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

Thank you, Mr. Liu. We will now enter into the Q&A session.

[Operator Instructions]

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

Congratulations on CMB's achievements in the first quarter, especially under the fluctuating market situation over the last year. I would like to raise one question only, and my question is about NIM, as it is concerned by many people. We understand that the banking industry is under pressure over NIM, but we also see some trends, which is positive to the NIM's development. We see that after the first quarter, the market liquidity tied to -- tend to be tightened. Maybe it will be a positive signal for a better performance of NIM. Of course, we understand there might be some restraint from the policy level. But we still think it is a positive signal for your NIM. And also, I would like to know what kind of pressure will be -- were brought by repricing to your NIM's trend? I see you also show a very good trend of the proportion of demand deposits over the total deposits. Will it also be contributing factors to your increasing trend of NIM? I would like to know whether my understanding is correct that your NIM will be stable and increasing in this year.

This question will be answered by Mr. [indiscernible].

Thank you for your question. In our road show of the annual result announcement, our result regarding NIM is that we will be faced with the downward pressure brought by the market over NIM, and we still have the same opinion. Our NIM was recorded 2.52% for the group level, recording a 4 bps lower comparatively. Most of the bank we see have also recorded a decreasing NIM, and CMB has actually been a very good player in terms of maintaining our NIM. I think it's brought by last year's special situation. PBOC has conducted 4 LPR cuts over the market interest rate. And I think these may cast deferred influence over this year's NIM. Even though -- another influencing factor might be repricing issue, especially for residential mortgage loan. And after the repricing policy, NIM's decreasing trend is mainly due to the repricing factor after the new LPR rate applied. For instance -- and also, when you look a look at the proportion of the deposit, it's a higher proportion of demand deposit. So this has led to the cutdown of our deposit cost. And combining all these factors from deposit side and also from asset side, which means that the advantage in the deposit side cannot offset the disadvantage from the asset side. So that is why we have led to a downward trend for the NIM. When you look at the first quarter NIM compared to fourth quarter NIM last year, we have seen that the NIM has been up by 10 bps, and this is because we have taken many measures this year, such as namely early arrangement for loan investment; namely, we have invested more into our high-yield assets in the first quarter. And from deposit side, we are continually making efforts to promote the growth of our core deposit, which has led to a low cost of deposit. And that is why you have seen NIM has increased quarter-by-quarter. And looking to the whole year and also taking into consideration of loan concerns, when you look at the whole year's trend, we think that we are still facing a downward trend for NIM. I cannot conclude, say that the NIM will continue to go downward or go up. But our general judgment is that we are still facing downward trend or pressure on NIM. And we are confident that in the next quarters, we think that the loan pricing will be higher than that of -- for the first quarter. But for the overall pricing upward, we don't think that the loan price will go up sharply. So as I just mentioned, several reasons, the implication from the cut of LPR and also the government expectations for the financial institutions to support the real economy. So we are not expecting a sharp rise in the loan price. So we think in the next quarters, we think there might be some warmup or price upward compared to the first quarter of the loan pricing, but it will not be a sharp rise. And from the market rate, we think that market rate will keep stable, or there might be some volatility, but it will not change a lot. From liabilities side, just now you have mentioned the proportion of demand deposit, whether you will continue the trend. We think that the proportion of demand deposits, namely it's a seasonal thing. I don't think there is enough evidence to show that the high proportion at this level will continue for the next quarters. So what we're saying the cost of -- the liability cost, we think that it will be lower than that of last year, but it will not be lower than the cost of first quarter. This is one that's from a trend level. Secondly, when we are looking at the growth of the deposit, we are facing more fierce competition. When you are analyzing the market, you might see that the first quarter, we have seen the deposit has grown higher at the very beginning of the year. And then you have seen the growth has been weaker. This is mainly because of the liquidity environment. Namely, the liquidity is going to normalization. As you can see, the growth rate of M2 is going down. So combining all the factors together, we think that the growth of deposit for the whole banking industry is becoming weaker. So looking into the whole year, we think the competition for deposits will be more fierce, and the cost of deposit will not come down a lot. So overall speaking, I think even though we are facing a lot of pressure and challenges, we are -- we will make efforts to -- take efforts to promote the low-cost deposit growth and also choose the right time to do some active liability management. And also at the same time, we are going to optimize our asset structure, such as in the first quarter, we are more investing in high-yield assets. In the next quarters, we are also optimizing the loan structure continuously. And also, we are making efforts to continue to grow the retail deposit so as to reach a stable, higher NIM. So overall speaking, even though we are facing downward pressure on NIM, but compared to other listed banks, we are continue or making efforts to become the leading ones in the market. Thank you.

Now it's from Mr. [indiscernible] from [ Guosen ] Asset Management.

My question is regarding for retail and wealth management. First one, we noticed that by the end of first quarter, the retail customers of CMB reached 146 million. And in 2015, that number was only 67 million, so which means for the past 6 years, it has grown by over 100%. So will there be any ceiling for the future growth of retail customer? Secondly, from last year to this year, we have seen the wealth management commission and fee has grown quite a lot. So may I know what is the proportion of the commission and fee income coming, which is contributed by the private banking or Sunflower or customers above Sunflower?

Thank you for your question. This will be answered by Ms. [indiscernible] General Manager of Retail Head Office Banking Unit.

Actually, as you can see, the urbanized population in China has grown a lot. Currently, our retail network is more concentrated in first and second-tier cities concentrated in Pearl River Delta or Bohai Rim Delta and also Yangtze River Delta. So we think it's huge room for us to grow our retail customers. We are trying to approach different channels to acquire new customers. And annually, the growth will be around 15 million retail customer. Most importantly, we think with the trend of urbanization, especially with the growth of urbanization rate, we will seize the opportunity from the creation of the Chinese people's wealth and also -- so as to satisfy customers' needs and to improve their experience, so as to improve the rate of customers who are doing wealth management business with us. And also, we think the growth of retail customer is very important annually by around 15 million; more importantly, how we can transfer them to our wealth management customer at the same time. So it's also our top priority. Your second question is regarding the proportion or contribution coming from the, well, private banking customer and customers above Sunflower. When you look at the fee and commission income from -- coming from wealth management, most are contributed by private banking customers and customers above Sunflower for -- there is around 50-50, namely among the contribution from the Sunflower above private banking and Sunflower accounted each for 50%.

Next question is from [indiscernible].

I'm an individual investor representing the smaller investors. I read your first Q report. I think that the provision charges are around CNY 20 billion, but among them is -- only CNY 10 billion is for loans, the other CNY 10 billion goes for investments. We think it's quite a high proportion for the provision charge compared to the total amount of financial investments. Last year, we know that you have done a provision for the assets which have been brought back to our own balance sheet for the wealth management underlying assets. So may I know, this year's first Qs provision is onetime arrangement or is a continuous move? And especially...

Thank you for your question. This question, it will be answered -- will be answered by Mr. [indiscernible] General Manager of Risk Management.

So when you look at our first Q asset quality, we think that the asset quality for the whole bank is quite stable, and provision charge is around CNY 20.3 billion, a slight increase. This will be a slight structural adjustment, namely: for loans, the provision is smaller; but for other asset classes, the provision is higher. Why it has led to the structural change? Because of following reasons. First one due to the outbreak of COVID-19. For retail loans and for credit card loan assets, we have done provisions last year. And also with the economy recovery, these things are all turning better. Secondly, for provision for other asset classes, you have seen quite a big increase. The main reason is since we think that it's quite a stable situation for China, after the outbreak of the COVID-19, but economy is still undergoing recovery, and we think that the environment -- overall environment is still changing, especially from the regulatory environment, and taking a very precautious standard. We have taken more provisions for other asset classes. And the loan-to-debt ratio is quite -- the criteria is quite as the same as the provision for loans. Thirdly, we have seen that the provision for loans is smaller. This is mainly because we have quite a large base. But for provision for other assets is bigger, and you have noticed this. It's because the base is smaller. This year's provision for other asset classes, mainly focusing on 3 asset classes. The first one that's non-standard proprietary investment for noncredit -- nonstandardized credit assets and also for the off-balance sheet assets. And now we think the provision level is only 1.6% of the total asset classes. Compared to loans, this is quite a lower standard. So we think that it's active move for us to make more provision charges for asset classes rather than loans, namely for investments into bonds and investment into proprietary noncredit assets. This will help us to have a better buffer to -- for future risks. And also, at the same time, we will follow closely on the risk of the -- all asset classes, taking a very precautious provision policy so as to make us have enough buffer to counter future risks.

Next question is from Zhang Shuai from CICC.

My question is for wealth management strategy. In your first Q, we think that the AUM has grown very fast quarter-on-quarter. It's almost a growth rate as compared to the growth of 2019. So what will be the driving force behind the growth? Secondly, we have -- in the past, we have written several reports. And we have quite an indicator such as how you could measure your growth in your AUM. And last year, I think you have launch the idea of building extensive wealth management. So in the future, whether -- how will you to implement this strategy?

Thank you for your question. The question will be answered by Ms. [indiscernible] from the General Office of Retail Finance.

In the 2021, AUM -- the first quarter, our AUM's growth rate was close to the year-round level of 2019, almost the biggest in the industry. The reason behind is that to see from the macroeconomic situation, the market is different from that of 2019. So I think this provides the foundation for our fast growth. In the year of 2019, I don't think monetary policy at that time is different from that of 2020 and 2021. And secondly, we are in opening year of the 14th 5-year plan. The income from mid- to level net worth -- high net worth clients will increase sharply. And also for residents' wealth management needs, this also increase along with the development. I think the allocation in people's investment over real estate and properties will decrease. It also provides us opportunity of increment. Against such backdrop, to see from CMB's side, I think CMB has seized this opportunity of the market in last year and this year due to the increase of M2 and the marketplace. And I think we act correspondingly to the marketplace and customers' needs and make proper arrangement of customers' wealth management requirements. No matter for Golden Sunflower level clients, wealth management clients or PB clients, last year, some of our peers have seized the opportunity to make proper investment decision for their clients and thus, have made profits and some not. So I think based on our customer categorization and segmentation, we will make better understanding over our clients and what they need, provide full products and full-cycle support and service to our clients. And besides, in terms of fintech, our investment, has become huge in terms of mobile banking and through the 2 applications. I think the customer has experienced quite good service during the usage of our product. It also serve as a foundation for what we provide to our customers, which also enhance their experience in using CMB products. It's also a very good application and demonstration of what we have invested in fintech. So I think no matter for this year and for last year, it's also a very important factor that we seize the opportunity. For the second question you raised, it's about what kind of investments will we enhance in achieving our goal of extensive wealth management. Well, in fact, the structure adjustment we made, the organizational structure adjustment we made last year is a demonstration of what we have done in increasing the investment over developing the extensive wealth management. It is an ongoing process.

Now we will take the next question. We will have the question from Xiao Feifei from CITIC Securities.

My question is about wealth management. We have discussed about agency sales and our capability in sales. And in building the cyclic chain of extensive wealth management, I think it's very important that you can organize assets. And we would like to know whether you have special deployments and developed special targets of business development? And second question is about credit card. We have noticed that the newly formed NPL totaled CNY 7.17 billion. And I would like to know how would you assess the quality of credit card loan? And what kind of strategy will you adopt in terms of your credit card business?

The first question will be taken by Mr. [ Zhong ] from -- General Manager of the General Office of Corporate Finance.

Okay. I will now take the first question and introduce our cyclic chain. And about our capability in organizing assets through 7 to 8 years assets and also our adherence to One Body with Two Wings, CMB's asset-organizing capability has a very solid foundation for noncredit and standardized assets. We have laid a very solid foundation for future wealth management development. In the future, in organizing assets, we will keep enhancing our capability construction besides traditional credit market and indirect financing, nonstandardized credit assets. We will further develop our capability and given to full play of our special role as a commercial bank in exploring more opportunities in the equity market and enhance our role as a group, including member companies within our group, such as our fund company, CMB Wealth Management and et cetera. These professional institutions capability will be fully deployed in our future target. We will enhance our professionalism in equity market and the capital market. And as an opening bank, we will also be open to the market and organize products from third-party providers and put them on CMB's shelf. Generally speaking, CMB will rely on its own advantages in its resources in multiple type of assets. We have our own plan and arrangement. We will continue to build up our capability in organizing assets and providing further support to construct the cyclic chain of value of extensive wealth management.

Your second question will be answered by Mr. [indiscernible] General Manager of Risk Management Department.

To see from the first quarter, credit card assets, even though its newly formed NPL has increased compared with the same period of last year. But to see month-by-month, I see several indicators have shown a positive trend compared with the same period of last year. Indeed, last year's credit card NPL formation, especially for Q2 and Q3, they actually have reached a peak. And to see from this year, we expect this year will still remain at a relatively high level, but less -- but lower than that of last year. In the following period, I think the credit card loan is dependent. The quality of credit card loan is dependent on the following 3 factors. Firstly, we will pay close attention to the residents' income. We have closely monitored the employment situation over the whole nation. This is our assessment over the quality of credit card assets. And the second aspect, what kind of measure have we taken to manage and control relevant risks? First of all, we will select quality clients, and they serve as the base of us to control such risks. We will enhance customer acquisition over quality clients. Secondly, in the acquisition channel, credit card business will strengthen cooperation with outlets. I think from previous data, our physical branches' customer acquisition has shown a higher quality compared with other channel. And thirdly, we will enhance risk recognition, especially to prevent high-risk -- high joint debt risk clients. This is for the first aspect. For the second aspect, asset side, we aim to achieve a balance in risk and return in terms of credit card loans; try to achieve a more balanced asset portfolio, which can be more resilient towards cyclic risks. For the third aspect, we would like to discuss in terms of regulatory requirements. We will further enhance collection and reorganization of customers' assets and dispose in a high-efficient model. We will rely on fintech's application and strengthen our control and management over high-risk clients and select appropriately of our strategy and measures taken on such clients. This is basically my report over your question.

We will now take the next question from Xu Ran from Morgan Stanley.

I have 2 points. First of all, we see that many more of us try to deem CMB as an asset manager, and we tend to focus more on your fee income's development. We see robust growth in the first quarter. I would like to know from the senior management what's the main driving force of your robust growth of the fee income, especially agency sales of funds, insurance and wealth management. What is the strategy of your pricing? And what is your future arrangement? And second question, I believe that technology has been more and more important for retail banks. I would like to know from the senior management what is your new philosophy over such investment.

The first question will be taken by Ms. [ Lily ] from Financial Accounting Department. The second question will be taken by Ms. [indiscernible] from Retail Finance Office.

Thank you for your question. From first quarter, we have seen our fee and commission income has maintained very strong momentum, up by 22.3%. When you look at the growth structure, it's mainly contributed by fee and commission income coming from wealth management-related businesses, especially it's covering different areas. Such as for agency sales for funds, it has been grown by over 60%. Agency sales for insurance is up by 40%. Sales for trust products, up by 30%. And also, for sales of wealth management products is a little slightly downwards or decreased year-on-year. But when you look at the fee for investment, overall fee and investment, it will have still seen an increase. So overall speaking, namely we have seen a strong momentum, especially for -- even for every -- almost for every aspects. And looking for the whole year, and at the very beginning of the year, we have launched the idea of building up the extensive wealth management value chain for the whole bank and making the efforts altogether to make a strong growth, no matter if it's in wealth management products or asset management or for asset origination or custodian businesses. So looking for the whole year, we are still -- we think it's optimistic to maintain this trend. Thank you.

And for the application of technology in wealth management, namely we are using Big Data or AI technology to optimize or restructure our processes and to optimize the processes so as to improve the efficiency about how we service our customer and build up a middle office, a strong big middle office and to improve our customer experience. And I think you must be very familiar with how we have invested into technology to support the growth of our retail banking. And from this year, the top priority for us is under this extensive wealth manager value chain idea. The priority is how we can transfer the MAU to AUM, namely to using the technology to transfer MAU to AUM. This is our top priority. We think it's very important to have the MAU as the base, namely we have 15.6 -- 156 million retail customer, and we have -- or through APPs, we have many, many MAUs. Now we have seen -- people are now going through the physical outlets. So how you can reach out to the customer? You may have the telephone call or you need to visit customer. But if you can, using the Internet, you will have a high-frequency contact with your customer. And also from the corporate banking side, from the B side, they will also introduce or originate customer for us or introduce customer to the retail banking sector. So from the B customers, we think that we will also have Internet interaction with our customers. And also the company customers or corporate customers also think that our platform is a good one to operate on. And also for our own APPs, we also need to have a very good scenario for wealth management. Namely, we need to have the scenario in place to help us to transfer MAU to AUMs. The first thing we are going to do is do a benchmarking those Internet platforms and to provide the online products and also improve the online experience, so that these MAUs will become fixed AUMs. Secondly, how we can do online, combine or integrated online services together with off-line. And this is a unique advantage of CMB compared to other Internet companies. Combining these 2 together is also something that we're investing heavily in. Thirdly, very important thing is to build a big platform. Big platform means that we are providing the platform into attracting the excellent asset management firms or the asset management firms that we have picked up to operate on our platform. And those asset management firms, they can also provides professional services to manage customers or to provide services to the customer on our platform. And so this will help us to change from MAU or transfer MAU to AUMs and to upgrade them to our Sunflower cluster customer or Sunflower customer above. So all the efforts we are going to do in the investments into fintech are all concentrated on this idea, namely how we can transfer customers from our retail customer to our wealth management customers.

Next question is from Gary Lam from HSBC.

A follow-up question on the provision for noncredit assets, non-loan assets. So is this a future trend, namely to increase the provision for other non-loan assets? This -- will this trend continue in the next quarters? Second question for loan growth for corporate loans. In the first quarter, we think that our total growth for retail loan is now the -- it's not very big, but there is a huge increase for retail, for the micro loan and also for the retail consumption loan. So what is the logic behind that? What is your risk judgment for this kind of loans? What you are expecting growth for these kind of categories? What is your loan [ speed ] for the whole year, whether you are still concentrated on loan growth for retail rather than on corporate loans? What is your expectations on that?

The first question will be answered by Mr. [indiscernible] from Risk Management. Secondly, second question will be answered by Mr. [indiscernible] from Asset and Liability Management.

Thank you for your question. Firstly, we are going to view this question from 2 aspects. Firstly, the policy for provision of CMB is always precautious, stable and forward looking. This is our policy because economy is very cyclical. Banks are also very pro cyclical industries. So we are trying to take this precautious forward-looking provision policy so as to flatten the cyclical impact on our profits. So this is whole logic of how we do the provisions. Secondly, in the future, next, we will also follow up closely on risks for different asset categories, especially the provisions for other asset classes will depend on the risk situation of other asset classes and also based on ECL provision policies. And also, we have forecast on the cash flow of different asset classes so as to have the proper provision in place. Thank you.

Firstly, from the loan growth of first quarter, for corporate and retail, we think we have kept a balance. In the first quarter, the corporate hedge loan has grown by CNY 120 billion and for retail loan, it is CNY 110 billion. So within the retail loan growth, we have seen a higher growth rate for micro loan and also for the consumption loan. The reason behind that are as follows: firstly, for a bank, it's quite a -- but it's normal for a bank to have early arrangement or early disbursement of loans in the first quarter. That is why we have seen the higher growth rate for this higher loan growth. This is an active move. The reason behind that is that for retail loan -- among retail loans, credit loan, the growth is slower than the years before because we have also shared with you our outlook for the risk for credit card. That is why internally, we have controlled the risk appetite of credit card loans. And also, at the same time, for mortgages, again, due to the impact from the concentration regulations on these part of assets, the growth for mortgages is also slowing down. So that is why it's an active pool for us to properly increase the growth rate for micro loans as well as for the consumption loans. And also, another reason behind this, you can see from the demand side. You have seen the economy is recovering and things are going back to normal. Our micro customers are recovering their manufacturing. So the demand is stronger than before. And also with the control of the outbreak of COVID-19, you have seen the residential consumption is also recovering. That is why you have seen from the demand side has also achieved higher growth for these 2 categories. Thirdly, from last year, we have done so many projects in pipelines, especially at the end of last year. After completing the whole year's budget, we are also doing the loan project pipelines. And this has also led to a higher growth of loan in the first quarter. These are the 3 main reasons behind the higher growth rate, but we think that the growth rate is normal and, compared to the whole year's budget, it's normal. For the whole year -- we think that we haven't changed our loan budget for the whole year. So the growth rate for these 2 categories is also within our loan planning. For the whole year, the loan growth rate will be around 10% to 11%. And for the internal structure of loan growth, we will increase more into retail loans. But overall speaking, we'll keep a balance for both loan growth for retail and corporate. For the loan disbursement speed, no matter for corporate or for retail, for next quarters, it will slow down. Because for the whole year, the first quarter is our active move to have a higher growth rate for loans. That is why you have seen a higher proportion of loan disbursement in the first quarter. So in the next quarters, we'll slow down. So overall, for the whole year, the budget will be complied with.

Next question is from [ Ma Keun Tan ] -- [ Ma Kwon Pong ].

I have 2 questions. The first question is how you transfer from MAU to AUM, a follow-up question. Because this is first time we have seen a very clear statement. Just now you have to say that the 2 measures you have a relying on is: one is technology; the other is to merge off-line and online services. Do you have any concrete or details that you could share with us or any indicators that which could follow? Or any idea or suggestion that you could give to analysts like us, how we can follow up on the -- on your progress? Secondly is for the customer growth. On -- in your first quarter, the retail customer growth rate is higher than last year's average. We know that CMB has done a lot of efforts on that. And just now, you are also saying that fee income is not from retail-based customers or mass customers. So it's important for CMB to acquire high-quality customers. My questions to you is on what is your concrete or detailed measures that you will have for the growth of mass customers? Or do you have any...

Thank you for your question. The questions will be answered by Ms. [ Zhao Yue ].

Thank you for your question. Thank you for your attention on MAU transfer to AUM. In our path and measures taken to achieve this goal, I have mentioned before that within CMB, the most important thing is to providing more wealth management products. For instance, we will design, innovate products, such as [ Zhao Tao Bao ]. And now we are designing new products for clients, and it provides value-added functions. I will provide the name to you maybe later on. Something like we have taken methodologies similar to Internet finance companies. It's merely a transfer from simple products to a more complicated products. In innovating our new products such as [ Zhao Tao Bao ] we have attracted several million clients to subscript -- conduct subscription over this product. I think it's a breakthrough we have made. And on the other hand, we are also constructing the new platform. We have quite high expectation on this platform, make it into opening platform, invite external asset managers to put their products on the shelf to attract more clients. So generally speaking, we just put this platform online. So we have more to do and to see achievements in later on. So generally, I think our main path is to provide services and products in the wealth management scenario. Family trust is also one of our good examples, which has taken around 90% of the total through its online customer acquisition. And I think it's also a very -- in our pattern. We have also put the Sunshine trust online. For PB clients, for high net worth clients, it's relatively more easy for us to transfer MAU to AUM. And for lower level, we see a lower ratio of transfer and migration. It's a trend that we observed. You can see from our annual report that the MAU for our wealth management scenario and the 2 applications and also the number of transactions and also customers that holding position in the 2 applications, these indicators, we deem them as the core indicators that we will pay special attention to. Your second question is about the growth of our retail customer base. I think I can achieve -- we have a base of 161 million clients, bank-wise, and we have maintained a growth rate of around 10% to 11%. Yearly, it's not very easy. And we are quite satisfied with such growth rate. Some other investors have also mentioned their questions in how we expect the increment of retail customers. I think it would be 115 million per year. Another question is how can we better migrate mid- to low-level clients to higher levels? If we focus on customer acquisition, since last year, we have paid special attention to high-quality clients in acquiring new customers. We pay not only -- we pay attention, not only to acquiring new clients, but also to the quality of the customers. We acquire. We aim to enhance the source of our value customers. And for a younger -- for the sources of younger clients, we aim to build up various products, such as [ monkey ] card, Bilibili co-branded cards. These also serve as good products that help us to attract potential value clients with younger age. Thirdly, we dig deeper into the channel of acquisition. We explore community around our outlets as we also understand that the traffic to our outlets has become decreasing, and we aim to explore communities surrounding our outlets and enhance the quality of customers we acquire, so that we can migrate these mid- to low-level clients to higher levels. I think it's also a very obvious example to show on our success in applying such strategy from the data we've shown in the report of the first quarter.

Next question will be from Ma Tingting of Guosheng Securities.

I am Ma Tingting from Guosheng Securities. I have a question from wealth management. CMB wealth management -- what's the total balance of CMB's wealth management and its assets and its income? I also notice that there is changes and decrease from the revenue of CMB wealth management compared with the same period of last year. And I would like to know from the senior management what is the future strategy of the development of CMB wealth management?

Thank you very much. The question will be taken by Ms. -- Mr. Wang Tao.

And for the question, it might be related to the calibrate it adopted, and it was also answered by another senior management. For the first quarter, CMB wealth management has embraced a successful opening. By the end of the first quarter, our total balance was CNY 2.64 trillion, ranking second in the industry, and we shrink the gap between ICBC, the first in the industry. So in terms of our scale, I think within the support and guidance of the big retail finance from the head office. I think we further develop. By the end of third quarter, I think our compliant new product has achieved a total balance of CNY 1.93 billion, accounting for 73% of our total products. The terms of our new products have also been prolonged. We have over CNY 500 billion in new products with durations over 1 year. The growth rate of such products is higher than that of the total products. I think we have made achievements in terms of these aspects. We have also arranged pipeline and made further explorations over pension products, featured target dated [ phones ]. By the end of April, our total volume has further grown into CNY 1.82 trillion. The second question is about revenue. For the first quarter, we have recorded a revenue of CNY 1 billion, recording a 10% growth compared with the same period of last year. To see from the industry level, I think the statistical calibrate has been different from that we calculated. So further on, it will be explained by Mr. Li later. Generally, I think the layout of extensive wealth management of the head office, CMB wealth management will play as well as a value flywheel. We will play a further role as a link, as a bridge in SSI and in the [ phone ] side. We will continue to exit old products and enhance the proportion of new products in our products and bring better returns to our investors. For the revenue side, our Q1 quarterly report is a bank-wise calibrate revenue, along with the transitional period -- along with the transitional period approaches, the revenue has been recorded only in the bank. And later on, this kind of revenue will be recorded in the subsidiary level. So you should combine the bank's level revenue and subsidiary level revenue together. You may get the revenue from entrusted wealth management products.

The next question will be raised by Judy from Citi.

My question is about retail loan. Traditional advantages for CMB, such as mortgage, has been slowing and small to micro size loans will increase, and it's also showing in our report. I understand that it is the arrangement proactively adopted by CMB. I understand that credit card assets and mortgage assets, these are quality assets for traditional banks. I would like to understand if less investments are made to this type of loans, what kind of influence will be -- will it bring to your return and also your calculation of RWA? I will ask -- I would also like to know what is the possibility of credit card loans obtaining lower interest rates and pricing?

Thank you for your question. The question will be taken by Mr. [ Peng Zhao Wun ], our General Manager of Asset and Liability Management Department.

To see from the retail loan growth, we maintain at a stable level and arrangement within our control in terms of its increment and investment. In terms of its internal structure, there are indeed some changes. For large residential mortgage loans and credit card loans, these 2 are traditional assets with higher speed of growth. And they have slowed down. On the other hand, we have increased the investment in the growth rate of small and micro size and consumer loans. This kind of arrangement is within our strict consideration over many aspects, including NIM. To see from the credit card loans, it has a higher yield and, at the same time, we obtain risks within this type of assets. We can guarantee a basic level of growth momentum within credit card assets. We may not say that this kind of assets will shrink. It's relatively a moderate growth for this type of assets. In terms of the residential mortgage loan, it takes around 50% of our weighted risks. And for small and micro-sized loan, they have a higher ratio of weighted risks. And for consumer loans, to see from the combination of residential mortgage loan -- to see from the combination of small and micro size and also consumer loans, I think they can bring similar returns compared with that of a residential mortgage loan. I don't think that the RAROC will experience sharp changes during our changes in the portfolio mix. The second question is about repricing of credit card loan. To see from the regulatory requirements side, there actually has no cap for credit card loan yield. To see from such trend, the banks have been competing over quality clients. We believe that the loan yield will generally demonstrate a decreasing trend because of the fierce competition. If you keep fighting for the most quality clients, it is assumed that the loan pricing will come down. I think it's also a reflection of us to combine risk-return and achieve a balanced development through credit card business.

Next question from Ms. Juan Shen Huatai Finance.

This is Juan Shen from Huatai Securities. One is for corporate banking. For corporate banking, my question is for the new formation, NPL formation for corporate loans because in the past quarters, we have seen the lease for the quarter, the new NPL formation has increased a little bit. What is the reason behind that? Second question is for wealth management. A follow-up question on that. For your first quarter, wealth management contribution from agency sales for funds and also for insurance has grown very fast. So my question is for agency sales for insurance. What is the reason behind the higher growth? What is your expectation for that? Another one is for the extensive wealth management. What will be the contribution from the agency sales from mutual funds and insurance? Except from that, what is the proportion will be for the sales of your companies' stability?

The first question for NPL formation for corporate loans, it will be answered by Mr. [ Li Ming Tung ]. The second question will be answered by Ms. [ Zhao Yue ].

Thank you. The first quarter's, as a quality for the whole bank, we think that the asset quality is stable. But structurally, there are some changes. Firstly, for corporate, new NPLs, balance and also the NPL formation rate has both increased a little bit slightly. The reason are as follows: for external reasons since the economy is recovering and also compounded by policy changes. We have seen some companies with a higher leverage and a poor cash flow are facing some risks, and the risks are surfacing. And for the first quarter, corporate banking loan from NPL formation is more concentrated in large enterprises. For the top 10, 80% are NPL, new formation are coming from the top 10, but the largest one is only CNY 600 million. So we think that the concentration risk is under control. The industries have been impacted, industries that is related to real estate, mining and manufacturing. So for CMB, we will have taken the following efforts in. Firstly, we will improve our knowledge or know-how in certain industries and certain customers. Secondly, we will increase our investigation into areas that have been deeply affected by the external environmental change. Thirdly, we will follow our continuous risk asset classification policy so as to expose as much as we can. And fourthly, we will also invest more into fintech so as to empower our risk management. So for the whole year, for the NPL formation for corporate banking, corporate loan, we think that even though we are facing pressure, but overall speaking, the asset quality will -- for corporate banking will be stable. Thank you.

For the second question regarding the fee income for the agency sales of mutual funds and insurance, you have seen quite a high-growth speed. One of the reason behind is that last year, we have seen a very high-growth rate and some of the profits has been reflected in the first quarter of this year. And for the sales of insurance products, actually, we haven't changed our tactics or strategies. For the customers' assets with us, we are always following the principle, namely, to have the proper asset allocation for our customers. A minor change we might have this year is that before the spring festival of this year, we are educating or kind of communicating with our customers, especially for the wealth management customers, and we are continuing to have dialogue with our customer before the spring festival when the market was very hard, namely also you can read from our letter to our customers. We have informed our customer that the market is too hard. And we think some of the customers, they have reallocated their assets. We think at the current circumstances, this kind of insurance products, these are the -- guarantee products are more -- for a -- more proper for customers, especially the proportion of customers' allocation for these kind of products is very low, counting for Chinese households. And at the same time for private banking customers for family trust, most of them are -- have allocated a lot of products in for the insurance. That is why all these factors together has led to the increase of our sales of insurance. So it's still more concentrated on those guaranteed kind of careful guarantee purpose insurance products rather than those investment insurance products. Your second question is for the WMP products, namely from our subsidiary. For the bank itself, we think that we are continuing to improve our capability to originate our assets and to design products so as to have our own proprietary products for our customers. We have strengthened the integration of investment banking and commercial banking together and to broader our asset origination capability or channels. And when we are doing asset allocation for customers, we are following the principle of proprietary allocation. When we are doing asset class allocation for our customers, we will not differentiate whether it's from ourself or whether it's designed by other classes. The most important thing is it's suitable for our customer. And for our own customers, it's more concentrated on noncredit and our standardized credit assets. But due to the environmental change for the property market, this proportion -- the proportion for these kind of nonstandardized credit assets will come down.

From Yang Shuo from Goldman Sachs.

Just now, many investors are asking the question for provision. Looking -- we think looking ahead, we think that with our transformation of wealth management WMP, it will come down. So in the future, may I know what is your plan for the capital for wealth management subsidiary? Or what is your plan for future provision? Because in the future, you might not need such huge provisions in place that will -- that might transfer into profits. So we think that when the provision for -- is coming down, what will be your outlook for profit? And what will be your policy for dividend payout ratio?

Thank you for your question. As for the provision plan, will be answered by Mr. [ Li Min Tung ]. And also for -- yes, this question will be taken by 3 different people, namely Mr. [ Li Min Tung ], Jiangtao and Hui Liu.

As for the budget for provision, I would like to elaborate of the following aspects. Firstly, for risk policies, CMB has been very precautious and stable policy. And we think that, that is why the coverage ratio will be at a high level and a stable level. This is first -- my first point. Secondly, in the first quarter, even though for loans and for other asset classes, for loans, the provision has decreased a little bit. But overall speaking, we are expecting the provision for loans will be still at the proper level. Thank you.

And for -- I will answer the question for capital. And actually, for the annual report, we also disclosed our annual capital budget or planning. Then we will have 1 to 2-point percentage buffer compared to the regulatory requirement. And I would like to make the following points. Firstly, we are continuing to have the ability to have the indigenous capital growth. Namely, we will not resort to financing from the capital market. Secondly, considering the noncore capital requirement, we might take measures to supply more prep loan -- prep debt for these kind of things. Thirdly, for the dividend payout ratio, it was always -- last year was around 33%, was highest ratio among the listed banks. It's written in our M&A, but the dividend payout ratio will be not lower than 30%. So we will insist on this policy. But for every year for the detailed number, how we'll change based on the 30%, we have taken into a -- different things into consideration and decide the concrete number, but we will continue following the principle that we have written in the M&A.

And third question for ROE. You can see that for the past years, CMB has maintained quite a double-digit growth, except for last year, we have maintained quite a high ROE. Last year due to the impact from the COVID-19, it has come down a little bit because the profit has been down to below 5%, which has led to a decline in ROE. And this year, with the business recovering, we have maintained double-digit growth for -- both for operating income and profit growth, especially for the profit, well, it has been up 15.18%, which also has led to a increase or recovery in ROE. For the whole year, we are optimistic to maintain this trend for the whole year. And with this growth trend for the whole year, we think that the ROE, there is possibility to continue to rise.

And since time is limited, last question, please.

Last question is from [ Lao Tzu Ming ] from CMB Securities.

For next 5 to 10 years, CMB will focus on extensive wealth management and also benchmarking the world-class asset -- wealth management banks. May I know -- now I think that the proportion contribution from wealth and general CMB's overall operating income is around 10%. So in the future, what is your expectation of the contribution from wealth management to CMB's overall operating income? And what is your plan for your AUM for corporate banking, integration of investment banking, together with commercial banking? What is your next measure or next plan for that?

The first question will be taken by Ms. Hui Liu. The second question will be taken by Mr. Jiangtao Zhu from our Corporate Banking Head office.

Thank you for your question. Your question is something that we are also considering because at the beginning of the year, we have launched the idea of building the extensive wealth management value chain. We are also thinking about -- or what is our plan for the next 5 years. And this plan or this target is a dynamic one and increased the -- our contribution of the wealth management to our whole overall income, of course, will be our target. And also for the target for our AUM is also, we definitely have an internal goal, but it might not be proper to disclose that to the public right now. So annual compound growth rate, it will be a double-digit growth rate for AUM and also for the -- when we are talking about the income contribution from extensive wealth management, it's not only limited to this narrow definition of wealth management. It is covering the wealth management, asset management asset origination as well as custodian. So it's mainly coming from the 4 aspects. And also, it's not only concentrated in for the parent company, but also it covers for our subsidiaries, namely CMB parent as well CMB International. So altogether, at a group level for the extensive wealth management, we have actually -- have already done a very active -- or plan for that. We have a very aggressive goal for that, so we are trying to benchmark in ourselves with our world-class banks. Thank you.

And I'm, Mr. Jiangtao Zhu. I will give you my view on the progress we have made for the integration of investment bank and our commercial banking. Actually, for the past year's [ average ], we have done a lot for the integration of investment banking unit. And also, we have -- now we have seen big opportunities in the capital market. So I can say that we have achieved quite significant progress in this regard. Firstly, you have seen we have disclosed the FPA in our annual report, the growth rate, the structure of FPA, especially for the financing from the nontraditional financing part. Now it has taken around 46% of the total FPA, especially for the financing from the nontraditional financing part. It has taken around 46% of the total FPA. Namely when we are servicing our customers, we are using the traditional banking products' resources. And at the same time, we are using the opportunities from investment banking products, such as all this. We think that it has taken quite a important role as well as the traditional banking products. And when we are doing investment banking, we are, not only servicing the cost of our corporate customers, but also we are servicing those companies that is more active in the new emerging industries. We are more taking the investment banking products and to innovate on the products we have for these kind of new emerging enterprises in the new emerging industries. So it's a important direction for us. We will continue to make more efforts in this regard.

And friends, analysts and investors, thank you for attending our first quarter earnings call. And if you have further questions, please, you could refer to our first quarter report on our website or you can contact our IR team. Thank you very much for taking your time to attend our first Q earnings call. And thank you very much for your long-term support and attention to CMB where we all continue to do a good job and to generate return for the investors. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]