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

Analysts, friends from the media, good morning. CMB 2020 Annual Result Announcement will now begin. I am Liu Jianjun, Executive Vice President and Secretary of the Board of Directors of China Merchants Bank, also the host of today's conference. Due to the current situation of COVID-19, we are hosting today's event entirely online. Today's event is also available through the webcast on SSE Roadshow and Wind Conference to allow all investors to join in. Now I would like to introduce the bank's management who will present today. They are Mr. Miao Jianmin, Chairman of the Board; Mr. Tian Huiyu, President and CEO; Mr. Wang Liang, Executive Vice President; Mr. Wang Jianzhong, Executive Vice President; Mr. Li Delin, Executive Assistant, President; Ms. Liu Hui; Executive Assistant, President; Mr. Jiang Chaoyang, Chief Information Officer; Mr. Zhu Jiangtao, Chief Risk Officer; and also Mr. Hong Xiaoyuan, Executive Director and our General Manager from related departments. On behalf of CMB, I would like to welcome you all to the event. Thank you for your interest in and support and investment in CMB. In today's presentation, it will be divided into 2 sessions. Mr. Miao Jianmin and Mr. Tian Huiyu will review the financial highlights and the operational performance of 2020, taking around 40 minutes. We will then move on to a Q&A session. We will answer to your questions, which will be around 80 minutes. The event will end at around 11:30. There will be simultaneous interpretation in English for both the presentation and Q&A session. Now I would like to pass the floor to Chairman Miao and President Tian.

Good morning, everyone. Welcome to CMB 2020 Annual Result Announcement. Today's presentation will be divided into 3 parts. First, I will present an overview of our full year performance in 2020. After that, President Tian will introduce our operational information in detail. And finally, I will briefly talk about our outlook and strategies for 2021. In the year 2020, confronted with the COVID-19's challenge, deep recession of the world economy, intensive launch of regulatory policies and drastic volatility in financial markets, CMB has adhered to its strategic direction of asset-light bank and strategic positioning of One Body with Two Wings, carried out its operations steady and healthily, maintained the dynamic and balanced development among asset quality, profitability and scale. It is evidenced by the following 5 aspects. We have steadily coped with pandemic with asset quality tested to be solid. Influenced by the pandemic, asset quality of the company, especially the credit card quality, was under huge pressure in the first half of 2020. However, as the pandemic became -- being mitigated and the economy started to recover, coupled with various measures, the company has released its pressure in terms of its asset quality. Balance of NPL was RMB 53.6 billion. However, our NPL ratio was 1.07%, down by 0.09 percentage points, maintaining declining trends since 2017. We have successfully withstood a severe test by the pandemic. NPL allowance coverage ratio was 437.6%. Credit cost was 0.98%. Our operating income and net profit grew steadily. We managed to overcome the impact brought by the pandemic economic downturn and policies of lowering interest rates. We have achieved steady growth in net operating income, especially we have seized the market opportunity to realize the double-digit growth in fee and commission income. Our profitability maintained resilient. Our net operating income exceed RMB 290 billion, up by 7.6%. Net profit steady grew by 4.82% to RMB 97.34 billion, maintain a rather relatively steady growth. ROAE, 15.73%; ROAA, 1.23%, maintaining relatively high level. Due to the declining yield of interest-earning assets, NIM was 2.49%, down by 10 bps year-on-year. But on the liability side, the company has maintained its core competencies of low funding cost. Therefore, the average liability cost was 1.73%, down by 7 bps year-on-year. Net noninterest income was RMB 105.25 billion, representing a year-on-year increase of 8.84%, among which net fee and commission income grew by 11.18%, the highest in recent 4 years. Cost-to-income ratio, 33.33%, up by 1.25 bps -- percentage points, mainly due to the increased investment into digital infrastructure and R&D talents as we accelerate our transformation of fintech. Capital adequacy ratio also steadily increased, demonstrating strong internal capital generation capability, a remarkable achievement of our transformation into asset-light bank. Core Tier 1 capital adequacy ratio under both the Advanced Management Approach and Weighted Approach increased by 0.34 percentage points and 0.04 percentage points, respectively. In addition, we have replenished our additional Tier 1 capital by issuing RMB 50 billion perpetual bond. Thirdly, we proactively support the real economy and maintained a good growth of our assets and liabilities. We have implement various financial policies and provide full support to the resumption of work and productivity, and we have actively addressed the financing needs of our corporate customers and serve the real economy. The balance of FPA was RMB 4.26 trillion, up by 15.46%, among which the balance of nontraditional financing accounting for 47.2%, representing an increase of 2.42 percentage points. The balance of inclusive loan was RMB 530.6 billion, up by 17%, surpassing the growth rate of total loans by 5 percentage points. Company actively followed the deferred repayment policy to support the recovery of the real economy. Aggregated loans granted to the customer who applied for the moratorium loan arrangement were RMB 152.57 billion. And at the end of 2020, the balance of such loan was RMB 21.91 billion. Total assets were RMB 8.36 trillion. Total liability were RMB 7.63 trillion, growing by 12.73% and 12.23%, respectively. Growth rates were 2.78 and 2.6 percentage points higher. Total loans and advances to customer were RMB 5.03 trillion, and total deposits amount to RMB 5.63 trillion, an increase of 11.9% and 16.18%, respectively. Fourthly, we continued to increase investment in tech and drive our development with innovation. We continued to increase our investment in technologies with a total investment amount to RMB 11.9 billion in 2020, representing an increase of 27%. Investments were mainly attribute to financial technology innovation project funds, infrastructure construction, R&D talents and system operation. We promote and open an inclusive atmosphere for innovation and encourage to apply small team innovation. We have confirmed 2,106 fintech innovation projects, of which 1,300 of them have been launched online, covering retail, wholesale risk and other fields. Fifthly, our market cap exceeded RMB 1 trillion, and market influence was further enhanced. By the end of 2020, our market cap was RMB 1.096 trillion. Our PB ratio in both A share and H share continue to be leading among major listed banks. In The Banker magazine's top 100 world bank list, we rank the 17th in terms of Tier 1 capital, up by 2 places from the previous year. By brand value, we ranked the 9th. In the Fortune Global 500, we ranked 189th on its list. In terms of the Euromoney magazine, we were awarded the best bank in China once again in 2020. We received the most honored company and other awards in 2020, all Asia executive team ranking by institutional investor. This concludes my brief introduction of our performance. And now I would like to invite President Tian to present the operational information of the company.

Thank you, Chairman Miao. It was a tough year to the world of the last year. I think for CMB, in such a tough year, we have managed to make it a year of harvest. So just now, our Chairman has explained from the 5 aspects of our performances in terms of the scale, profitability, and other aspects. And in another aspect, mainly 6 aspects, I would like to further introduce our performances in detail. Firstly, we broadened customer base with improving quality. The number of retail customer was 158 million, up by 9.72%. Retail AUM, RMB 8.94 trillion, up by 19.32%. Increase in total AUM exceeded RMB 1 trillion. The number of Sunflower-level and above customers and the balance of their AUM were 3.1 million and RMB 7.35 trillion, up by 17.15% and 20.71%, respectively, recording the highest growth rate in the last 5 years both. Number of PB customers approached 100,000, representing an increase of 22.41%, recording the highest growth in the last 5 years. Total AUM for PB clients increased by 24.36% to RMB 2.77 trillion, achieving highest growth rate for the past 7 full years and being the #1 in the industry in terms of the PB AUM scale. Number of corporate customer grew by 6.42% to 2.23 million. Number of newly acquired corporate depositors was 397,000, contributing average daily deposits of RMB 224.88 billion, increasing by RMB 63.84 billion year-on-year. Number of institutional customer was 41,500, increasing by 17.23%. Average daily deposits contributing by such clients were RMB 914.3836 billion (sic) [ RMB 914.356 billion ], up by 8.81% year-on-year. Number of head office-level strategic customer, 288. And balance of daily average proprietary deposits amounted to RMB 734.84 billion, increasing by 20.9%. Number of branch-level strategic customer was 6,142 with the balance of daily average deposits of RMB 545.41 billion. Number of small-sized enterprises reached 2.12 million, increasing by 133,400 compared to the beginning of the year. Number of companies opening IPO special fundraising accounts with us was 167, accounting for 42.93% of the total, increased by 12.88 percentage points year-on-year. We won RMB 152.12 billion IPO fundraising deposits with a market share of 36.38%, 26.79 percentage points higher than the end of the previous year. We pioneer the cross-branch supply chain business model with the feature of providing service by all branches in a collaborative manner to one enterprise and its industry chain. We focus on both the marketing of core enterprise and customer management for numerous upstream and downstream suppliers. Second, we have developed faster deposit growth and optimized loan structure. The growth in our customer deposit record a historic high with more optimized structure. We have taken a series of measures such as controlling the volume and price of large denomination CD, pushing down the scale of structured deposits and deepen the customer management to continuously increase the proportion of demand deposits and reduce the cost of deposits. The company's deposit from customer amount to RMB 5.63 trillion, recording a record high increase of RMB 783.91 billion or 16.18%. Our market share in deposit market further expanded. Balance of core deposits were RMB 4.71 trillion, increasing by RMB 1,027.5 billion or 27.9% from the last year. Daily average balance of demand deposits accounted for 60% of the total, up by 2.01 percentage points. Customer deposits average cost ratio, 1.55%, down by 0.03 percentage points. Retail loan business has escaped from the shadow of COVID-19, gradually resumed its growth with an increasing proportion and optimizing structure. Total retail loan increased by 13.5% to RMB 2.64 trillion, accounting for 55.9% of the total. Retail loans proportion was up by 0.16 percentage points. The growth of credit card loans, micro finance loans and consumer loans was once affected but started to recover since the second quarter of last year with the full year growth of 11.27%, 7% and 9.83%, respectively. Corporate loans has grown steadily with the optimized loan structure, and we have enhanced capabilities of asset origination and financing medium- and long-term projects. Total loan -- corporate loan balance increased by 8.29% to RMB 1.76 trillion. For medium- and long-term loans, it has increased by 24.89% and accounted for 62.09% of total loans, up by 7.5 percentage points. Green loans and loans toward strategic emerging industries achieved quite a vast growth speed for over 17%, respectively. Thirdly, we have distinctive business features with enlarged leading advantages, benefiting from our wealth management operations and also for our credit card businesses. As we can see, fee and commission income from retail wealth management increased by 32.83%, the highest growth in the last 5 years. The balance of retail WMP was CNY 2.22 trillion, representing increase of 17.72%. The sales of nonmoney market mutual funds amounted to CNY 610 billion, up by 177.88% year-on-year. Agency distribution of trust schemes amounted for CNY 469 billion, up by 38.19% year-on-year, all leading the market. Private banking asset per account was CNY 27.75 million, increased by CNY 436,000 from last year. Our family trust business surged. The number of newly established on- and offshore family trust and the amount of new customer assets increased by almost 2x year-on-year. The credit card transaction value was CNY 4.34 trillion. We continue to rank the first in the industry in terms of total transaction volume and overseas transaction volume. Our corporate banking business still focused on professionalism and set up efforts to build our core competitiveness. For institutional banking business, we have achieved a new model. Among the local governments' special bonds issued nationwide, projects served by us amounted to CNY 1.3 trillion with a coverage rate of 36.65%, ranking #1 in the industry. Retained deposit were CNY 638 billion, up by 143%. And entrusted pension fund grew by 133.87% year-on-year. Our investment banking capabilities continued to improve. Bonds underwritten amounted to CNY 791 billion, representing an increase of 21.11%. And market transactions amounted to CNY 218 billion, representing an increase of 86% (sic) [ 89% ]. And our transaction banking business kept innovating. We provide online supply chain services for small and midsized enterprises with the domestic trade financing volume increased by 32.93%. For interbank market industries, we have seized market opportunities and have steady growth. As for Zhao Ying Tong platform, we have signed 2 financial institutions for 2,778% (sic) [ 2,778 ] with the agency sale of third-party financial products increased by 98.33%. Sales trading in financial markets increased by 52.92%. Commercial acceptance bill discounting business was CNY 105 billion, representing year-on-year growth of 109%, marking number one in terms of growth volume and number two in terms of total scale. Our market share was 10.23%, up by 4.86 percentage points year-on-year. Asset management business has maintained steady growth with accelerated transformation. The balance of WMP managed by CMB Wealth Management amounted to CNY 2.45 trillion, increased by 11.87%, a record #1 -- #2 in the industry. Balance of new products increased by 141% to CNY 1.66 trillion, accounting for 67.76% of total WMP and 36.54 percentage points higher than the end of 2019. Fourth, deepen the openness and integration and strengthen the flywheel effect. The organizational culture of openness and integration has been deeply rooted in the hearts of employees. And the strategic positioning of One Body with Two Wings, we have demonstrated a more and more significant flywheel. We'll continue to improve our awareness of internal coordination for the wealth management, asset management and investment banking. We have effective linkages among each other. AUM has reached a historical high. Total assets under custody exceeded CNY 16 trillion, up by 21.32%. And we ranked #1 in the industry in terms of custody scale of newly issued mutual funds. Our head office branches and various business lines are promoted for integration to expand services in our real cycle system together. Our provident fund services covered 78 cities. The social security inquiry service covered 66 cities, and nontax charge payment services covered 85 cities. We have issued 13.77 million electronic social security cards in total. The MAU of both governmental convenience scenarios and utilities bills payment scenario rapidly increased. Fifth, we have reinforced our basic management with solid asset quality. Facing the very complex external environment, we continue to improve our risk management capabilities. We have used fintech measures to [ solidify ] our financial risk management and also to strictly classify the assets. As we can see that the company has the adopted prudent classification criteria for risky customer, ratio of nonperforming loans to loan overdue for more than 90 days was 1.31, up by 0.13 percentage point compared to last year. Although our NPL balance slightly increased, the NPL ratio continued to decline. The percentage of special mention loans and the amount was down by 0.36 percentage points and 0.29 percentage points, respectively. And the NPL formation ratio reached 1.26%, 0.13 percentage point higher than the previous year. This was mainly due to the increase of NPL formation ratio of credit card. That is why we have expedited our disposal of nonperforming loans. And also, we've written off RMB 10.83 billion. It was recovered from the collection. For the retail NPL ratio, it was 0.81%, up 0.08 percentage point. But the corporate NPL ratio was 1.58%, down by 0.26 percentage points. Sixth, substantial progress in transformation empowered by fintech. We continue to increase investment in financial technology, further promote the digital transformation and the update the 3 -- version 3 business model. Fintech continue to empower the operation management of various business lines and has delivered significant outcome. The CMB APPs will continue to take MAU as the North Star metric to enhance our digital operation capabilities. The CMB APP and CMB Life APP have become the major operation platform for our customers. The aggregate number of CMB APP users increased by 27.19%, and the aggregate number for CMB user for CMB Life increased to 110 million. The MAU remained robust amid the epidemic. The aggregated MAU of the 2 major APPs were 107 million, increased by 5.42%. For 23 scenarios, we have MAU exceeding 10 million. And our relationship managers established online business relationship with gold customers and Sunflower customers through the APP, which means we have servicing customer for over 9.3 million, increasing 44.77% year-on-year. The number of transactions completed were 2.25 million with an aggregate amount of CNY 472 billion, year-on-year increase of over 31%. The number of wealth management customers using APP reached 10.33 million, increased by 35.55% and accounted for 94% of the bank's total WMP customer. WMP transaction via CMB APP amounted to CNY 10.09 trillion, increased by 28.21% and accounted for 79.24% of the total WMP transactions. And comprehensive improvement in digital management capability efficiency constantly improved customer service experience management. The Wind Chime System monitored 1,367 retail customer experience indicators and 954 corporate customer experience indicators. We have continued to upgrade intelligent customer services. The proportion of online tech service reached 90.23%, and the proportion of intelligent self-service reached 77.23%. And we have been -- keep enhancing middle and back office operational automation. The bank proactively promoted the application of fintech in 49 middle- and back-office scenarios. Number of alternative business reached 27.23 million. And we have further enhanced intelligent risk control. The company kept improving the risk warning model and developed AI-aided approval tools. The online risk control platform has been able to provide such functions through its online customers access, quota application, approval risk control and risk monitoring. We continue to construct future R&D technology base and capabilities. We actively promoted host cloud and application cloud and accelerated the application of AI. The customer service cloud saved a workforce of over 4,000 people. Early-warning timeliness of the public opinion cloud improved from 1 day to 1 hour. We promoted the open choice and reuse of business and technical components and have released a total of over 800 co-share components. We established a unified data portal known as Zhao Shu and significantly improve our data analysis and data utilization. That's the operation information for 2020. And we would like to invite Mr. Miao to share our outlook and business strategies for 2021.

Looking ahead into 2021, recovery will be the main theme of the global economy. With the commencement of the 45-year plan, China will step into a new stage of development, forming a new development pattern and a new development philosophy. Facing the new macroeconomic situation, the bank will follow the principles underlying industry demand, giving full play to our own advantages. We will adhere to the strategy of light-model bank and strategic positioning of One Body with Two Wings and focus on customer experience and risk management and build an extensive wealth management as value chain as our main business thing. We will complete our efforts to forge the digital bank and the organization culture to promote openness and integration. We'll continue to explore the 3.0 model of commercial bank operations, seeking -- achieve high-quality development while actively serving the real economy, creating greater value for shareholders. Our detailed strategy are as follows: first, expand wealth management business to further develop a cyclical value chain. We will base it on the capital flows of customers. We effectively connect the customers' need at the investments and financing and further develop the cyclical value chain of wealth management bank, investment banking and asset management. With a more open mind, we will promote the integration of One Body with Two Wings at a higher level, better integrate the advantage of CMB with the resources of the whole society and realizing the flow and retention of customers' funds and assets in the platform of CMB, build up an interactive ecosystem of funds supply, fund management and financing so as to form a flywheel effect of business and better create value for customers. Secondly, we'll optimize fintech to expedite the transformation business model. We will comprehensively upgrade our apps, the product system, service model and intelligent capabilities and speed up digital transformation. We will create an open service platform, explore the advantage of people and digital and accelerate platform-based transformation. We will improve the quality of living scenario construction and operational capabilities. The breakthrough focus is industrial Internet and corporate digital services. We will accelerate [ cloud ] transformation as well. We will propel the transformation of data center toward cloud computing centers, continue to promote the construction of technology middle office and data middle office and speed up the construction improvement of future R&D and digital infrastructure. We will strengthen risk management with continuous improvement in comprehensive risk management capabilities. We will continue to approve the risk appetite, continue to effectively control the risk weighted -- growth of RWAs, improve our allocation capabilities of major category of assets, optimize asset structure and build a strong balance sheet. We will establish a risk management that can be applied to extensive wealth management with full coverage that fits all, namely all risk or institution or customer or assets or processes and/or factors. Fourthly, we will stick to approach of openness and integration to promote the organizational cultural reform. We will persist in promoting organizational cultural reform under the overall situation of openness and integration and push forward the transformation of openness and integration from physical reaction to chemical reaction. We will take cross-border integrated organization as an effective organizational method to handle complex tasks and create an organizational form to meet the needs of different scenarios. We will further improve the talent exchange system and exchange mechanism, avoid the departmental barrier to enhance the practicality, empowering the front lines of middle office. Fifthly, we will remain market-oriented and provide the system mechanism guarantee for high-quality development. The market already has a system. A mechanism has served as a fundamental guarantee for our past system of development. Looking forward, we will continue to uphold the principles of the President, assuming full responsibility under the leadership of the BoD, the market-oriented incentive and restraint mechanism and the stability and continuity of our talent team. We will continue to improve the modern enterprise system with Chinese characteristics from the principle of market-oriented commercial banking and also to consolidate and improve our market-oriented system of mechanism. This is our introduction. Thank you. Now we go to the Q&A session. Now we'll come to your questions.

Thank you, Mr. Miao. Thank you for -- Mr. Tian, for your introductions. Now we go to the Q&A session. First, we will have the Q&A from the investors and also financial analysts. And then we have the media friends. [Operator Instructions] Now we have the first question. Now we are going to use the Q&A session. [Operator Instructions] Now first, we have Ran Xu from Morgan Stanley raising the first question.

My question is for Mr. Miao. You have stated in the annual results reports say we need to stick to the strategy and to withdraw our blueprint to the end since CMB is #1 in retail banking in China and since you have a long experience in the industry -- insurance industry. So my question is under the current trend of the banking industry or other strategic opportunities CMB is now facing under these opportunities, what kind of strategic adjustments we should do under these circumstances?

As the Chairman of CMB, I said we need to insist on our strategy. I have repeated, emphasizing that for many times. And also, the report I made on the work meeting of CMB said, we need to stick to our original strategy because the success of the one company depends on the success of the strategy. The leading role of CMB lies on the leading of its strategy. It's a big risk for a company if it doesn't have a strategy, but that will hurt the company more if he has a wrong strategy. Over the past 33 years, CMB has its own clear strategy, and it has been proved to be correct by market practice. And our vision is innovation-driven and retail advanced with distinctive characteristics to be the best commercial bank in China. This strategic vision has been tested true in practices. That is why markets say that we are the king of the retail bank in China. Our direction is to become the light-model bank, and the strategic position is One Body with Two Wings. Facing the new circumstances and situations and to implement the new development philosophy to serve the new development pattern, we -- in implementing our strategies, we also need to reinforce all kinds of capabilities in many aspects. Banking industry is the same as other industries. We still need to conquer difficulties to reach a successful end. So as CMB, when we are implementing our strategies, we need to take into consideration our own advantages and also the changes in the external market and need to strengthen some capabilities. I have said that we need to improve 3 capabilities. One is wealth management. One is fintech. The other one is risk management. For wealth management capabilities, it depends how high we can attain, whether we can reach a new high in the future. Why is that? Because I think in the mid and long run, our country's banking NIM has -- it will facing a contraction trend. Secondly, as for -- financial disintermediation is accelerating. But at the same time, the wealth management of the banking industry is still at a very beginning phase. We have a population -- have the largest population in the world. And also, the household wealth, they ranked #2 in the world. But the security industry and also the wealth management accounted for only a small portion of the GDP, which lags behind U.S.A. So wealth management business have huge opportunity in China. But at the same time, it consumes less capital. It's in line with our light-model banking strategy. So we need to strengthen this wealth management capability. And the wealth management capability depends on how high we can attain in the future. CMB's market cap leads in the market. This is also in line with our strong advantage in terms of wealth management, another factor because we also have a very good or solid asset quality. Second capability is fintech. And compared to our peers, we are leading in terms of fintech capability. But we have a higher target. We need to benchmarking the top ones in fintech and to build fintech to be our major capabilities. A third capability is risk management. Risk management depends how far we can go. It means that we can go high, but we also need to go far. Risk management depends on how far we can go. Because now we have steady steps moving forward because we have a strong risk management to be at a base, and we have a strong risk management culture. So our risk management capability in compliance or in line with the new changing environment also need to be improved. This is 3 unchanged things we need to insist on. When I just said, one is we need to withdraw the blueprint, we should avoid those self-destructive behavior. Secondly, we also insist on the CEO assuming full responsibility under the leadership of the Board unchanged. And also, we need to keep the market-oriented incentive mechanism unchanged and also to continue the stability of our talent team unchanged. We think that when we insist on the 3 un-changes and also we continue our strategy and also to improve our capability applying to new circumstances, we definitely think we will do a better job in the future. Thank you.

Now we will take the next question. The next question is from Spring Capital's Mr. [indiscernible].

Dear senior management, I am [indiscernible] from Capital of Spring. I would like to know from President Tian that every time when I read your annual report, I will pay special attention to the President's statement. It -- you have pointed out the direction of CMB's development and make it focus on our different development model during the 1.0, 2.0 and 3.0 stage. So our -- under current situation, we are faced with the challenge brought by the decreasing basic-level customers. And you have pointed out that we need to develop the extensive wealth management. And I would like to know, what is the essence of this extensive wealth management strategy? And how can we achieve our goal and overcome the difficulties during the process?

You have brought up a lot of questions. Indeed, extensive wealth management, I think it's a bit hard for me to explain in such a short period. It might be a bit difficult. If you have further interest, we can discuss later. After this conference, I can give you a very brief introduction over extensive wealth management. So this idea was brought up. It's actually -- it's not out of sudden. It's not an idea coming from nowhere. It's the 3.0 model that we have bring up for over 3 years. It's a stage summary of our exploration. It's that we're standing on the opening year of the 14th 5-year plan. In future, 5 year is the mainstay -- is the focus of our major business development. As mentioned by Chairman Miao, it is the market trend that fit into our own strategy planning. We aim to develop into a light-model bank. And it is a very natural result for the combination of the trend and our own development for the full aspects: first, market opportunity; second is the market situation. They are changing. Market interest rates liberalization, the low interest rate circumstances will come. Ultimately, whether it's next year or the year after next year or 10 years later, along with the development of Chinese economy, it's -- sooner or later, we will become a developed country. And you can see from the European countries, most of them are actually negative interest rates. We need to get well prepared. By then, it will be too late for us to get prepared. It's never getting us enough time to get prepared just 1 year earlier. And the second -- third aspect is the competition based on the digital era. It's actually ecological competition for us. So for banks, what kind of ability we have? We're not about social network. We are not about digital commerce. So our capability is in extensive wealth management based on retail clients. When it comes to our advantages, you must think it thorough, what we have, what we are good at. So based on wealth management, we construct our ecosystem. This is the strategic high we can attain in the future competition. The fourth aspect is that CMB, our strategic transformation aims for less cycle-sensitive and light capital. I think we are good at attaining light capital, and we have -- avoid capital replenishment through equity for over 7 or 8 years. We're always relying on our endogenous growth of our own capital. And we increase our capital fund of different level. We are quite proud of it. How to be more -- less sensitive to the cycle, I think there is still a long way for us to go. Wealth management, I think especially extensive wealth management, they have characteristics that can be less sensitive to cycle compared with banks. I think if we do a good job in this aspect, we can achieve our goal to be less sensitive to the cycle and to be a more light-model bank. So basically, it's based on the above 4 aspects. So for the above-mentioned difficulties you brought up, I think what risk management capability and fintech capability mentioned by Chairman Miao, it's no doubt the difficulties and pain point we are faced with. So for the cyclic value chain of extensive wealth management, during the chain, for more market-oriented asset managers, banks have its difficulties in establishing new products. Even though we have made preparations, but compared with our advantages in our channels, we are still lacking in our capability to develop products. So in the future, what kind of risks are we facing? I think what we are looking at is not just asset organization, product, establishment, investment, education, accompanying of our investors and post-investment capability, investment capabilities, these are difficulties we faced compared with the traditional ones during the previous era. CMB will not put its goal -- regard its goal as the reality. We are clear that in order to achieve this goal, it takes more than 5 years or maybe longer. We are well prepared for this.

Now we will have the next question. The third question is from Xiao Feifei from Citic Securities. [Operator Instructions]

I'm Xiao Feifei from Citic Security. I would like to know from your equity investments over the Taizhou Bank's equity, what is the mindset behind? Is it a pure financial investment or an approach to learn from its small- and micro-sized loan model? What kind of contribution will it bring to us? And are there going to be a similar plan in the future? So actually, CMB Wealth Management introduced Morgan -- JPMorgan Asset management as its strategic investors. And what kind of plan will there be in the following product design and cross-sell? And how do you agree to the valuation of the 10% equity?

So I think the Taizhou Bank is a very special bank. I think in some aspects, they are doing a better job than CMB. So this time, we increased our equity holding of the Taizhou Bank, are mainly because of the following aspects. First of all, we are confident about Taizhou Bank. Secondly, CMB has always been exploring a more efficient way to provide service to small- and micro-sized enterprise and explore the operation in the niche market. Many people may ask, I think you can learn from other bank. It's not necessary for you to do equity investment in order to learn from -- just from a bank. I think different institutes have different culture, different gene and different experience in special markets. It's never easy to just simply learn from them. So I think through equity investment, our exploration to providing service just more a micro-sized loan might be a more efficient way. Thirdly, we are the existing shareholder of Taizhou bank. And in order to maintain its corporate governance structure, it would be a convenient and less influential manner for its own operation through this acquisition. For introducing JP and asset management as the strategic investors, and how do we agree to the valuation of the 10% equity? I think my answer is through negotiation. Through over 2 years' long-term discussion, we have come to consensus. Why do we choose JPMorgan? It's very easy. I think both the 2 sides are very picky. You can also ask JPMorgan why they choose us. It comes back to the first question, extensive wealth management. We need to forge our wealth management capability and product organization capability. And for CMB, this is what we learned from JPMorgan. They're a very respectable peer for us. In 2019, we have already established strategic partnership. And during our cooperation, we have developed deeper understanding of both sides. And both team have very strong professionalism, especially in product design, risk management, investment research and fintech and system and organizational mechanism. I think we can learn a lot from them. So I believe introducing JPMorgan will contribute a lot to the next step development of CMB Wealth Management.

Now it's the next question. Now we have Gary Lam from HSBC.

This is Gary Lam from HSBC. My question is about loan loss reserve. We're not in a financial [ step ] during the fourth quarter of year 2020 or -- as well as based on a full year perspective. There has been some decline in the loan loss reserve as a percentage of total loans. The decline seems to be in a magnitude that is larger than the decline of NPL ratios. And into details, we have seen the coverage ratio or the loan loss allowance on the backing of the stage 1 exposures and stage 2 exposures, both were declining. So we're just trying to better understand what are the drivers behind the move. And into year 2021 or even '22, how does management think about the appropriate level of loan loss provisions?

[Foreign Language]

Yes. This question will answered by Mr. Wang Liang, our CFO.

Thank you for your question. As for the coverage ratio and to coverage to loan ratio, this has interact with each other for these 2 indicators, as you just mentioned that the coverage ratio and the loan to -- coverage to loan ratio are all coming down. Last year -- as for the last year, we have charged around CNY 65 billion for the reserves. That is why you have seen that we have loan to coverage ratio has come down a little bit because coverage ratio is -- the denominator is the NPLs. But at the same time, we have increased our reserve to around CNY 6.565 billion. So that is why you have seen the coverage ratio has come up to around -- to above 430%. So that is why you have seen different changes for different indicators. Just now your question for this year and next year's coverage ratio, and this year, we will continue to have steady coverage ratio and will continue to keep at current level. I know many analysts are very concerned, are interested how -- why -- whether CMB will try to control or kind of manage its profit growth rate by leveraging or by managing its coverage ratio. I think we will continue to keep our steady and prudent risk management approach and to have strict risk classification and -- so as to keep a high standard of high leverage coverage ratio. We will not liberally to use the coverage ratio to manage our profitability. Thank you.

Next, we will have Mr. Zhang Shuai from CICC.

I'm Zhang Shuai from CICC. This year, I think CMB has put forward the idea of wealth management. I think that CMB will continue to lead the market. We also noticed, there is structural adjustments in the departments of CMB. So what is the logic behind that? And also secondly, my question is regarding the interaction between corporate banking and retail banking. And also, you have emphasized the interaction or -- of commercial banking and investment banking. So would you please also share with us your data or view on this regard?

The question for retail banking will be answered by Mr. Wang Jianzhong.

Thank you for your question. Just now Chairman and also Mr. Tian has already very clearly elaborated the logic behind our thinking of extensive wealth management. So how can we implement this new idea? For the retail business, we have made some adjustments for the certain departments relating to retail banking business. What is the mindset or logic behind the adjustments? First, these adjustments is a long thinking. It's not a very sudden move. When we look at the reform and structural reform of our retail banking business in 2018, we have adjustment in the retail banking business. At that time, we have built up our retail head office. We have the retail financing, the retail loan financing department as wealth management department. At that time, we are focusing on this -- our long-term target for MAU metric. For these years, we have achieved our target. Our MAU has reached over 100 million and is quite stable and still continue to improve. So our contacts with our customers as well as the transaction with our customers, the proportion for digitalized or online platforms has reached over 94%. Under these circumstances, what we are trying to build ourselves into extensive wealth management, we have a combination of our head office as well as the wealth management, which means that when we are reaching a new phase, namely in the future when we are building the new wealth management, that will be more efficient. And in the new structure, we will try to have a more efficient transformation from MAU to AUM because we have reached our first target of high MAU. And our next target is how we can transfer the high MAU to high AUMs. And these kind of adjustments, a combination of different departments will help us to reach this goal. Secondly, how we can reach our platform operation and operation for ecologies? On this regard, to combine product and also operational platform together as well as external purchases or resources together will also help to improve the efficiency. Thirdly, we are going to build a people-plus digitalization strategy. And the contact to our people will come from different aspects, such as from physical outlets, from counters to ATMs and to online platforms and to APPs or telephone banking. All these kind of customer contact platforms will be run at one platform, which means the customer experience will be improved, and the efficiency will be improved. And another thinking behind is for risk management. For all procedures, risk management will be fully implemented. So this reform or kind of change, we can conclude that: Firstly, we are embarking on a new development stage, and it urges us to do this change; secondly, to improve customer experience, customers service efficiency so as to reach that.

The second question will be answered by Mr. Li Delin.

As for the interaction of the corporate banking and retail banking and which could be shown as the interaction of customers or introduction of customers such as for the salary, like for the payroll services, we are introducing the customers to our retail -- to our corporate customer. Secondly, for our high-end retail customers, they sometimes have corporates, and they will also introduce these kinds of customer to our corporate banking business. Thirdly, for the long run, as Mr. Tian has stated, that on CMB's APP, we have different scenarios such as for the public services. And this is also a collaboration with our corporate banking business, such as for the welfare fee and also for the utility bills. And these are all collaboration between retail banking unit with our institutional banking unit. And also, we are collaborating with [ DD ] or these kind of transportation companies. So this kind of public service, convenient to provide the convenience services to the public. These are all joint efforts by the 2 sides.

And now the next question.

We have the [indiscernible] from Guotai Asset Management.

Thank you for your -- for giving me this opportunity. I'm [indiscernible]. We know that CMB's vision is to become the best commercial bank in China. In my view, I think CMB is now leading #1 or #2 in the world, in my view. But I think management will -- do not recognize that. So if you're benchmarking yourself with the leading banks in the world, so which advantages do you think that we need to maintain in the future? And what kind of the weak points that we need to improve in the future?

Just now you said that CMB already #1 or #2 bank in the world. We don't want to put it in this way. When we look at the balance sheet of CMB, we think that we are leading in the world. For ROE, we are also leading in the world. So I think that we are moving in the direction of being the best commercial bank. This direction has not changed. And we want to be better and better. So next step, what kind of areas or which areas we need to improve ourselves? At the beginning of the year, when I do deliver the report on the annual conference in CMB, I said we need to deal with 4 relationships. The first one is the light and heavy relationship. We need to consolidate our basis for strategic development. Our strategy is light model banking. But for a commercial bank balance sheet is also very important -- is capital -- is very capital-intensive. So we need to do a good job for our traditional commercial banking business. Our auditors say that CMB is very solid. CMB's balance sheet is very solid and it's a fortress balance sheet. We need to make a good fortress balance sheet in the future. On this basis, we will extend our extensive wealth management business. As Mr. Tian just stated, we will make a good job in extensive wealth management business. At the same time, we have a fortress balance sheet, which means that will be very good for CMB, and I know that many enemies say that the valuation for CMB is already at a high level. So if you look at -- from the balance sheet, CMB will need to be the best commercial bank. When for the wealth management business, we need to benchmarking the best wealth management business. Secondly, we think the second relationship we need to deal with is when you to move forward, when you need to back off. In China, you'll see there is a differentiation of different Chinese banks. In these circumstances, we need to be very clear about what factors had made -- what is the underlying reasons behind this diversification. We need to advance our competitiveness edge, maintain our competitiveness edge and to lead the market. Thirdly, we need to deal -- handle the relationship between fast and slow. I made an example of -- about 1 book I read before about fast thinking, the book was fast thinking and slow thinking. When you are innovate or when you are doing innovation, we need to be fast, you need to lead the market. This is what CMB has done over the past 33 years and why we are competitive in the market because we are fast in terms of innovation. But for fintech, we also need to benchmarking the top companies in the small area. And we -- now we have advantage of low-cost deposit, and the other advantage will lies on fintech, will help us to upgrade. The fifth one is to handle the relationship with high and low. Namely, how you can create value for your shareholders. So when you look at the valuation for different banks, the valuation differentiate from each other, why is that? Because one -- the reason -- one reason behind is the balance sheet because different bank have different balance sheet. We have a strong balance sheet. Secondly is capital-light business, how you can deliver performance in this regard. Some are not good at that. But CMB's balance sheet is strong and fortress. Secondly, we have done quite a good job in terms of capital-light businesses, and this return depends on the valuation of the bank. We need to still handle the 5 relations and if we can do a good job in handling the relationships, and this will guarantee our strategic development.

We'll have the next question.

Next question is from analyst, Mr. Mark [indiscernible].

I would like to ask a question about the retail customers. I see from the annual report about the growth of retail customers. There is a pattern of reverted pyramid with the fastest growth demonstrating in PB clients. And the next would be golden Sunflower and the above and the slowest would be the growth of basic level customers. We can see after the year 2019 -- 2016, the pyramid became back to a normal state. But now we see another reverted pyramid. I would like to know the reason behind. I think the relatively slow growth rate of the basic level of retail customers might be attributed to the 3 reasons I conclude by myself. Is it because of your strategy, proactively arranged? Or maybe it is influenced by the pandemic? And the third reason is, is it relevant with the cross-industry competition that CMB is faced with? This is my question.

The question will be answered by Mr. Wang Jianzhong.

Thank you for your question. I think you have done a very thorough study of this issue. It's quite a complicated issue, and I was wondering how can I explain in a more clear manner. So the reverted pyramid, as you see in the annual report, our basic level customers, Sunflower and the above customers and PB customers have shown a growth rate of declining. As shown in our annual report, the customer growth includes debit card and credit card growth. We do not make clear distinction between the two. Is it act out of our purpose? Or is it based on the market pressure? I think both. Influenced by the pandemic, we are indeed under some pressure, especially in Q1. We cannot maintain normal operation for our outlets during Q1 last year. So credit card customer and debit card customers are under pressure. And challenges during that very period. It is impossible that we say we are under no influence by them. I think comparatively speaking, debit card is better. Actually, we have achieved a quite satisfying growth in the growth of debit card. In terms of credit card, I think its declining growth is actually out of our purpose, our arrangement. Under a rather complicated risk environment, we have been exiting high-risk clients and putting credit card customer structure under optimization. So yes, to answer your question, it is out of our special arrangement to exit some of the credit card clients and to slower the pace of growth. For Golden Card, Sunflower card and PB clients, they actually have achieved a very satisfying growth with a growth rate of 23%. I think the result is quite outperforming. There is an opinion lying inside. The retail customer has totaled [ 156 million ] in total. High-end and basic-level customer has formed a pattern of reverted pyramid, indeed. So the next focus for our next -- for our next phase is to increase the number of Golden Card and Golden Sunflower-level customers. This is our mainstay. So in the past year, we have achieved to increase our efficiency in moving some of our basic level and Golden Card and Sunflower-level customers upward to a higher level. Indeed, this is actually also influenced by the pandemic where people getting more money deposit in their account. And without our own efforts, it can also not be achieved. It is a very huge number and a huge potential lying in basic level clients. And for our focus, I think we still maintain in acquiring basic-level clients. When you mentioned about young people, we have done a lot of successful trying for the past year. I think the acquisition of young customer is relevant with their culture and better understanding what they like. We have done several successful trial and pilot program in credit card in the cooperation with bilibili.com. Online customer acquisition, we have seen many progress made in this aspect. And we have successfully improve our conversion ratio on online customer acquisition, and so is the quality of the customer we acquire. Basically, this is our -- this is my answer.

We will now take the next question.

So the next question will be from an individual investor.

I am an individual investor, but actually, I am represent a group of small investors that holding over 30 million shares of CMB stock. So my question is that last year, you have established the top bank together with Jingdong Finance and I would like to know what is the position in the top bank in your future strategy and development plan? We can see many of the direct banking are not very successful and there might be a reason lying inside internal consumption. This is my first question. And the second question is about NIM. We can see a declining trend of your NIM. And for individual investors, we are not very willing to see the declining trend quarter-on-quarter over your NIM, and I would like to know the reason behind this fluctuation. And in the future, will we see a more stable quarter-on-quarter trend over NIM?

The first question will be answered by Mr. Tien. And the next question will be taken by Mr. Wang Liang.

Finally meeting you, [ Mr. Hu ]. I've learned a lot from your opinion, and I would like to take this opportunity to thank you. Thank you for your investment in CMB and your valuable opinion to us. The establishment with Jingdong Finance of the top bank is similar with our equity investment in [ Title Bank ]. We are exploring customer experience and service in niche market. If our equity investment is our capability increase in regional markets. And then the top banks establishment is our capability increase in the industry market. This is our original aspiration. So in the future, the top bank will complement with CMB is that of a competitive relationship. So the next question will be answered by Mr. Wang Liang.

For the past year, Q4, our NIM was 2.48%, down by double-digit bps quarter-on-quarter and 1 bps higher year-on-year. Our year-round NIM level was 2.55%. So indeed, Q4 has experienced a downward pressure in the NIM. That is similar with the situation in 2019. In Q4, our NIM declines based on the following reasons: firstly, in order to satisfy the residential mortgage needs and some other low end investment and also the enhanced efforts on [ ABS ]. As you know, in the previous periods of 2020, I think the low-end investment in some other fields, such as real estate market is not enough. So in Q4, we enhanced our assets and lower investments in [ ABS ] and some other sectors. So that is the reason why the NIM decreases. Second is our investments in credit card assets. As the risk increases for the past year, for credit card clients, especially quality clients and quality assets, we take measures such as lowering relevant interest rates. And some other measures to better adjust the credit card assets and customer structure to better improve our credit quality. So in pricing level, we have also moving it downward. So the adoption of the combined 2 measures has lead to -- has led to the lowering NIM level. I have also listened to your suggestion, and I wish that we can achieve a more stable NIM level for the whole year.

And we will now take the next question from L. Lei from JPMorgan.

I have 2 questions about moving wealth management products back on sheet. You have put in RMB 12.6 billion off sheet wealth management products back on your sheet and making [ RMB 12.2 billion ] allowance. Can you illustrate about its asset quality? So in the year 2020, how many more are going to be moved on sheet? The second question is about the CET ratio. We see there is a very significant increase in Q4 quarter-on-quarter, and we noticed the RWA in Q4 actually decreased by 2 percentage points Q-on-Q. How did you manage to achieve both when you move back RMB 12.6 billion of that balance back to your sheet, and then maintain to achieve a stable growth in your assets?

Thank you for your question. So we have moving back RMB 12.6 billion off sheet assets back on sheet. And most of them are -- they are all nonperforming assets. This is actually a new regulation issued by CBIRC to guide us the disposal of nonperforming assets of wealth management products. So we act according to this regulation and move them back on sheet. So in the future, we have try our every effort to move those NPLs of wealth management assets back on sheet. And for new -- for wealth management product that are still not fitting into the regulation, and if nonperforming loans were generated through these kind of assets, we will still follow the policy and act accordingly. There is -- in the process of risk exposure, I have strived every effort to move those back on sheet for those risks fully exposed. For -- we have moved our CET ratio up by 0.36 bps, thanks to our strong capital endogenous capability. Facing this very challenging external environment, we still strive to achieve a very strong capital position. This is not very easy. Especially in Q4, lower investment have follow a pace from fast to slow, especially for corporate loans. And comparatively, retail loan follows a slower pace in investment and in the next half of 2020, especially in Q4. We have guaranteed retail loan investment in the next half and Q4 and moderately exit the investment of corporate loan. And in the future, we will still act according to appropriate arrangement of the investment of corporate loan and retail loans.

The last question from the investors or analysts.

Next question come from Yan Meizhi from UBS.

My question is about how you can mitigate the volatility for NIM. And also, I want to know the forward-looking for NIM because the fiscal policies might exit. So what -- will that be -- have a positive impact on the NIM? And -- or will the NIM expand further this year? Secondly, for wealth management products, and my further question is about the contribution from wealth management. Last year, we have seen strong growth in the fee income from the agency sales of wealth management projects. Will that -- the trend continue this year? And how about the new product transformation for WMP products? As for corporate banking business last year, we do see strong growth this year, corporate banking, how is the positioning in the whole banking structure? And also, we have seen strong growth in corporate banking deposit, so what is the trend?

This year -- actually, you raised 3 questions. The first one will answer by Mr. Wang Liang. Second one will taken by Mr. Wang, and third one will taken by Mr. Liu.

First question for the NIM, outlook for the NIM. This year, taking an objective view, we think NIM this year, on the basis of last year, will come down a little bit. Last year, our average was 2.55%. This year might come down a little bit. We will strive to keep it stable and continue our competitive advantage in the industry. Why is it that? The first one is coming from the deposit side. Last year was quite a loose, liquid market, so we have seen very good strong growth in deposit and the cost is coming down for around 3 bps. But this year, since the market interest rate will increase, and the competition for deposit will be more fierce. And from the monetary policy side, we think there will tightening in -- marginal tightening in the monetary policy. So we expect the deposit cost to go up. From asset side last year, due to the reform of LPR, and also there will be LPR for the mortgages, that will also lead to the reduction of our yield in asset side. And also, last year, the CBIRC have launched the policy for -- to management of the concentration of the property loans. This kind of mortgage loans as well as property loans are high-yield assets. So this year, we need to maintain the whole proportion of these 2 kinds of laws. And this will, in return, also lead to the downward trend of the asset yield. Thirdly, for credit card. As is last year, there was outburst of the risk in credit card business. So this year, we will improve for kind of our decrease our risk appetite for credit card risk appetite, and this will also lead to the reduction or the cuts in our SAO. So this will lead to a negative impact on the NIM. This is my answer joining.

And because it's the last question, I will go into detail for you. Your question will go into from the sales side and also the production side. Production side, Ms. Liu Hui will answer that from the sales side, last year, the fee income from sales side, you have seen the fee income has grown very robustly last year. The highlight was the agency sales of the mutual fund. We have lead the market. As for the sales of our own WMP products definitely is a very important part of our wealth management. When you look at the fee income of wealth management, although it's not as fast as the sales for the mutual fund, but this year, we see a very good opportunity in the WMP products. This year, we have seen fluctuations in the capital market. When we are helping our customers to allocate our assets, we have adjusted our strategies. Namely, we will keep good momentum in mutual fund by taking customers' interest at the center. Our strategy will be -- we are trying to choose the excellent managers for mutual funds, and we want to diversify the products. If the fund can close for 3 years, there will be higher probability for the customer to profit. As for WMP products, especially for those fixed income products, that will be a major direction for asset allocation suggestion for our customers. And this has provided a great opportunity for our own wealth management and also wealth management departments from other banks.

Thank you. I will answer from the production side for the transformation of wealth management. Our wealth management subsidiary is acting according to the regulator's requirement. And now we have kept steady growth rank #2 in terms of total balance. As for the structure of the new products is moving in the expected direction. As for the products over 1 year, we have reached our expectations and also we are also moving ahead in terms of some strategic products such as multi-asset products or fixed income assets. These products will have distinctive features. And also, we have done quite a good job in terms of investor education and risk balancing with -- from all these [ trends ], we think our transformation is well above our expectations. Secondly, for income. Fee income, as Mr. Wang has just pointed out, this market will provide a good opportunity for the FICC products and multi-asset products for our wealth management subsidiaries. We do hope that we can continue to improve our new product -- total amount of our new products and maintain a steady growth. We think that will lead to a steady growth of fee income. And the third question is for corporate banking. Thank you for interest -- your interest in the corporate banking of CMB. In 2020, we see a robust growth in corporate deposit. I think there is -- it is due to the external environment as well as our own efforts. Namely, we are focusing on the funds flow in our market, as Mr. Tian also said. Such as for the fund-raising deposit coming from IPOs, we have reached quite a good results. And also last year, due to the very active physical policy, we have taken quite good results. This is one reason behind why we have seen such a robust growth in corporate deposit growth. But I think this is now the most important one, according to my own view. For these years, we have launched our corporate banking reform and going back to the origin of serving the customer. Namely, now we have a solid customer base. And also improve our capability to service our core customers, corporate core customers. And as you see, the newly opened account customers has reached a new high, was quite a large amount. This means in our marketization, we have made a great progress. Secondly, in terms of servicing customer service, especially for our service for strategic customers at branch level and also at the head office level, we have improved our capability for customer service. As long as our core customer base is expanding and our capability for servicing customer is improving, and that will -- we will continue to keep our strength in terms of deposit advantage.

And actually, this question was the last question for analysts. But just now they have give me a notice that say investors and analysts are very enthusiasm and very -- want to ask another question. So yes, we will add 1 question for analysts and investors.

Last question is from Mr. Fan Hans [indiscernible] from CITIC.

I'm from -- I'm Fan Hans [indiscernible] from CLSA. Question is very concerned by the market. This question is for the property loans. Last year was for the concentration management for property loans. This year, I think the property loan and also mortgages, the proportion of CMB will come down. So how will you allocate your assets or for loan growth? Will you have any adjustments to your loan growth structure? Or will that change CMB's risk appetite?

Thank you for your question. As for property loans, the concentration management policy we are -- according to that, we are the second largest in terms of proportion of property loans to the total loans. The limit for CMB was 27% and 20%, respectively, and we will act according to the regulations to adjust our loan structure. This is our direction. Well, in detail, we will follow the 2 major strategies. The first one is for risk appetite. It's a kind of a plan for asset allocation. It's not targeting a certain customer clientele or a certain assets. This is taking a comprehensive income, namely, we are taking into the PD, LGD and also concentration risk. Taking all these factors together to meet our asset allocation strategy. And we will improve our allocation for investments such as for treasury bills or for the special debt from our local governments or from -- debts or bonds from financial institutions. And also, we will also improve the proportion for consumer lending loans as well as for SMEs, for supply chain and commercial bills and also for loans for the new emerging industries. So overall speaking, we will not increase our risk appetite because we don't have allocation limit for those low-risk assets. We will keep a balanced risk appetite. And to increase the amount of the risk that have a [ mid ] risk appetite. So as to stabilize our risk appetite, it will not be moved because of the structural change of loan growth. Thank you.

And also to ensure that the small mid investors will also have a chance to raise questions, we have collected the questions before our announcements, and also now we have investors online. They have raised their questions. Now we will have 2 questions from our online investors. The first one is, what is the impact of fintech investment of CMB? Do you have any detailed indicators for the fintech investment? Mr. Jiang Chaoyang will take the question.

For these years, CMB has very resolute and investing in fintech last year was over RMB 11 billion, 27% up by -- compared to that of last year, accounting for 4.45% of the total revenue of CMB. But when you look at the output, we think that there are 4 major highlights. First one, we have set up a digitalized operational platform, which can be represented by our 2 apps. Just now we have seen our MAU of 2 apps has reached 107 million MAU, and actually, there is a -- this has shown our comprehensive fintech capabilities, such as for our contacts, world people interaction platform for the customers and also for online operation platforms and also the data analysis platforms and how we can swiftly upgrade the IT systems. This all capabilities have shown why we have reached such a high MAU, and especially during the outbreak of the COVID-19. And these apps functions have played a pivotal role in that last year, as you can see, relationship managers can sign the agreements with customers. This amount has increased by 320% compared to the year before. These will also, in return, shown why we have achieved such a good results in the wealth management business. Secondly, as for the buildup of the digitalized ecosystem, we have already built a base for that. Just now Mr. Liu also answer how we build the digital ecosystem for the likelihood of people such as for mail coupons and film coupons and also for transportation. We have built up our scenarios MAU over 20 million, and this help us to consolidate our relationship with our customers and also expand our contacts with the customers. And fourthly, the digital operational capability or the intelligent customer service now accounted for 77% of the total customer service on the whole and saved over 4,000 people. And also, we have risk management wind chime system, and also has -- the fraudulent transaction has been reduced to a very low level and -- which show that we have been strong in building up our digital operational capability. Fourth one can be shown as in our infrastructure. As you can see, the cloud infrastructure has been built up, and we are accelerating our pace in that and transfer from our -- to our cloud system. We hope that in the next 2 years, we will finish that and we'll cope with the new challenges. These are the achievements we have made in terms of the fintech. But when you need a quantitative indicator for how to measure our performance for fintech, actually, internally, we have quantitative targets -- target or indicators to show how we have performed in a fintech. But for different things, you have different factors or different indicators. Some could be shown as the financial indicator, such as for the -- our online loans, online lending. This year, online lending, the digitalized risk management is already over 110 billion. These kind of things could be measured by various digital financial targets. But last year, for fraudulent transactions risk management. Last year, we have stopped the fraudulent transactions very much for very large amount last year. But this will definitely very difficult to show as the financial indicator. So for different projects, we have different kind of a measurement for that. It is not easy for us to use 1 financial indicator to measure the output of the fintech investment. So I think in this digital era, business is very intertwined with the usage of fintech, whether you can -- to measure the fintech investment. One thing is to measure how you perform in your business sector. So if you want to do -- to perform very strong in a business, you need to have very strong technology to support that. So I think we cannot only look at 1 single financial output. We need to look at competitiveness of CMB in every niche market, and see whether we can continue to improve our competitiveness in niche markets. But definitely, internally, we have -- we are also thinking about how we can better measure the output of the fintech. But it's difficult to find a unified indicator. Thank you.

Second question from online is for the dividend payout ratio, whether you can improve the dividend payout ratio. How you can balance that with a capital adequacy ratio? Mr. Tian Huiyu, will take the question.

As for the dividend payout ratio, it is already quite high, around 33% will keep at this level. And I think it's more or less around this level. 30% has been written in our M&A, definitely will be above 30%. But for capital, we will maintain indigenous generation of capital is our target, objective to be light, and we will insist on that. Looking into next 5 year and according to our next 5 years plan, we do have a plan for our capital, for we are quite confident we will generate capital through profit generation. Thank you. Yes.

Next, we will go to Q&A from the media. Now we will take the first question from the media. The first question is from Xinhua News Agency, [indiscernible].

Dear senior management, good noon. I am [indiscernible]. My question is about NPL. Influenced by the pandemic last year, the government has released policies regarding deferred repayment with a deadline of Q1. And I would like to know from the senior management about this kind of loan and what is its asset quality? Will there be any rebounds risk in terms of this kind of loan?

This question will be taken by Mr. Zhu Jiangtao.

Regulatory policies on the deferred repayment by the end of last year, we have provided a total number of RMB 152.5 billion volume to our clients. Clients under such policy was RMB 21.9 currently. And for RMB 20 billion, they are attributed to corporate loan and for the rest, our retail loan. And for industry concentration, they are mostly in telecommunication real estate. And to see, generally, the overall risk migration to NPL and retail loans entering into collection level, have normally come backed to the level previous to the pandemic. So I think the risks are under control. To see in the year 2021, we will strengthen relevant management in the following aspects. Firstly, we will conduct systematic label to this kind of loans. And secondly, we will establish separate accounting bills. And thirdly, we will conduct dynamic monitoring. And fourthly, we will conduct differentiated allowance arrangement and to see, generally, this kind of asset is maintain a relatively stable quality. And for this year, it will not cast a very huge influence over this year's asset quality.

Next question, please.

[ Jo Lifan ] from Taixing news agency will raise her question.

I would like to know your opinion over the organizational structure. How can CMB maintain growth of AUM after you make your internal changes? And the third -- and the second question is about CMB Wealth Management. I would like to know the product issuing focus of CMB Wealth management, and will you enhance the introduction of products from your peer banks within the platform of CMB?

The questions will be answered by Mr. Wang Jianzhong and Ms. Liu Hui. Mr. Wang Jianzhong will first answer your question.

The organizational structure adjustment is solving our problem, answer our questions regarding our structure, will we achieve our goal because -- just because we adjust our structure, the answer is no. So I think to say from the system and mechanism level, we can strive our best to coordinate. As Mr. Tian mentioned a concept called light culture, there is an element of integration line within light culture. I can give you an example. The CMB mobile application is actually a very good example of good customer experience, which is receiving appraisal from our peers, from our customers. And during which a very great difficulty is how to integrate our IT personnel and our business personnel. It is very different kind of position, and how to make them work together and how can we technically solve ideas from the business end. No matter how you integrate, there is no ideal results. And then CMB by then, actually established a task-based team with personnel consisting of different business line, namely business and IT. We do not pay much focus on the evaluation of their performance. And we can see now that they are doing a good job and having very good achievements. Every appraisal given from our customers is reflected in every member of the team. And I think this kind of integration is where we have our strength. The second question will be answered by Ms. Liu Hui.

Thank you for your question. About the wealth management subsidiaries product layout, as we define ourselves as the full product provider asset manager, so in providing our products, we have conducted many thoughts based on a strategic level. We will consider our retail channel and our customer base characteristics. We will focus on cash management-type products, which lays a solid foundation for customer management and liquidity management. And we also learned from the Internet companies that we develop more customized, more scenario-based and more payment-convenient aspects. Secondly, when we talk about the bank's special product, which is the fixed income plus, they are characterized by the bank's nonstandardized credit assets, and these, we will consider to enhance our efforts in developing more fixed income plus products. I think it can meet the demand of different level of clients. It's of characteristics of low volatility and absolute return. I think it actually can fit into the customer portrait and customer categorization of the CMB banking group. One of our focus this year would be the targeted fund of our pension fund clients. Such as the [indiscernible] Life and products customized for the lady customer base. And the third, we will also consider to develop strategic products such as alternative soft and oversea investments and equity investments. These are all products we consider to make a strategic arrangement in developing our full product line. Thank you.

We will now take the next question.

The question will be raised by [indiscernible] from the 21st century economic report.

I have several question. I am [indiscernible]. You have just mentioned about the extensive wealth management strategy. So wealth management is regarded as our transformation direction. Does it mean our approach to achieve the goal of extensive wealth management will change compared with the previous period? And what kind of result do we expect to achieve? As CMB was regarded as the king of retail in terms of corporate finance, I think you're also outperforming in -- among your peers. And the low-end investment ratio from corporate clients accounting for 20% of your total low-end investments. What is your overall planning for future corporate finance for future corporate clients? What is your consideration? My next question is about your stock price. You are one of the commercial bank with the highest market cap. Are you satisfying with your performance in the stock market? Are you worried that the stock price is getting too high?

Retail questions will be answered by Mr. Wang Jianzhong. Corporate question will be answered by Mr. Li Delin. Stock price will be answered by Chairman.

Thank you for your question. As we look back as a commercial bank, it is impossible that we bring up the concept of extensive wealth management equals to we're giving up on other fields. We are a system. We are an overall organic body. As Mr. Tian has mentioned in the report, extensive wealth management refers to 3 flywheels, value chain. To realize a good performance in extensive wealth management requires corporate finance, asset management, retail wealth management and asset custody's contribution. It's a great value chain that involves every aspect of commercial bank, including IT and tech. To see from the retail side, if you want to achieve a good result in extensive wealth management, you need to expand your customer group. You need to upgrade your operating philosophy of the basic accounts of your clients. Especially nowadays, people tend not to go to their outlets, they tend to do more online interaction. You need to strengthen your online operation capability or online platform to satisfy customers' needs. You need to enhance your platform base and digital lives and ecological development. We are not just offering CMB-developed product, but also products from all society, all other asset managers. And when our clients are generating more and more new ideas, we need to react and respond timely.

So I think extensive wealth management involves every aspect of a commercial bank, and the development of extensive wealth management will definitely drive the development of corporate finance, asset custody, asset management. It is a natural process. As we mention extensive wealth management, we regard retail asset management as the engine to drive the value chain up. So we will involve every aspect of our work to develop extensive wealth management, and will not let corporate finance stand alone. In extensive wealth management's cyclic chain of value, corporate finance has its duty. Corporate finance is CMB's corporate finance, and should provide the strategy -- provide service to the strategy of 1 body with 2 wings. That does not mean that we require less on corporate finance development. On the other hand, it actually pose higher challenge and higher requirements on the development of corporate finance during our proposal of extensive wealth management. It follows the trend of deepening the development of capital market, and it requires us to strengthen our integration of commercial banking and investment banking. Under the big backdrop, corporate finance has a duty and higher burden, a stronger burden within its shoulder. Through our own reform, we can provide support to the reform of the total Chinese financial market. We will dig deeper into industries that fit into our risk appetite and fit into the trend of Chinese markets. And we will explore openness and integration with retail finance regarding different scenarios, providing quality assets to the future's asset management industry.

The third question is about the stock price. It's quite a sensitive question to answer. In the previous century, regarding the deep -- the greatest depression, there is a question for the CEO of JPMorgan, and what he said has impressed me until to now. He said market would be volatile. It's a question that can never fail other people. In the valuation of CMB's stock price, I think we outperform our peers because of the following reasons. Firstly, it follows the trend of the market. Investors are actually. Investors are actually responding with -- actually, we can see from the European and the U.S. market that under the big backdrop of the pandemic, they are reacting in a very volatile manner, causing fluctuation in the market and further appreciation. We can take the 10-year yield of the U.S. bond as an example. The curve is a very -- reaches top in a very short pace. We can see there is a change. There are changes happening within the market. And in asset reallocation, banking are more in favor of people's choices, especially both in Chinese market and in foreign countries market. Our valuation is high because CMB has a strong balance sheet. To see a publicly-listed company, we often take consideration into 2 ratio: PB and PE. We have a good profitability so when it comes to the valuation, people regard both the past profitability and future profitability as an important factors. To see from the PB side for traditional commercial banks, our PB ratio is around 2x, a relatively high level in the industry. Most of our peers are less than 1. As we aim to build an extensive wealth management bank, to see from wealth management side, PB is not a very a reliable indicator for us. Wealth management is not a capital consumption business. To see if we aim to be an extensive wealth management bank, we should bench ourself with international asset managers. From a bigger perspective indeed, we earn our reputation in PB ratio and PE ratio and valuation from the market from your interest, support and investment from all our investors through 33 years of development. Through the dedication work given by generations of CMB staff. We stick to the principle of commercial banks development. We stick to a market-oriented manner, we develop into a successful bank, and I firmly believe that our stock price can keep delivering a good result in the future.

We will have the last question from the media. The last question is from [ Security Times ], [indiscernible].

I am [indiscernible] from [ Security Times ]. I would like to know in detail about your asset liability arrangement, as last year, we witnessed a very robust growth over demand deposits. How can you balance the repository outflow that are possibly happening in this year?

Thank you for your question. For the next phase, you mean in 2021, our arrangement in asset and liability side. The senior management has reported to the BoD that we aim to strive for a stable manner, but achieve progress. From the liability side, we stick to take core deposits as our focus of growth to guarantee a steady growth of core deposits. The growth rate is expected to be M2 plus 2 percentage points. This is a dynamic adjustment according to market situation. We will keep maintaining deposit quality and control the liability cost. Low-end growth is restrained with capital planning is limited by the RWA strategy. We have sticked to our principle to maintain a 10% to 11% growth within our RWA. So in terms of low-end investment arrangement, we will focus on the growth of retail loans, including consumption loan, small and micro-sized loan and retail loan. For corporate loan, it will also be one of our important aspects of growth. We aim to achieve a higher growth compared with that of last year. Last year, we achieved RMB 120 million of growth. And this year, we aim to achieve higher growth based on that. As corporate loan is reflected on sheet and we proposed another new concept called FPA, achieving RMB 4.2 trillion to our clients. We aim to provide financing services to our corporate clients in various aspects. It will also be a very important development goal for us. This is the overall planning of our asset and liability management. About your question about the growth of core deposit -- core demand deposit. Is it sustainable or not? I think this year's monetary policy is marginally tightened. As we are no longer in a relatively loose market liquidity, the falling costs will increase and will cast relatively negative influence over our liability. We will act according to the change of the market, and as we are faced with the increase of liability cost, we will maintain strict control over our cost and control and extend steady control over our NIM.

As time flies, we are now entering into the final stage of our announcement. I believe that there are still a lot of questions for you from our media, from our analysts and investors. But due to time limits, we will now conclude today's session. If you have further questions about our operational statistics, you can refer to the annual report we released on March 19. If you have further questions, you're more than welcome to contact with the Investor Relations team, we welcome you. Thank you again for attending our event. CMB will strive our best to provide service to our shareholders and bring better return to you. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]