CD further declined, among which structured deposits balance was RMB 495.14 billion, down by 4.02% compared with the end of the previous year. Balance of demand deposits accounted for 62.69% of total, up by 2.59 -- 2.56 percentage points as compared with the end of the previous year. We keep optimizing credit structure and comprehensively solidified asset quality. We promote the growth recovery of retail loans, with higher risk-adjusted return. Total retail loan amounted to RMB 2.44 trillion, up by 5.02%, accounting for 54.25% of the total. Influenced by the pandemic, the growth rate has slowed down, but in Q2, we are back to our recovery. Residential mortgage loan, microfinance loan both maintained stable growth. Credit card loan were more affected by the pandemic, down by 2.8% as compared with the end of the previous year, but Q2 growth rate is significantly better than Q1, with the loan gap narrowed down substantially compared to the end of the first quarter. Total corporate loans amounted to RMB 1.78 trillion, up by 9.67% as compared with the end of the previous year with the loan structure optimized. Credit resources were given priority to be allocated to major infrastructure construction projects as well as strategic emerging industries. In order to offset the downward risk pressure and to appropriately extend the strength of loan duration, the balance of the medium and long-term loans to domestic enterprises accounted for 57.52% of the total. The balance of general loans to the strategic customer of head office level amounted to RMB 583.8 billion, an increase of 25.13% accounting for 32.77% of total. We uphold a prudent risk strategy, comprehensively adopt various risk control policies, continuing to optimize customer structure and asset structure to maintain a stable asset quality. NPL ratio of corporate loan was 1.87%, down by 0.18 percentage points compared with the end of last year. NPL ratio of retail loan was 0.83%, up by 0.1 percentage point as compared with the end of the previous year. NPL ratio of retail loans, excluding credit card, was 0.45%, down by 0.03 percentage points. Credit card NPL ratio, 1.85%, up by 0.5 percentage points. Q1 special-mentioned loan and overdue loan ratio both increased Q2 -- in Q2, have been significantly improved. By the end of June, special-mentioned loan ratio was 1%, down by 0.28 percentage points. Overdue loan ratio, 1.41%, down by 0.25 percentage points, among which special-mentioned loan ratio for credit card, 3.47%; overdue ratio is 3.5%, down by 0.73 and 0.63 percentage points compared with the end of Q1. The leading indicators have improved significantly. Newly formed NPL was RMB 27.93 billion, representing a year-on-year increase of RMB 4.87 million. Annualized NPL formation ratio, 1.29%, up by 0.09 percentage point year-on-year. Annualized credit cost ratio was 1.66%, a year-on-year increase of 0.16 percentage points. We continue to intensify disposal of NPLs by disposing RMB 25.19 billion NPLs in the first half. We adhere to the positioning of Light-operation Bank with distinctive acts in noninterest income business. Despite the impact of COVID-19, the retail noninterest income business still performed well, benefiting from strong online operation capabilities. Balance of total AUM from retail customers amount to RMB 8.26 trillion, an increase of 10.26%. First half's increment report RMB 769.2 billion. PB AUM, RMB 2.5 trillion, up by 11.94% compared with the end of last year. Agency sale of nonmonetary mutual funds was RMB 256.7 million, an increase of 207.03% year-on-year. Active credit card was 96.39 million, representing an increase of 1.14% as compared with the end of the previous year. Credit card transaction volume amounts to RMB 2.04 trillion, a decrease of 0.12% year-on-year. Net noninterest income from retail finance amount to RMB 25.8 billion, a slight decrease of 0.06% year-on-year. With steady improvement of our wholesale customer service capability, asset allocation capability and trading capability, wholesale noninterest income business delivered solid growth. We continue to build our core competitiveness of our investment banking business. Value of bonds with bank as the lead underwriter amount to RMB 461.47 billion. We accelerate the transformation and upgrading of our asset management business. CMB Wealth Management's balance amount to RMB 2.38 trillion. Products with -- in compliance with the new asset management rules, exceeded RMB 1 trillion, second in the industry. Our custody business competitiveness further improved. Balance of assets under custody was RMB 14.56 trillion, also ranked second in the domestic custody industry. Discounted bills transferred to other FI amount to RMB 592.2 billion, ranking second in the market and a year-on-year growth of 76%. Cross-border finance, the onshore international settlement for corporate customer amount to USD 108.7 billion. Trading volume of derivative transaction service to customer reached USD 195 billion. Net noninterest income from wholesale finance amount to RMB 23.31 billion, year-on-year increase of 30.56%. We stick to connection and openness and accelerate the construction of an ecosystem for partners. We expand public handling service, provident fund service, social security query, nontax payment service continued to increase. 6.7 million electronic security -- social security cards have been issued in aggregate. We penetrate further into public transportation service, including bus, subway, and also credit card recharging. We promote openness and connection, explore ecosystem-based cooperations with new retail, express delivery and logistics. We opened API during the pandemic and quickly connect with outlets, including lead doctor COVID-19 information and online education. We improved corporate services. CBS platform MAU projects reached 1,185. The total volume of the aggregate collection business amount to RMB 74.23 billion, up by 21.63%. We promote internal integration by pursuing the One Body with Two Wings strategy. Wealth management, investment banking, asset management, circular value chain has been deepened. Balance of saving deposit wealth management product, funds, insurance products and other categories maintained rapid growth. Sales of neutral fund boosted the expansion of the custody business. Custody net neutral fund scale exceed RMB 1 trillion, and the company ranked first in terms of the scale of newly issued custody mutual funds. Rising effectiveness of retail and wholesale business integration has been demonstrated. Loan-to-deposit ratio of corporate business was 53.11%, offering strong funding support for the branding of retail loans. We launched a jointly operated B2C payroll service to improve our comprehensive operation capability of corporate and retail clients. New effective retail customer of payroll service as strategic customer of head office level increased by 26% year-on-year. We take MAU as the north star metric and substantially improved our digital capabilities. First, our digital operation capability continued to improve. CMB and CMB Life Application MAU under the impact of the pandemic still remains strong resilience. By the end of June, we have reached 98.92 million users. CMB applications number of users has achieved 1.29 million -- 129 million; MAU reached 56.07 million. Percentage of digital acquisition of debit card customer was 19.71%. CMB Life Applications aggregate number of users has achieved 98 million; MAU, 48 million. Digital acquisition of credit card users has achieved 62.48%. 1,544 of our outlets have opened online store. Percentage of wealth management transaction via CMB application was 78.41%. Percentage of wealth management customer using CMB App was 93.17%. As for CMB corporate application number of client was 1.16 million; MAU was 0.45 million. Second, we have increased our capability in digital risk control, continue to strength and expand our intelligent risk control platform, the Libra System. Reduced the ratio of counterfeit and misappropriation by non-card holders to 5 in 10 million. The accuracy of intelligent rating and pre-warning in our wholesale business was further improved with the accuracy ratio of pre-warnings on the corporate customers with potential risk reaching 75%. We actively promote the application of AI in AML. With the identification risk of high-risk transactions associated with money laundering, reaching 95%. Third, we have increased our efficiency in digital operation and service. The Wind Chime System is connected to 20 internal systems, monitoring 1,268 customer experience indicator and keep promoting the improvement of customer journey. 76 customer service are replaced by the intelligent customer service provider. 9 high-frequency corporate business have been migrated online and continue to be optimized. The innovation video cloud chain platform was launched and using remote video interaction as new method to approach customers. Fintech were applied to 24 middle and back office scenarios with 11.64 million transactions being replaced. Both, the construction of fintech infrastructure was accelerated. Number of Cloud Native servers was 4,015. The storage capacity of Cloud Native was 29.18 PB. And then number of Cloud Native containers was 69,000, all having significantly increased. We strengthened the application of big data, launched the banks unified data portal of Zhao Shu and established BIX and AIX platform to enhance the efficiency of data application. The application of AI technologies were deepened in the fields of products, marketing, risk control, operation and investment consulting. Last part, let me briefly share with you our outlook and business strategies for the second half. Currently, we see 4 major headwinds pose great challenges to the bank's operation and management. The first one is the COVID recession in the global economy. Currently, we still see the virus spreading overseas. And it's a long way for the world economy to recover. And China's economy is not immune to that. So the bank's customer expansion, business growth and profits is still facing great pressure. Second, the uncertainty of the Sino-U.S. relations. Amidst the rising trend of the anti globalization, we see many sources of global -- turbulence and risks. As the U.S. presidential election approaches, the trend of Sino-U.S. relations is still full of uncertainties. Thirdly, delayed outbreak of credit risk. The COVID-19 has brought a huge shock to the Chinese economy and people's daily life. With the phasing out of the special policies, we see pressures going on for the asset qualities. Fourthly, the lower interest environment also brought a shock to the financial disintermediation, and especially with our lowering of the market rate. That will be a long-term environment. And the other financing will take up a larger proportion. So the bank is facing a shock of this intermediation. Facing all these challenges, China's economy is leading the world in terms of the control of the virus as well as with work resumption, production resumption. So we think that fundamentals of the Chinese economy, in the long run, has not been changed. Firstly, we need to insist on the domestic demand, insist on the dual circulation economic pattern. Now we are trying very hard to sustain the domestic and the international circulation, and what we believe that will inject new power and new vitality to the economic world and to expand new growth spectrum. Secondly, the countercyclical economic management -- economic policy will continue to take effects. Chinese economy is expected to continue the momentum of recovery and the proactive physical policy to be more rigorous, effective and prudent monitoring policy to focus on flexibility and precision. The integrated effects of fiscal monitoring policies as well as employment policies will bring more business opportunities for commercial banks. Thirdly, digital transformation is irresistible. It has been inevitable that the image give birth to many new business models. So the trend of digital transformation, of online and off-line integration has become irresistible. Banks with strong digital capabilities will demonstrate better resilience. In the base of the risk and challenges, we will remain our strategic determination, adhere to the strategic direction of Light-operating Bank and structure position on One Body with Two Wings in system opening and integration and also focusing on the customers and technology to accelerate our digital operation. Firstly, we will persist in open up and integrated services. On the one hand, we'll insist on connection open-up with our partners. On the other hand, we will strengthen the internal integration by breaking the boundaries between systems, data, organization business and concentrating of servicing our customers and market operations. Secondly, we will be back to the origin and continue to build our customer service system, especially for the retail banking, we'll strengthen the digitalization and create value for the customers. For corporate banking, we will focus on direct financing and capital markets. And to promote the investment bank, commercial bank integration and better service the real economy. Thirdly, we will continue to improve our overall management system. Namely, we will focus on the substance of the risks and also to take up the long-term view, make a balance for the long-term and short-term targets. Also to consolidate the results we have achieved and to make up the shortfalls and to control the conduct risk or the concentration risks, these kind of major areas. Fourthly, we will upgrade our IT infrastructure and promote organizational, cultural change for accelerated construction of cloud computing capabilities, data, middle office and technology mid-office and also take collaborative office as a breakthrough to accelerate digital construction of internal management. We will continue to improve promote line Light-operating culture of openness integration, equality, inclusiveness, that will be the common belief of the employees of the bank. Now we go to the Q&A session. Please raise your questions.

Thank you for -- Mr. Tian, for your instruction for the 2020 and also for the outlook and strategies. Now we are going to the Q&A session.

[Operator Instructions] Now we will have the first question. Now the Q&A session, please -- okay. [Operator Instructions] Now first of all, we have the first question from Shenwan Hongyuan Securities, Mr. [indiscernible].

So congratulations on your performance in such a difficult environment. So my question is about the profit. As for the profit in the mid run, as you already say that we are very confident about your profit and also your risk control because you're very prudent in terms of risk management. But comparing to other commercial banks, CMB's profit is much better than theirs. So this is quite different, especially in terms of the profit growth side. So why your performance, your profit growth is different from other shareholding banks in the future? For the whole year, what is your forward outlook for the whole year's operating income as well as for profit? This is my question.

Thank you very much for your kind words. And so how do you say, it's not a good news because we have negative growth rate. Our operating income and profit growth, the relationship between them is based on CMB's real activities. We think banks are differentiated from each other. In the first half of the year due to the COVID-19, really, the impact -- implication is quite obvious. Except from CMB facing all the common challenges faced by all the industries or the common difficulties, we also have our own unique challenges, our kind of difficulties, namely the common difficulties, but our own challenges. So how do we say that individual challenges or special challenges for CMB within expanding of the following 2 aspects. The first one is retail banking. People all know now, we have retail bank, one body, retail representative, one body. And accounted for more than 50% of the total contribution, profit contribution. So in the circumstances, our retail banking has been mostly affected, especially in the short run. This, I have already shared with you in the annual results announcement. And just now, I walked through you through the interim results. Many data also show this feature, such as for our retail assets or the loans for the retail business. Now the growth rate of retail loans is lower than that for corporate loans, which you can compare that to that of last year, and that will pose a difference to our RWA growth and also the total yield of our assets, especially when you compare to the past period, that will have a larger impact on CMB than the other banks. As for asset quality, when you look at for the NPL, sort of amount of annual analysis, more than that of last year for CNY 303 billion. This is mainly contributed by credit card. As for new formation loans, it's mainly also -- mainly come from retail banking. This is something CMB is unique because CMB is mainly a retail bankers, the one body. Secondly, for asset and liability structure, when we look at asset and liability structure of CMB, you see, we have advantages. This is mainly because our funding mainly comes from the customers' deposit. Most of them -- normally over 60% are timed deposit, it's good. Demand deposit -- this circumstance, today's circumstances, this kind of demand deposit, it cannot be reduced any further. So which means it's not easy for us to reduce our funding cost. That is why we see in the first half of the year, our NIM, the management of the NIM has been challenged or we face more challenges in terms of the NIM in the first half of the year, it's 2.5%. I think it's now the very perfect number, but it's based on the unique structure, business structure of CMB and unique business asset and liability structure of CMB. In the long run, it's good. But in the short run, if you only take a look at only 6 months or a quarter, I think, that will be a problem. So everything we see is relative long and relative to the run. And you may win from that, but sometimes you may lose from that. And just now you mentioned, as for the relationship between the operating income and profit, why CMB is negative 1 is -- a little bit negative, 1.63% negative growth. This is -- I would think we take into all kinds of situations and based on our own situation, this is the number with -- don't think it's necessary to compare banks with other banks. Banks are differentiated from each other. Thank you for your question. The next one?

The second question, we have from Morgan Stanley, Richard Xu.

My question is about fee-based -- fee commission. In the second quarter, we see that the customer base continue to expand, not only for the private banking, but also for AUM in the second half. Second quarter, we see the fee income quarter-on-quarter has slowed down, the growth rate slowed down. So what is the main reason behind? And looking into the future, do you have any other -- do you have any outlook for the fee income in the future? Do you have any strategies?

Mr. Wang Liang, please answer the question.

Thank you for your question. In the first half the year, for the fee income has slowed down a little bit in the second quarter because our structure has changed a lot. First one, we see the highlight of the fee income growth is the agency sales of different products because the capital markets was very hot, with the sales of the mutual fund has doubled in the first half of the year. And also the fee income from the wealth management products see -- and also stronger than that of last year, and growth rate is over 200% because last year, in the first half of the year, our wealth management product sales fee was at the bottom. So in the first half this year, we see there was a very strong growth, especially for the transformation to the new products, we have very obvious results this year. And thirdly, is the custodian business. This year, the total volume for the custodian also increased a lot. So that we see a great increase over 10% for the fee income from custodian business. So this all has made contribution to the fee income. But when you look at the second quarter, you have to come from this side. The first one is credit card business because first quarter, the credit card has been deeply affected by the COVID-19, not only for the transaction volume, but also for the credit card loans. This has been contribution to the shortfall. The second one is the agency sales for the insurance. Because for the insurance, mostly carried out by off-line business, so off-line and social distance has made a negative impact on this. And this has made up also one of the short run for trust products and also for insurance comp products. So that is why we see there's only a slight decline in the second quarter, especially facing this kind of difficult environment amid the COVID-19, we think it's quite -- still we have done quite a good job in this. And with the economy reopened, we think in the second half of the year, we think we expect a very strong growth of our fee income in the second half of the year. And [indiscernible] also mentioned our customer base for the customer structure base. We see very good signs and also good performance in the first half of the year, especially high-value customers for the Sunflower class customers, [indiscernible] customers and private customers, we see a strong growth. So in the first half of the year, you'll see the AUM total volume has reached over CNY 8 trillion -- CNY 8.3 trillion. This means that compared -- this means quite the same as the balance sheet. Total balance sheet is CNY 8 trillion. Now we have another off-balance sheet asset, AUM is CNY 8 trillion. And this all will have a very positive impact on the fee income growth in the second half of the year. This is my answer to your question. Thank you.

Thank you. Next question.

Now we have Gary Lam from HSBC Bank.

Gary Lam from HSBC. My question is on asset quality. We can see quite clearly that follow basis in the second quarter. NPL ratio and special mention declined. Can you better -- and what is the driver behind? What is the write-off behind for the formation of the new NPL? What probably -- can we get your insight, especially namely, how do you see the current credit cycle from a retail and from a corporate perspective? Where should we think about the credit cost for second half of 2020 versus first half?

This is for translation for the question. We noticed that your special-mentioned loan rate and NPL rate has declined in the second quarter. What is the driver behind the write-offs? And also, you have mentioned that. As for the changes for asset quality, my question is what is the period for your NPLs? And what's your outlook for the second half of the year? Thank you. This question will be answered by our new appointed Chief Risk Officer, Mr. Zhu Jiangtao.

Thank you for your question. Firstly, for the first half of the year and also the second half -- second quarter for the asset quality side. From the first half of the year, we think that the asset quality has remained stable. And as for the asset structure, our -- for the half of the year, for the corporate banking, for formation rate for corporate banking has declined compared to the same period of last year. And when you look at the changes from the first quarter to second quarter, in the second quarter, we have stepped up our efforts to recognition of the potential risk customers. Risks, so which you can show -- see from the indicators, our special-mentioned loan has declined in the second quarter. And special-mentioned loan rate also in downward corridor. So when you look at the whole year, in the second half of the year, our corporate loans is our special-mentioned loans. We will continue to work in a very potent way to set up our efforts in this way, to downgrade these kind of loans -- potential risk loans. This is for corporate banking for potential risks. And just now, Mr. Tian also mentioned that we think that the deferment, all the total of the deferred loan is around CNY 69 billion. Around them CNY 67 billion are from corporate loans, mainly focusing on real estate and transportation. As for transportation in the first half of the year, because due to the COVID-19 outbreak, the highway cannot take the fees. And these 2 take up the around 70% of the total loan, deferred corporate loans. So we will mainly focus on these kind of customers and to examine one by one. And now we see that the risk is still under control. And as for the whole year, for corporate banking, the formation of the NPLs compared to this last period of the -- same period of last year, that will decline and for special-mentioned loan, it's largely -- probably will also decline. This is my projections for corporate banking. And as for retail banking for the first half of the year, we think it's also stable from formation ratios and amount. The asset quality of retail banking has risen up around 1 billion, and we think it's stable in the second half of the year. So we will look at the indicators, we think it continue to decline. And also for the deferral payment policies, the total retail loans, the total balance is only CNY 2.5 billion for the year. We have in total in -- all around CNY 130 billion in total accumulated amount of deferred payment. But for retail banking, now many of them has gone into the normal payment situation, is much better than our expectations. So we think that for the retail side, resale is also under control. And also, the loans only for deferred payments due in the deferred payment situation is only CNY 2.5 billion. The amount is not big. So for retail banking asset within the asset quality, is stable. For credit card business in the first of the year, in the first quarter, we also have many feedbacks and communications with our investors. Then within that in June, the credit card formation might be the peak. In August, that may be the second lower peak. Why we have this judgment, because this is mainly based on our judgment on the deferred payment and also according to the national policies for the credit card assets. So within May, we have tightened our policies for the deferred payment. Currently, the total balance for credit card is only 0, is already -- has been down to 0, now the 244 payment. So in May, if we have another 3 months extend, the second peak will be in August. So next, in the second half of the year, within the formation rate, we're still high but if you want to determine the risk, you will still need to -- it depends on the 2 factors. The first one is the household income. The second one is employment rate. So when you look at the credit card business, we think that will -- the provincial, rural will keep in a high range, and there will be some disturbance factors, but we think that peak time has passed. As for the whole year's credit cost for the first half of the year, it's 1.66%, up by 0.32 percentage points than the beginning of the year. This is in line with our increasing in terms of formation loans. And as for the whole year, the credit cost will rise compared to that of last year.

Thank you. Next question.

Now we have from Springs Capital, [indiscernible].

I'm from Springs Capital. My question, the first one is a short-run question. The other one, it will be a long-run question, 2 questions. The first one is for the provisions. First, we think that the coverage ratio is around 440%, and our deferred tax assets is around CNY 60 billion. So considering 10% of the deferred assets will be calculated into Core Tier 1. So when we think about your core capital and your risk, so what's your outlook for your coverage ratio in the future? Second one is for the asset management business, Mr. Tian has mentioned that the asset management business will continue to grow in a normal way. We think that the industry, especially for CMB has recovered in terms of the asset management business since the launch of the new rules, we think that -- does that mean the contraction of your asset management business has already bottomed up? What is your future outlook for your wealth management subsidiaries.

The first question, as for the coverage ratio. I think, it's quite a reasonable range, around 440%, more or less. Second one, please, we will invite Ms. Liu Hui to answer the question before.

Thank you for your question. As for the wealth management business, since the launch of the new rules, especially for the future of the wealth management business, you all know the regulators and the PBOC has jointly issued an announcement to extend the transition period to 2021 for the new rules. These new policies is within the expectations of the market because many market participants also has applied for the extension of the transition period. And also, there are many reports and suggestions for the extension. So finally, the policy allowed to extend the transition period for 1 year. And from the wealth management subsidiary, we supported very positively. We think that this decision -- our policy decision is very positive, and we will work according to our budget and according to our own prospects. So for the first half of the year, the total industry is keeping a stable pace and relatively fast transformation pace. So I look at the first half of the year, the bank's wealth managements, the total assets for wealth management for banks last year was CNY 2.34 billion at the end of last year. When you look at the first half of the year, the mutual fund, plus mutual fund subsidiaries, the total asset volume has exceeded that of the wealth management subsidiary of the banks. This is mainly the cause for the very rapid growth of the equity product markets. And as for the wealth management subsidiary itself, we see the NAV products growth rate is very fast. And the old products has been kept stable and has been reduced. We think after the new policy for 1 year, extending -- extension, the subsidiaries will be more active more clearly to reduce the existing old products, ex-CDO products because those principal guarantee products is kind of the -- on the one hand, is the -- if we cannot reduce those kind of products, it will -- it doesn't help to develop the new products. So with the phaseout of the old products, we do believe that the NAV products, especially under the wealth management subsidiaries will be more rapid and be accelerated. Secondly as for the scale and also the income of the wealth management side, we think that it's more important to take up -- say, whether the NAV new products can take up the role of the old products or the total asset volume. So if that is -- that moves smoothly forward, we think that will be quite easy for us to gain the asset volume and also to gain the income. In the first half of the year, the total new products is CNY 1.3 trillion. The growth reduced 59%, it's very fast and take up 40% of the -- 40.58% (sic) [ 45.80% ] of the total volume, 14 bps up than -- percentage points up than the beginning of the year. As for income, we have achieved a CNY 5.6 billion income from wealth management for the bank's sales side income and also for our branches, take up around 36% for the management fee. For the wealth management subsidiaries, it's around CNY 2 billion. So with a stable growth, our income has been steadily increased, year-on-year increase of -- I think we have -- some have some onetime effect in this number because in the first of the year, we also mentioned that -- because in the past, the products has been right in our product pool and some old products really have pressure on the NAV transformation. So last year, we reduced the fee income to make up the net equity. This is a onetime effect because that is why this year, we see the number -- growth rate is quite high. So we look at the -- we want to calculate or when you predict the future income, that will be when you look at the asset size, whether they can grow.

Next question.

Next question will come from CICC, Wang Yaoping.

Thank you for your robust performance. And thank you for your extent of disclosure, exceed our expectation for a better understanding of the management. My question is about corporate finance. According to my understanding, besides you take a leading position in retail finance, you have also made progress in corporate finance. You have attached great importance in the operation and management of strategy clients and you see some industry opportunity. And on the other hand, I think, you have made improvement in the fintech application of corporate business. You are beginning to empower fintech, empower technology and also co-build ecosystem. You have also bring up the new concept called FPA. So I would like to know from President Tian, do you have other indicators similar to retail MAU and AUM for corporate banking? And what kind of indicators do you attach importance to? And what do you think, what kind of indicators can provide for the investors to follow and measure the progress and quality of corporate business? What's your outlook and target for corporate business developing in the short run or even longer period?

Thank you for your question. I think for CMB, most of your importance may be attached to retail. In fact, around 5 to 6 years ago, we began to develop corporate business when we are facing 4 challenges brought to the banking industry. The 4 challenges, one is the interest rate marketization, disintermediation of funding, Internet finance and also another factor. I think the challenge brought by the 4 factors are more powerful to us. In order to cope with these challenges, retail is our lifeline, is our body within -- the One Body with Two Wings. So One Body with Two Wings is not an independent existence. They are organically combined within each other. So for corporate business, it's delayed. Its deployment is also a strong support for the one body, our retail business. So we should pay more attention to the change in the fundamental change. The FPA for the whole society in the future will definitely undergo huge change. That is the ratio of direct and indirect financing. When providing indirect financing, this is one of our strengths. And direct financing, I have to say, it's our weakness. It's not about what can we do, it's about our problem within our system. We need a system-based operation to provide services such as direct financing. For instance, risk management, we always refer to the free sheet, like traditional credit granting, where we are looking at the customer's financial statement. I think for these old mindset, these cannot cover the new method of indirect finance -- of direct financing. So overall, the transformation of corporate finance should be focused more on the difference between indirect and direct financing. How can banks get more engaged in financial intermediation? You should pay more attention as to develop your capability in providing capital market services. This is not a strength that you can acquire within one day. So 5 to 6 years ago, we began to develop such capability. FPA is quite a similar concept with social fund aggregate. Actually, within CMB, we have long adapt the concept of FPA. So under current situation, in disclosing FPA, this new concept, in the interim results, it is within our consideration. It is just for the first time we disclosed this concept within the interim announcement. We always use this concept to measure the capability, the service quality from our teams providing to our clients. We will use this new concept to make assessment and to measure their performance. So within the FPA, I think that contain -- that includes indirect and direct financing methods. So it could be said that FPA is a mature practice within CMB. It's not under discussion. It's not just a pilot project. It is already a practice, a mature products within CMB. However, it still takes time. I think with a good start and with a good direction, our corporate business, faced with the new challenge brought by the environ market, will be as excellent as our retail business. I will take the next question.

Next question comes from Judy from Citi.

I am Judy from Citi. My question is about e-currency, digital currency. I would like to know, how would this cash changes to the landscape of payment business? What influence will it bring to CMB? Another question is about the third-party payment business. The fee charge, such as WeChat and Alipay, are actually quite high from CMB to these Internet giants. I would like to know, it is a common practice? Or you are actually negotiating individually with different clients?

The questions will be answered by our new Chief Information Officer, Mr. Jiang Chaoyang.

Digital currency. The question is actually new to CMB also. Through public resources, the digital currency is [indiscernible] internal tested. We have also talked to relevant departments. But to this issue, we need to observe and pay more attention to the changes. We are happy to see new changes happening in this market, new projects, new products and new market participants about the fee charges. Indeed, I think in order to change the landscape, to change the situation, it must be under the influence of more market participants. I'm not sure whether your question is about their strategy, their fee charge strategy of Alipay and WeChat. I do not see a very significant declining trend upon the charges by WeChat and Alipay. I think for CMB, we would always want to be an active participant to promote a more active market. For us, we have invested a lot in the payment business and would like to increase our customer service and to improve our performance in such field. We cooperate with the Union Pay. And also, our all-in-one net service are also efforts we made to improve customer experience within the payment business. So much for my answer.

Next question will be from [ Chu Xan Xi ] from [indiscernible] AMZ. Thank you for your question.

I am [ Chu Xan Xi ] from [indiscernible]. Congratulate on CMB's performance under this challenging external environment, giving us confidence. I would like to ask a question about cultural construction. I noticed that you have put up a new idea called breakup silos and empower the front line and promote the open and integration of culture and organization. So I would like to know from the management about the backdrop of this mindset. And what kind of condition or achievement would you like to achieve?

I myself will take this question. So frankly speaking, breaking the silo and the simple working style proposal and also empower the front line, it's not common questions concerned by the analysts. I'm kind of surprised. It's not something that analysts would take more attention to. It also means that you have a quite deep understanding upon CMB. CMB's strategy, for each time -- I would like to mention and propose it for several times, our strategy is Light-operation Bank from the business perspective. Light asset, light capital, low growth rate of RWA and to promote the internal growth of our capital. And for the past 7 years, I think we did it. But that is not enough. That could be said that we are a Light-operation Bank. So we are still faced with the second half of the Light-operation Bank transformation, which featured light -- culture-light management. Light management refer to the process when a enterprise is getting from small to big. When people are growing older, so is the institute. No matter in capital market or in China, they are all faced with large enterprise disease. CMB's market cap has ranked seventh in the global market. We should always remind us from preventing to get the big enterprise disease. So the construction of light operation bank is entering into the second half. It is natural for us to bring up light culture and light management. It is a common question we are faced with. So breaking the silo refer to -- it's quite easy to understand. Within big enterprises, there are so many silos. I believe it is also happening within your company. For instance, communication is not that smooth within 2 departments. Sometimes, it would be nice even if they choose to simply cooperate. So in terms of business, I think business silos means that departments are cooperate in a not smooth manner and systems data cannot be shared within the internal system. When you are a big enterprise with so many silos, you cannot provide good services to your clients. It will greatly influence the experience you provide to your client. So that is why we mention the concept of breaking silos within internal departments. And this is also an efforts we spare a lot to do in order to enhance our light culture and light management. I will take the next question.

The next question comes from Yan Meizhi from UBS.

I have 2 questions, which is quite similar to the questions raised by other analysts, but I would like to know from my side. The first question is about profit growth. For first half and Q2, profit has dropped at a higher magnitude compared with its peers. I would like to know from your perspective, what is your outlook over your next half's revenue and profit? Can you maintain at least a positive or neutral growth? As we known from the regulatory information, the banking industry is required to dispose CNY 3.4 trillion nonperforming assets. So I think it's quite a huge efforts. I would like to know from CMB whether it is also a practice required by the regulator. And also, I've heard that for the next year, the effort is also required even higher in disposing nonperforming assets. Will it be an external factor influencing our profit and revenue? And how will it influence our ROAE? And what do you think of CMB's ROAE in the future 2 to 3 years? On the other hand, my second question is the Supreme People's Court about private lending. The protection -- the legal protection for the upper limit is 4x of the LPR, annualized 15.4%. So in my understanding, although the legal interpretation might not be applied to financial institutions, I would like to know whether this interpretation will influence CMB's credit card business. And at present, how much proportion of interest rates was higher than 15.4% within the credit card loan? And how will it influence your retail business?

The question will be answered by Mr. Wang Liang. So actually, I think your question is actually partially answered. But now I think I will let Mr. Wang Liang to answer.

Thank you for your question. For revenue and profit growth, I think we have already provided comprehensive answer. For the other question you raised, compared with other peers, I think, for the banking industry, the profit growth was minus 9.4% and for CMB, was minus 1.6%. We are actually record a better performance compared with our peers, and it is all owing to our differentiated strength in profit growth. During the upward trend of the banking industry development, CMB can maintain a good performance. During the downward trend of economic development, we can maintain a relatively small drop of our profit growth. So I think it is our competitive edge. For the next half or for a longer period, what's our outlook over the revenue or profit growth? So for my personal understanding, of course, just as you have just mentioned, to conduct fee reduction and benefit to the real economy, we'll continue -- this kind of policy, we'll continue to implement and will indeed bring risks to the banking industry. So the risk is going upward. It is also required by the regulatory -- regulators, such as the CNY 3.4 trillion disposal of nonperforming assets. This strict requirement is indispensably influencing the bank's operation, NPL ratio, NPL balance, special mention and other indicators all showing CMB's stable asset quality. So in the short run, profit growth is still under pressure. So in the long run, I think CMB's overall performance and solid foundation has provide us confidence to maintain our differentiated strength. This is my additional response to your first question. And for the second question of the People's Supreme Court regarding private lending, your question is about whether the new interpretation will influence CMB's credit card business. As the People's Supreme Court has made it clear, that interpretation applied just to private lending. So I don't think as FI, we will be influenced as our credit card business is a licensed entity. And for instance, consumer finance company is also a licensed FI, so they are not within the scope of applying this interpretation. We will also closely follow the change upon these rules and regulations and to see whether the changes will cast any changes over our operation of credit card business. We will strengthen and deepen our study and research and try the best effort to eliminate negative influence brought to our credit card business. Thank you for your question.

Next question will come from [indiscernible] from CITIC Security.

I would like to know -- a question from customer-based transformation. As you are faced with challenge posed by direct financing and also Internet finance, have you switched your focus of high-net-worth customers to other customers? Where would you conduct transformation over wealth management business and asset management business?

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

It's quite a big question indeed. In retail business, we have always keep a close focus over the changes or challenges brought by Internet finance companies. 2 to 3 years ago, we have already brought -- bring up -- we have already brought up the retail transformation 3.0 mentioned by Mr. Tian to see from commercial bank's perspective. CMB will benchmark with Internet finance company and see where we are different from them. Internet companies are fully operated online. They provide simple products. They are not as good as banks in understanding clients' financial requirements. So in this aspect, I think banks are doing a good job than Internet companies. So our understanding towards clients are deeper than them. So in the past, our major battlefield is our understanding of clients and also our service and product -- of complicated financial products. And also, commercial bank has a strength, an interactive strength of combining offline and online. It is a comprehensive strength compared with Internet companies. And it also benefit us in terms of providing complicated products to our clients. On the other hand, I think, we have also admit the strength of long-tail clients and their requirements upon simple products such as the agency sales of mutual fund products from Internet companies. This figure is increasing. CMB, I think, has a strength in online operation, online business operation, as there are many figures brought up by Mr. Tian just now. 70% to 90% of our products are sold online. So it is also one of our focus, about how to reach the long-tail client base, how to better understand young clients. We have also made early arrangement over these topics. It could be said that in terms of online service experience, CMB has taken a early step and can provide better service experience compared with its peers. I think the experience and service provided by CMB in online will be quite similar to Internet banking -- Internet companies. It is also CMB's strength to provide lifelong service to our clients, and we will also conduct refined management upon this characteristic.

Next question, from Guosheng Securities, Ma Tingting.

My question is about the -- we see the economy has reopened. So what is the -- in the second half of the year, as for the -- what is your plan for provision buildup and also for the disposal of NPLs? And also, as the profit of banks are facing pressure, what is your outlook upon -- for the dividend payout?

As for dividend payout, it's already stipulated in our M&A, 30%. So if we don't change our M&A, we will not change our policies for dividend. So this -- I think your -- this is the question concern most. The first question will be answered by Mr. Zhu Jiangtao.

Thank you. I will answer your question for the second year's NPL disposal and also for the provision. In the first half of the year, we have disposed CNY 25.2 billion NPLs, and this is a year-on-year increase. So when we look at for the whole year, the whole year's disposal will definitely increase. In the second half of the year, we will maintain the efforts, we'll maintain the speed of the -- as the first year, we will not diminish. As for provisions, Mr. Tian has already answered the question as for provision level for around 440%, more or less, around this range. We will maintain quite at this level, at quite a high level. This is my question -- answer. Thank you.

Next question, we have the Ms. [ Li Yamin ] from [indiscernible] Securities.

I'm from [indiscernible] Securities, [ Li Yamin ]. This time, we see the performance of CMB beat market expectations, especially in wealth management. So my question is about the wealth management. First half of the year, you achieved such a good results not only from the AUM for retail banking but also for private banking. Customer for private banking has also grown. Especially, you made a record high. My question is for this high growth, have you already analysis? What is the driving force behind? Is it because the liquidity in our home market? Or this is allocation of the households, namely moving from the real estate investments to bank's wealth management product? Is there a transition in the -- in this area? Or is there any special measures the bank has taken to improve our strength and advantages?

And I will give you a simple answer, and that will be answer followed by Mr. Wang Jianzhong. Just now also for the analysis of the driving factors, just now the factors you mentioned are for the whole industry. For CMB as a unique or individual bank, we do have the internal analysis, so to speak. There are opportunities always for the prepared person. After the breakout of the COVID for -- we have the social distance policies, and this has brought us a big opportunity because we are continuing to promote the digitalization of our retail banking. So in this time, we see the sales of the simple products. The digitalization has taken up a great effect. Now Mr. Wang Jianzhong will supplement my answers.

Thank you for your question. This year, for the first half of the year, CMB's retails wealth management has achieved really a good results. Just now, Mr. Tian has point out the substance, namely our online service capability has been built up in the years, and the outbreak of the virus has given us a good opportunity to show up. In the first half of the year, the wealth management, we see great momentum. You can see from the 2 indicators. This is the -- the first one is AUM. AUM has grown by over 10% and reaching CNY 8.2 trillion. The second indicator is the fee income from wealth management has grown by over 40%. This is a very fast growth rate. In our first half of the year, why we see the momentum is so good? This is mainly because the following reasons: The most important one that Mr. Tian Huiyu has already point out, namely due to the social distance. People can only stay home. But our -- as well -- and also, our relation managers also need to stay home, so -- which means that the digitalization on how you can offer the services online can show the distinctive advantages of CMB compared to other investment -- or other banks or other Internet companies because our products as well are better than Internet companies'. The second one is the buildup of our middle office. We have made continuous efforts for years in building up our middle office because this year, we see very good performance in the capital market. And as you can see from the sales of the mutual fund for CMB, the first one we will design on the difference of our customers. We will design different products on -- for different customers. I cannot leak this to you. It's a commercial secret. The second one is actually we oppose some very hot ones because under this circumstance, we really do not sell the -- do not want to sell much of those hot products. Well, we say that we need to -- the fund managers need to restrict the AUMs the fund manager can manage. So these are all the results we can show by the buildup of our middle office, namely we -- what we are trying to strive is to drive the best value or create the best value for the customers. And these values will be transmitted from the mid-office to the front office. And the front office is not only following on the sale of the products but rather the creating of the value. The third one is the team buildup, namely not from -- not only from the head office but also from branches to sub-branches. This is a team that we have built out very stable. Fourthly, and also we say the flywheel effect. We think the market are -- and they know that our flywheel effect is not a secret from the investment banking to asset management, to wealth management, to custodian. It's a close circulation for all of our products, and it's taking effect. Fifthly, I would think we benefited from the capital market because the capital market really performed good. So it gives us an opportunity to give us a very good opportunity to transform our wealth management products. Especially for the NAV transformation, we are leading the market. In the past, we have helped our customers to allocate many of the fixed-income products. But this year, we see the transformation is quite rapid and see rapid growth our private banking business. And there's a very profound transition in the product structure, namely the reduction of the fixed income. Rather -- instead, the equity products and also those insurance products has taken a larger part. So in the investment education and also the NAV product transition, we are leading the market. This is my answer. Thank you.

Next question.

We have from Goldman Sachs, Yang Shuo.

I'm from Goldman. I'm Yang Shuo. My question, about fintech. Because the tech companies has also crossed the boundaries into the banking sectors, we think that CMB has invested a lot in fintech, and the cost -- the investment has increased recently -- in recent years. Now your proportion for 1% of the total income to 3%, in the future, what is your plan for the investment in fintech? Second question. As for your -- the commercialization of fintech projects. Some companies, they have -- sometimes, they have outsourced their ITs to other companies. So for CMB, do you have any plan to outsource your fintech companies? Or you'll use your IT companies to empower other small enterprises, small banks?

Thank you. Your question will be answered by our Chief Information Officer, Mr. Jiang Chaoyang.

You have 2 questions. The first one is your investment into fintech. In our M&A, we have already written that stipulated that the fintech investment should be no less than 3.5% of our total operating income. And our fintech fund take up around 1.5%. This proportion in the short run, I think, will be quite stable, no less than this level. And if there is really a need that could be above this level, but generally speaking 3.5% is the appropriate level to ensure that at least 3.5% will be invested into fintech. For the first half of the year, the fintech is CNY 3.9 billion, and this has already been mentioned in the PPT introduction, up by 8% compared to that of last year. We think the growth rate is quite strong. The first question. As for your second question, for the empowerment of other banks using our own fintech technologies, frankly speaking, for fintech, the top problem for us is to meet our own business needs. And what we have gone through for what we are doing is to digitalize our own businesses to support our own bank currently, especially for the system buildup and also for the IT research. And at the same time, for some part of our matured technologies, we could consider -- based on the buildup our ecosystems, we are also considering to empower our partners in -- I believe in the letter to the shareholders in the annual report, Mr. Tian mentioned the opening up and integration with our partners, namely empower our partners to open up with the -- our partners in the ecosystem and link up with our systems. One of the major way is to empower our customers or empower our partners with digital service capabilities by using our own technologies for other partners. And this year, we have upgraded one of our subsidiaries -- upgraded our company to [indiscernible] for our direct subsidiary. This means we need to set up our efforts to provide more digital services to the corporate banking customers. And the original purpose for us is not use to create business value by using fintech technologies. Rather, to empower our partners or corporate clients to build up more intimate connections between the bank and the partners and to build up a more effective cycle. And we do see good progress in this regard such as for the -- compared to that of last year, our services -- fintech services has been increased by 37%. For this year, we think that the active customers will see significant growth also this year. Secondly, and also we have seen some interesting scenarios. The first one is the AI customer service. In the first half of the year, we -- actually, we have 7 partner -- government partners where we use our AI customer services to help them to service around 150,000 their customers. So this is an example showing that we are also using our capabilities to helping our partners. It doesn't mean that we are using these technologies to cash out in the capital market. Rather, we use these technologies to build up a better ecosystem with our partners. Thank you.

Next question.

Next we'll have [ Charlie Xu ], an individual investor.

I'm [ Charlie Xu ]. My question is about the demand deposit. We -- according to my observation, from 7 -- 2017 for the demand deposit, ratio has been increased, namely from 2019, the proportion of our demand has declined from 60%. Does that mean that in the future, whether it's possible for the proportion of our demand deposit in the total deposit to rise again? What is your outlook for that? The second one is for AUM. The growth rate is good. But except from deposit, what is the asset class under this AUM? Or can we say that you will squeeze out -- the assets will squeeze out the deposit? So what is the relationship between deposit and other asset class in the AUM?

Mr. Wang Liang will answer the question.

Thank you for your question. As for the demand deposit proportion, in the past, we have kept that in a very high level. This is why we have kept our funding costs low and also keep our NIM high. This is a very major precondition. And we really pay high emphasis on demand deposit growth. But according to our analysis, the highest time for the proportion of demand deposits was in 2014 to 2015, even exceed 70% of the total deposit. Why is that? This is because the wealth management business at that time also help us to attract the demand deposit. And also, at that time, the capital market was at a downturn. Many investors has transferred their funds from capital markets to the banks such -- or by the banks' wealth -- many products or to place with the bank. That is why we see a high proportion at that time. And then after that, then the total proportion of the demand deposit has begun to decline. Last year, the proportion for -- in total was around 60%. In the first half of the year, a good sign is that we see the proportion has risen to 62.5%, up by 2.65% than the beginning of the year. So we see some rebound. And we do have internal analysis for the driving force behind. The first one is benefiting from the loosened monetary policy. That mean the liquidity has been loosened in the market not only for the corporate banking but also for retail banking. See, both demand deposit growth has risen, and this is one reason behind. So we see that demand -- total demand deposit growth has been over CNY 400 million -- CNY 40 million. And this has -- this is why we see a higher proportion of demand deposit of first half of the year. The second reason behind is to build up our growth, our wealth management products, which can be shown in our AUM exceeding CNY 8 trillion. So it's kind of a reservoir that all kinds of assets could be included in this reservoir, including the funds, insurance, deposits and all kinds of assets with the customers' different allocation of assets or transformation of different types of assets. Some of them will be shown as demand deposit. And the third one is because we pay high emphasis on the expansion of our basic customers not only from corporate side but also from retail side. When you look at the base of our customer base, it has been grown for these years. This is all why we have advantage in the demand deposit. And also in -- from product side, we also have the settlement products in place. We try to -- we encourage the customer to use us as a settlement bank or the payroll bank or the fee collection bank. And that will help us to have access to this demand deposit. All these together, we have maintained our advantage of a low cost of deposit and a higher proportion of demand deposit. And for -- as for the proportion within 60%, even we have that in the first half year to 62.5%, within that, with the -- nowadays, households are beginning to have more allocation of assets in wealth management, and it's impossible or unrealistic for us to have an even higher proportion of the demand deposit. So we think that the 60% is already quite a high level. We think that we will continue to make efforts in this regard to keep our liability costs low. As for your question for the AUM's growth rate, just now Mr. Wang also has responded to this question. AUM for years is one indicator we emphasize most. And because we make efforts in this regard to build up our AUM, we have seen strong growth in the fee income of our retail banking and help us to keep a proportion of our demand deposit in a higher level, building up the AUM, and also help us to have a better connection with our high-net-worth customers and Sunflower customers and customers above. So this is, in one way or another, kind of provide a very positive impact on each other factors. Thank you.

Yes, the question just now -- or your question, I think, is more emphasis on the deposits and other assets. And I will add to that for CMB, we create value -- creating value for customers is the most important thing. When you look at the performance indicators that are reflected in AUM, namely it reflects how we can service our customers or how our customers trust our bank, if we only focus on CMB's own interest, namely to induce more customers to only place with a bank or to induce customers to place demand deposit, we could not service or create value for our customers. Within -- it's not good for the customer. If the -- within that, the AUM and demand deposit can influence each other or impact each other soundly. It's not -- we are not trying to -- striving for demand deposit by only focusing on demand deposit, such as in -- at the end of July, maybe we can have some incentive programs to incentivize our relationship managers to boost up the deposit value. But -- and last, it will ruin our reputation or the value of our customer. So we think there's a sound relationship between deposit and the AUM. Even there's a problem or conflict between deposit or AUM, we will choose AUM, namely how we can say that we could choose to create value for our customer rather than focus on our own indicators.

The -- then we will have another question coming from [indiscernible].

I'm a long-term investor for CMB. My question is, just now you mentioned AUM, namely AUM have supported the fee growth of our AUM or have a positive relationship with the growth of our fee income. Except from the deposit, what is -- when we look at the relationship between other asset types and the AUM with the fee-based income, this year we see a rebound. May I know what is your strategies or measures to help to increase the fee income coming from AUM growth? Secondly, as for direct financing, it's taking up a more proportion. I also noticed that CMB for years before already focusing on investment banking business. And -- but from your report, we don't see a disclosure for the investment banking business. Is it possible for you to give us more disclosure on the corporate banking business?

Sorry, I just now -- I didn't get your question clearly. So maybe I only get 50% of your question. Maybe I could give you -- answer your first question -- second question as for the contribution from investment banking. If you'll -- if there is -- there's no disclosure in the annual report, I could not disclose it just now. But if you are interested, you could contact our IR department and have more communications. As for the contribution from investment banking, I think it's not only reflected in the financial figures. Rather, it will be a part of our customer service system. Especially for the financing structure of the whole market, it's changing namely from the refinancing -- it's from indirect financing to direct financing. Otherwise, investment banking will help us to do the direct financing. Otherwise, we'll be disintermediated. Second question will be answered by Mr. Wang.

Just now it's a very detailed question as for the AUM and also the relationship between AUM and fee income. As for AUM structure, now we see the whole structure of the AUM. The biggest part is wealth management, namely products from our subsidiary. The second one is deposits. These are the 2 major parts. When you look at the growth volume, the mutual fund is growing very fast. And insurance, we see stable or down by 0.1%. Precious metal grow very fast for the first half of the year. When you look at the structure, what will be next? And not to mention that private banking for trust products or the private equity funds also growing fast. So what is next? Just now, Mr. Tian already said that, well, our purpose, main purpose, original purpose is to create customers value or to improve customers' experiences. And CMB's wealth management principle is to -- or what we do is to -- we classify our customers and divide them into different groups. And depending on the customer's own situation, we help to -- help our customers to allocate their assets. We don't emphasize on sales of products. Give you an example. For example, mutual funds. This year, mutual fund has very rapid growth. One of the reason behind is the capital market. And secondly, I will give you another secret, is for high-end customers, especially for private banking, we see very rapid growth for the sales of mutual fund. This is also customer centric. Because for these years, the mutual fund has provided more better experiences than private equity funds for customers. Secondly, mutual funds is -- could be delivered online. That is why we see a rapid growth for these kind of funds. As for precious metal, we seize the opportunity and we see very strong growth momentum. As for insurance, if that insurance -- insurance has not grown very fast. But for those guaranteed products, it has grown quite well. So back to the origin. With the condition of creating value for the customer, we help our customers to create -- improve the value of their assets. And our ability for us to help them has also greatly improved, namely our capability to service our customer has been improved. And in other words, our connection with our customer has been improved. And based on that, we do expect our -- we think it's very -- have a sound future for the future income.

The last question.

Last question, [indiscernible] Finance [indiscernible], Jefferies. From Jefferies, [indiscernible].

Sorry I could not -- just now we have said the -- mentioned the NIM. Mr. Tian, so you are not very satisfied with the NIM figure. Could you have any -- elaborate on that? I think the reason behind, one is the decline of the corporate yield and maybe some -- the market rate and also the repricing of the loan assets. Secondly, we also see the improvement on the credit card business. So what is your outlook for the NIM? And also, we see for the liability side you have made up many efforts to issue the CDs or interbank lending to replace those high-interest bonds. What is your outlook for liability cost?

Mr. Wang Liang will answer the question.

Thank you very much for your question. In the first half of the year, as you look at the NIM, it's down compared to last year. We think that in the second half of the year from the asset side, the loan yield will continue to decline. The trend is that this is one -- one is the background of the policies, namely to benefit the real economy. Secondly, we need to optimize our loan structure such as to support the manufacturing industries and support mid and small enterprises because they are facing a lot of difficulties and they need to have low-cost access to -- access to low fundings. We see the interest rate for this industry is still low. But -- so -- but good to know that our retail loans is recovering. As for mortgages, it's rebounding rapidly. As for credit card loans in the second half of the year, it's still below that of last -- the beginning of the year. But we think that in the third quarter, we're beginning to recover. But the growth rate definitely will be lower than that of last year. And the growth of our credit card in the second half of the year will help us to improve our loan yield. But the -- for the whole year, the total growth rate will be less than that of last year. This is from the asset side. From the NIM, it will be stable but might decline a little bit. From the liability side, we think that we will set up efforts to attract the core deposit and reduce the structural deposit. Especially for the first half of the year, structural deposit has been declined by 4.4% when compared to that of last year. In the second half of the year, we'll continue to reduce that, reduce the interest rate and control the liability cost. By acting in these 2 ways, we think that in the second half of the year, the NIM will be quite the same of the first half of the year. And for the whole year, the NIM for the whole year, as we predicted in the first half of the year, will be less than that of last year but will be higher than the fourth quarter of last year, maybe in between. Thank you.

Thank you very much for your participants. And due to time limit, we now conclude our interim results announcements. If you have any questions or want -- you can go to our website to -- we have our reports on the website. And also, you could contact our IR team in our -- all of our office. Thank you very much for participating our announcements. We will try our best to provide better value for all the investors. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]