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

Dear investors, analysts, friends from the media, good morning. CMB 2022 annual result announcement will now begin. I am CMB Securities Affair representative, General Manager of the Office of the Board of Director, Xia Yangfang. Today, our event is held in person, and we are happy -- we are very happy to meet you face to face again. And at the same time, it is available through webcast for those who cannot be here physically. Now I would like to introduce the members of the bank's management who are present today. Sitting on the stage, they are Mr. Miao Jianmin, Chairman of the Board. Mr. Wang Liang, President, CEO and Secretary of the Board of Directors. Mr. Zhu Jiangtao, Executive Vice President and Chief Risk Officer; Mr. Peng Jiawen, Executive Assistant, President and CFO. We also have online and on-site participant, Mr. Zhou Song, Director; Mr. Hong Xiaoyuan, Director; Mr. Jian Zhang, Director; Mr. Li Menggang, Independent Director; as well as our general managers from related department today. On behalf of CMB, I'd like to welcome you all to the conference and thank you for your interest and support for CMB. In today's presentation, there will be 2 sessions. The first session will be introduction given by Chairman Miao and President Wang on the bank's 2022 annual result, takes around 30 minutes. The second session is the Q&A session, takes around 1 hour and 30 minutes. The meeting is expected to end at around 11:30 a.m. There will be simultaneous interpretation in English for both the results presentation and Q&A session. Now I would like to give the floor to Chairman Miao and President Wang on the introduction of the CMB 2022 results highlights.

Dear investors, analysts, friends from the media, good morning. Welcome to CMB's annual result announcement of 2022. Over the past 3 years, we have been holding the presentation online. And in this year, I am very happy to meet you face-to-face. Online communication is not that efficient and directly compared with face-to-face communication. So today's presentation will be divided into 3 parts. First, I will give an overview of our 2022 full year performance. And after that, President Wang will introduce our business operations in greater details. And finally, I'll briefly talk about our outlook and strategy of 2023. In 2022, as we are faced by complex domestic and international situation, we managed to go through internal and external challenges and pass the stress test of the market. Under the general keynote of seeking progress while maintaining stability, we stick to our strategic focus and continue to build our [indiscernible] of transformation and development. We have achieved a dynamically balanced development of quality, efficiency and scale and made new progress in building 3 major capabilities of wealth management, fintech and risk management. And we have strived to drive meaningful improvement of business quality and reasonable business growth. This is evidenced by the following 5 aspects. Firstly, we effectively respond to various challenges with stable and improving performance. Our net operating income increased by 4.02% year-on-year to RMB 344.74 billion. Net profit attributable to the bank's shareholder was RMB 138.01 billion, up by 15.08% year-on-year. ROAA was 1.42% and ROAE was 17.06%, up by 0.06 percentage points and 0.1 percentage point year-on-year, respectively. Net interest income RMB 218.24 billion, up by 7.02% year-on-year. Net noninterest income, RMB 126.5 billion, decreased by 0.77% year-on-year. Due to the tightened interest rate spread, the net interest margin was 2.4%, down by 8 bps year-on-year, continually representing a high level among our peers. Amongst, the NIM in Q4 was 2.37%, up by 1 bps quarter-on-quarter. We deeply optimized cost management. The cost-to-income ratio was 32.89%, down by 0.22 percentage points year-on-year, achieving 2 consecutive years' decline. We continue our capital endogenous growth. CET1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio under the advanced approach were 13.68%, 15.75% and 17.77%, respectively, up by 1.02, 0.81 and 0.29 percentage points from the end of last year. Under the weighted approach for Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio were 11.52%, 13.25% and 14.68%, respectively, up by 0.35, 0.06 percentage point and down by 0.03 percentage points from last year-end. If we exclude the impact of a redemption of overseas preferred share, all capital adequacy ratio under the advanced approach increased. Secondly, total asset rose to higher level, and we maintain our edges in liability management. Total assets reached record high, an increase by 9.62% to exceed RMB 10 trillion. Total loans and advances was recorded RMB 6.05 trillion, up by 8.64% year-on-year. Total liability increased by 9.56% year-on-year to RMB 9.18 trillion. Total deposit was CNY 7.54 trillion, up by 18.73%. And our increment balance exceeded RMB 1 trillion for the first time. Thirdly, asset liability management was solid and effective with robust risk management capability. We continue to optimize our management and maintain a good level of overall liquidity. All indicators were higher than regulatory requirements and leading position among our peers and leave a large margin for safety. Average liquidity coverage ratio in Q4 of 2022 was 164.92%. In 2022, Q4 and the NSFR was 131.83%. Interest rate risk management follow a prudent and neutral risk appetite. Structure of interest rate risk maintained a neutral with weak asset sensitivity bias, and the risk level was stable. Due to the risk rising in relation to some real estate clients and insufficient demand for retail loans, both NPL balance and ratio slightly increased, but the overall risk were under control. Among all, NPL balance was RMB 58 billion, representing an increase of RMB 7.14 billion year-on-year. The NPL ratio was 0.96%, an increase of 0.05 percentage point year-on-year. Allowance coverage ratio was 450.79%, a decrease of 33.08 percentage points compared with the end of last year. Allowance to loan ratio, 4.32%, representing a decrease of 0.1 percentage point. Risk prevention capability was still robust. Credit cost was 0.78%, an increase of 0.08 percentage point year-on-year. We continue to the innovation-driven growth and further strengthen our fintech capability. IT expense increased by 6.6% year-on-year to RMB 14.17 billion, accounting for 4.51% of the company's net operating income and up by 0.14 percentage point year-on-year. Number of fintech innovation project launched and put into operation amounted to an aggregate of 3,242. The project of cloud migration program in 3 years was successfully completed, and we free ourselves from the conventional centralized architecture and achieved capacity expansion and entering into the cloud era in all round way and driving future quality growth with equipment technologies. Talent structure was further optimized with number of R&D personnel increased to 10,846, accounting for 9.6% of the total head count. Fifthly, we effectively implement the ESG concept and proactively serve the real economy. We promote to improve the ESG corporate governance structure and add green finance-related responsibility to the Strategy Committee of the Board to carry out ESG responsibility in an integrated manner. We continue to promote our green development and transformation and release the first plan for green development. We continue to create value for the society and serve the real economy with increasing efficiency and quality. Green loan, manufacturing loan, technology, enterprise loan and inclusive SME loans growth rate were higher than the company's overall growth rate. We kept contributing to the society with love and made a total of RMB 94.76 million external donation for the year. Our MSCI ESG for 2022 was A, remaining to be the best among listed banks in Mainland China. This is our recap of our performance in 2022. Next, President Wang will introduce our operational information.

Thank you, Chairman Miao. Next, I will introduce our operational information in 2022. In 2022, CMB grasped the [indiscernible] and forged ahead and stick to our strategic focus and implement the requirement of the full stability set by the Board and achieved stable operation through stable mechanism, strategy and stable team. We managed to further consolidate our fortress-style soundness of our balance sheet, improve our operational results and made good achievements amid difficulties. This is evidenced by the following 6 aspects. Firstly, we dynamically adjust our asset allocation and our low-end scale steadily grew. We continue to optimize the asset structure and enhance the allocation efficiency amid relatively eased market liquidity, insufficient credit demand and shortage of investable assets for the banking sector last year. We continue to expand customer base, increase volume, stabilize the price and ensures liquidity to increase our total loans and advances by 8.64%, accounted for 59% of the total assets. We increased bond investment to enhance overall return from our asset allocation. Total investment in bonds and other financial assets grew by 26.68% and accounted for 27.49% of the total assets, representing an increase of 3.7 percentage points. Due to macroeconomic and real estate industries downturn, growth of retail loan slowdown and structure changed. Total retail loans were up by 5.74%, representing 54% of the total loans and advances to customers that still accounted for more than half of the total. Balance of residential mortgage loan and credit card loan increased by 1.12% and 5.25%, respectively, representing a slower growth, but higher market share comparing with the last year. On the premise of controllable risks, we increased the disbursement of microfinance loan and consumer loans, which were up by 12.32% and 29.64%, respectively. Reasonably, we increased the corporate loans, balance of which increased by 11.42%, accounting for 36.66% of total loans and advances. Secondly, we further optimized our liability structure with increased balance and improved quality of deposit. We adhere to the liability growth strategy, focusing on growing low-cost core deposits, refined liability management and enhanced cost control and proactively reduced the high-cost deposit to achieve balance between scale and cost of liabilities. Increment balance of core deposits exceed RMB 1 trillion at the end of 2022. Daily average balance increased by 17.08%, which accounted for 87% of the daily average balance of customer deposit, an increase of 0.24 percentage points. Daily average balance of demand deposit was maintained at a good level, accounting for 62% of the total. For the fourth quarter, the cost ratio of customer deposit was 1.55%. Thirdly, we continue to promote the business development of extensive wealth management and maintain resilience in noninterest income. We continue to focus on our customer and create value on our customer. We solidify customer base, upgrade customer service and enhance our capability of extensive wealth management. Total AUM from retail clients increased by 12% to CNY 12.12 trillion, among which AUM from the Sunflower and above customer increased by 11% to CNY 9.87 trillion. Total AUM from private banking customer increased by 11% to RMB 3.79 trillion. FPA increased by 8.07% to RMB 5.12 trillion. Total AUM of asset management business increased by 2.32% to RMB 4.41 trillion against the headwinds. Balance of assets under custody exceeded RMB 20 trillion and was leading in the market. Influenced by the fluctuated capital market, the high base effect and writing risk associated to the real estate sector, net noninterest income slightly declined. Net noninterest income was capped at a high level with a slight decline of 0.77%, accounting for 36.7% of net operating income. Amid market fluctuations, the income from extensive wealth management remain resilient, was recorded CNY 49.15 billion despite decreasing 9.10% -- 6.1%. Among which fee and commission income from asset management and custody business increased by 14.75% and 6.59%, respectively. Fourthly, the traditional noninterest income continued to grow steadily, among which fee income from bank cards increased by 10.44%, and income from settlement and clearing fees increased by 8.26%. And fourthly, we're persistently cementing our customer base with distinctive advantages in our featured business, further solidify the one-body position and systematic edges for retail finance business. Number of retail customers grew quickly. Total number of retail customer increased to 184 million by 6.36%. Number of Sunflower and above customer increased by 12.84% to 4.14 million. Net operating income from retail finance business accounted for 52 -- 55.52% of the total, up by 1.5 percentage points. We further enhanced wealth management ability. Number of customer holding wealth management products increased by 14% to 33 million. Number of customers under our upgraded TREE asset allocation service system was 8.13 million, up by 16.08%. Xiao Zhao Miao, our open wealth management platform, further opened up and attracted 139 asset management institutions. We further enhanced our capability to provide comprehensive service in private banking business. Number of PB clients increased to 134,800 by -- up by 10.43%. We promote the integration of wholesale and retail finance as the model for customer acquisition and a coverage rate of private banking service for key enterprises reached 33.5%. We continue to promote the transformation strategy of stable and low volatility for our credit card business. Value of transaction increased by 1.52% to RMB 4.84 trillion, remaining top in the industry. We deepened the segmented and classified service system for our wholesale finance business and strengthened our industry knowledge as well as our service capability that integrates investment banking and commercial banking. Number of corporate customers was 2.53 million. And we expanded the base of customer -- corporate customer under the integrated model of people plus digitalization. And the number of wholesale customers reached -- obtained online channel reached 2.39 million. Among MAU, reached 1.52 million. And the number of corporate customer for withholding transaction was 1.08 million. We upgraded the CITIC finance service system and launched a pilot project in 6 first-tier branches and 1 second-tier branch to provide high-tech enterprises with professional services. The balance of loans granted to technology enterprises was up by 44.86%. We optimized the supply chain business model of providing comprehensive and consistent services to customers across all the branches of the bank. Under this model, we accumulatively launched a total of 247 projects and expanded services to 22,903 SME with RMB 268 billion of loans granted. Bonds with the company as the lead underwriter amounted to RMB 675 billion. Volume of bill-direct discounting business increased by 21%. In respect to transaction banking business, number of customer of corporate collection product grew by 71%. In respect of cross-border finance business, corporate international settlement increased by 10.38%. Trading volume of transaction service to the corporate customer amounted to USD 221.98 billion. Our Zhao Ying Tong platform provides financial institutions with online sales and trading services of various products and assets in the market. Online sales volume of third-party asset management product increased by 24% year-on-year. Fifth, we enhanced our management and control of various risk and asset quality remains stable. We adhere to prudent risk appetite and continue to strengthen the risk management foundation by unifying the risk management of on-and-off balance sheet business, strengthen unified customer risk management, actively preventing and mitigating risk in key business areas and enhancing efforts in the collection of nonperforming assets. Retail NPL ratio of 0.89%, up by 0.08 percentage point. Amongst credit card NPL ratio, 1.77%, up by 0.12 percentage points. Corporate NPL ratio was to 1.26%, up by 0.02 percentage points, mainly due to risk exposure to certain real estate companies. We attach great importance to the management of risk in key business areas such as real estate, local government financing platform with overall asset quality under control. Balance of corporate loans granted to the real estate industry was RMB 333.72 billion, accounted for 5.83% of the company's total loans. Over 85% of the company's balance of corporate loans for retail -- for real estate development were distributed in the first-tier and second-tier cities. Ratio of nonperforming real estate loan was 3.99%, up by 2.6 percentage points. Total balance of the business for which the group did not assume credit risk in real estate sector such as wealth management, bond financing, interested loan, agency distribution of trust schemes under the active management by cooperative institutions and debt financing instrument with the group as the lead underwriter amounted to RMB 300 billion, representing a decrease of 27%. Bonds of the local government financing platform business was RMB 263 billion, up by RMB 1.96 billion. Amongst, the balance of loans to domestic company was RMB 132 billion, accounting for 2.32% of the company's total loans and a nonperforming loan ratio was 0.14%, down by 0.49 percentage points. We continue to strictly classify assets, fully exposed risk and increased efforts to dispose nonperforming assets. Ratio of nonperforming loans to loans overdue for more than 60 days were 1.25. New NPL was RMB 62 billion, up by RMB 15.67 billion year-on-year. NPL formation ratio was 1.15%, up by 0.2 percentage points. We disposed a total of RMB 57.99 billion nonperforming loans during the year, of which RMB 24.25 billion were written off. RMB 15.86 billion were securitized. RMB 12.85% (sic) [ RMB 12.85 billion ] were recovered by cash collection. And RMB 5.03% -- 5.03 billion were disposed by repossession, transfer, restructuring, upward migration, remission and other means. Sixthly, we accelerated the application of our fintech and focus on building digital CMB. We continue to promote the establishment of digital CMB in terms of customer service, risk management, operational management and internal operation focusing on online data, intelligence, platform and ecology. In terms of retail customer service, we continue to improve service quality and efficiency in terms of products, platforms and channels. The monthly active users of the CMB APP and the CMB Life APP reached 111 million. And wealth trading customer of CMB APP accounted for 98% across all channels. The number of customers subscribing for Zhao Zhao Bao reached 24 million, with an ending balance of RMB 205 billion at the end of the period. In terms of wholesale customer service, we accelerated the online migration and basic services to corporate customer, financing business and foreign exchange business to all, reported a significant increase in the online coverage rate. To empower the digital transformation of enterprises with the idea of technology inclusivity, we released a new version of Xin Fu Tong 4.0, which had cumulatively served 695,000 enterprises. In terms of risk management, we have extensively leveraged fintech to enhance our digitalized risk capability. The intelligent risk control platform named Libra lowered the percentage of fraud and account takeover amounts by noncardholders to 0.57 and 10 millionths. In terms of operation, coverage ratio of big data service has reached more than 50% of all employees. And in terms of the internal operation, we have on average saved 6 hours per transaction for relationship managers through the remote loan granting, increasing the efficiency by 32% as compared to the traditional process and by leveraging the intelligent application in scenarios such as the intelligent customer service process, voice quality and the Conch RPA. We achieved a total replacement of more than 12,000 full-time staff. We continue to build a digital operation model and further upgrade the new digital infrastructure for the future. We complete the smooth cloud migration for customer and realized full transaction to cloud architecture and making business development more agile and efficient. We work on the construction of data middle office and technology middle office and lowered the barrier to application development and data access. These are all for the key operational information of 2022. And next, I would like to invite Chairman Miao to share our outlook and business strategy for 2023.

And next, I will briefly introduce our outlook and strategy for 2023. Looking into 2023, China's economic growth will be further challenged by growing uncertainties from the external environment and weaker growth momentum of the global economy and trades. However, China's economic foundations characterized by highly resilient and full of potentials and vitality remain unchanged. In addition, China's economy will see an overall improvement as we fully reopen and the various policies continue to take effect. On the top of its retail banking and light asset banking strategy, the -- with the strategic vision of building the best value creation bank and innovation-driven development, leading model and distinguished features, CMB will continue to maintain a strategic focus about the philosophy of win-win business and business for common good, pursue to maximize the value creation for customers, employees, shareholders, partners and the society and develop a new pattern of high-quality development. Firstly, we will continue to value creation and achieve high-quality growth. We will contribute to high-quality development of the country, improve capital-heavy business, expand capital-light business and pursue value creation so as to achieve our high-quality development. We will improve our capital-heavy business with improved asset structure and enhanced risk pricing capability. We'll expand our capital-light business by developing extensive wealth management business and create a high-value business cycle chain involving wealth management, asset management and investment banking. And we would like to extend such advantages to corporate investment banking, global market and asset management sectors and to strengthen our mutual cooperation. And we will stick to innovation-driven development for enhanced financial service capability. We will remain willing, passionate and able to pursue innovation as we did in the past. And we dare to break new grounds. We will put more efforts to speed up the construction of sci-tech finance subbranch and to construct a full life cycle of technology financial service system to promote a virtuous cycle among technology, industry and finance. We will continue to provide support to IT investment and to speed up the construction of digital CMB. And thirdly, we will uphold the market-oriented system and to strengthen our growth driver. We've always adhered to the 3 costs in principle of the President, assuming full responsibility under the leadership of the Board, the market-oriented incentive mechanism and stability of the management team and talent. We have always stayed with the original aspiration of focusing on customers and creating value for customers to strengthen the implementation of strategies. Unswervingly take the direction of development based on specialization and market-oriented principle. And fourthly, we will focus on risk control to build a fortress-style overall risk and compliance management system. We have always adhered to prudent risk culture and appetite, and we'll continue to improve the relevant mechanism, accelerate to establish risk management system tailored to the extensive wealth management business, improve capability to deal with unconventional risk and strengthen the internal control and follow the culture of compliance first, compliance creates value. We are confident that we can create more value for our customers, employees, shareholders, partners and society as a remarkable value-creation bank. Thank you.

Thank you, Chairman Miao and President Wang. We'll now move on to the Q&A session.

Will now first take questions from analysts and investors before moving on to the media Q&A. [Operator Instructions] Please also state your name and the name of the company you represent before you ask the question. We will rotate the question in order with 2 from on-site participants, followed by 1 question from online participants. We will now take the first question from an on-site participant. The gentleman in the second row, please?

I am Mr. Fan Haishuo coming from CLSA. Congratulations for your solid and as always performance. So my question is regarding the strategic direction of CMB, it's for Mr. Miao. We know that CMB has done well in terms of the large banking model. And in this address, you have -- remarks you made in the annual report, you said that in the future, CMB want to make a larger scale of those light capital business, but also want to be more strengthened in terms of the heavy capital business. I know it comes from -- you also mentioned the heaviness is the route of lightness and it comes from [Foreign Language] . So how shall we understand this statement?

I remember -- I still remember your report when we announced our third quarter report. So the name was -- the title was solid and as well always. I remember that. It's a very good question. And as for the commercial banking business, you can divide them into 2 categories. One business means that the bank take up the own book, take the assets on book and take up the risk weight and do the loans and also proprietary investments. The other business is the business that we do not take on the take-on book, but we can charge fee-based income on that, such as the wealth management business is the -- belong to the second category. So the on-book business, we earn the interest income and also the capital income from that. For a business that we do not take on book, namely such as the wealth management business, we can profit from them on a fee-based income. And the traditional commercial banks, they're mainly doing heavy capital business. Namely the first category, I call them the heavy capital consumption business. So traditional commercial banking business are more concentrated in those heavy capital businesses like loans and proprietary trading -- proprietary investments. But they do some or little light capital business, but it doesn't have a higher proportion in terms of the total income. When we look at the world, when there's a systemic risk in the financial crisis, it often happens for those heavy capital business like the Silicon Valley Bank is also the same. I read through their balance sheet and their bond investment accounts for around 60% of their total asset book, and it doesn't have a higher proportion of the fee-based income business, and the non -- the fee-based income is only around 26%. So in terms of the overall banking business, you can see that the financial crisis always come in from those heavy capital businesses. For light capital business, even though you do not do that well, but it doesn't lead to a systemic risk. That is why I said we need to be stronger in terms of the heavy capital business. Be stronger means quality. Namely, we lay high emphasis on quality, namely risk management. So our measurement -- when we measure the performance of the senior management, we always say that the risk management is a very important thing and NPL ratio should be low. And when I say we need to make bigger scale of the light banking business, that is where I -- for that, I say that the scale of that is very important. But I don't say that the NPL is very important. Because for the light banking business, we do not take capital. We do not consume capital. So bigger and larger scale is more important. That is the relationship between the heavy capital business and also light banking business. So when we have stronger characteristic or advantage in terms of the heavy capital business, last year, we also NPL is below 1%, which means that we are very strong in this area, and we need to be even stronger, have better risk performance. We -- our -- another advantage of CMB is in terms of the live banking business. Last year, we have -- the fee-based income is over 36%. But when you look at Silicon Valley banking business, its only 26%. So which means that overall speaking, we have already a larger scale of the light bank capital business than other peers. So we need to increase or make a larger scale of the light banking business. So what do I mean by heaviness is the route of lightness? Route means that we cannot have any risk problem on book. So even though if you have the risk problem on book, even though you have a very large light capital business, you still need to face some fatal challenges when you have risk problems on book. Like the Silicon Valley Bank and also like Credit Suisse, you saw the same. That is why I say we need to be very prudential and have the sound risk management for heavy banking business. And based on that, to make a larger scale of the light banking business. So in our vision for the 14th Five-Year Plan, when we are making our strategic vision. Our vision is to be innovation-driven and also advancing in terms of business model and with special characteristics and also to become a bank that can create value. So how shall we say that the advanced business model, like the digitalized business model and also our risk management business model and also the business model based on wealth management, I know that everyone is doing a digitalization now. So -- and also, we think the culture of the bank shall be open and also integration. So when I say business model now, I think that very importantly is to have a more balanced business structure. Namely, there will be a more structured, more balanced or more optimized business structure. Now it's not a very good business model because we still highly rely on heavy capital business. So in the future, we need to be larger or stronger in terms of the light banking business. In terms of the income, the structure is also not the -- there is still room for improvement for that because the fee-based income ratio or fee-based income still has a lesser proportion in the total income. So the proportion of the fee-based income, there's still bigger room for us to improve and that will help us to achieve a higher, more balanced and more optimized situation and help us to counter those -- the cyclical, namely with the interest rate coming down, especially in marketization and liberalization of the interest rate, we need to expand our fee-based income to help us to counter those challenges coming from the interest declining. For heavy capital banking business, if the interest rate is coming down, it will damage both the interest income and also both damage the -- and help us to go through the cycles. And if we can do this well, we have a very advanced business model when the other banks are focusing on heavy banking business. We already are making progress in terms of the light banking. With the others, their income is still relying on interest income. And then we can already have both interest income and fee-based income. So that will -- I think that will help us to have a step forward compared to our peers. So in the past, we think that digitalization of wealth management is only a part of this strategy. And this time, we have continued to upgrade this into our vision. Thank you.

Thank you very much. Now next question, please. Yes, the lady in the third row, please.

I'm from CICC. My question is also regarding the strategy. When we are reading the annual report, we think that there is some new statement or some statements that we more emphasize on, namely saying the value-creating bank. So what does it mean by value-creating bank? And currently, there's a changing competition among the banking industry. We have read the new -- some of the new strategies that CMB has carried out in your annual report, like you are having comprehensive sub-branches and you are doing the new pilot tech branches. So are these the new movements that you have to adopt to proceed with your business.

And in the past, we call it, CMB, as a retail bank. And then we say it's a light banking business. And this year, we say it's a value-creating bank. We think that they are consistent with each other and is upgrading continuously. Retail banking is from a customer aspect, and heavy banking business can be divided into corporate banking and also retail banking. So in the past, we are more emphasized on retail banking business. That is what we call we are king of retail banking. And then we upgraded our vision into being the light banking business, namely including wealth management business and to have more fee-based income, do more heavy banking business, which means our light banking business. So it's only from one angle of the banking business. And then we say it's -- we want to upgrade it into the value-creating bank, is targeted both at -- is consistent with retail banking and also the light banking business. So they're consistent with each other, but it includes a more comprehensive ecosystem. And also, we are emphasizing the feeling of our experience of our shareholders. Only can -- we are doing very well in terms of the retail banking business because we have the higher interest income compared to corporate banking and then become very good in terms of the light banking business, and then we can create a bank that creates value for our bank. So it's an upgrade or it combines retail banking, light banking business together into value-creating bank. When we are talking about the value, we create value for our customers, for our employees, for our cooperative partners and also for our society, and then it leads to creating value to shareholders. So if we only talk about our shareholder return, last year, it was around 17% ROAE. So these 17.06% ROAE is based on our value creation for our customer, based on our value for our counterparties and also the value created for our shareholders and also for the employees. So value creating is an upgrade of our retail banking. Light banking is the highest level. And for commercial banking, in the past, we are benefiting from the passing times. First is the very high rapid growth. Second one is high growth of property market. And those -- now we see the GDP growth rate is coming down and also the property market is coming into -- there is no much growth momentum in the property market. So these pose great challenges to the commercial banking business. That is why we have proposed this vision, namely to create the best value-creating bank to come up with these challenges. Only with the innovation driven and we can focus on risk management and to find new growth momentum or new growth point for the bank. For the property market, in the past, the total market sales volume is around CNY 17 trillion. But last year, it has dropped to CNY 13 trillion. So we need to find new growth points, growth area for CMB. So that is why we have launched green finance, the tech finance to find new growth volume for -- to counter the challenges coming from the property market. That is why I say the innovation driven. And also we have more balanced business model with more balanced and optimized income structure and also asset structure. And for CMB customers, the most important thing, we are -- customer is the sun and that is why we have the symbols, the sunflowers because sunflower is always moving around the sun. So with customer at the center, it's a very important characteristic of CMB that we have pursued for as always. And we follow the changes of the time and also the external environment. So it's the optimization of the -- it's optimization of the strategy, focusing on our customers' needs and to continue to optimize our strategy. And just now you say we -- some movements or some measures that we have taken. You can call it new, but it's also pertaining or is also relating to our philosophy and also our strategy, is the same or consistent with our strategy. So if you talk about the consistent strategy, it's always old strategy, namely it's always the same. But only with -- but you can also call it new because the measurement has changed according to different times. And it's in a very scientific way. To make a scientific strategy, you need to implement that, then you can be more effective on that. So we always follow the new -- the modern corporate governance structure and always be market-oriented and to be very professionalized so that you can implement our strategy in a more -- in a very comprehensive way. So it's consistent with each other, namely the modern corporate governance structure and to insist on innovation. It's very important for us to implement the strategy. Strategy is the direction, but the business environment has changed from time to time. You need to be innovative to turn the direction of the strategy into practice and to be -- have diversified business structure. So CMB is not following others, but we are leading the others. We are not crowding with each other, but we are leading the way because we insist on diversified business structure and insist on building our 3 capacities, wealth management, financial technology. Financial technology decides on how fast we can go because we are very advanced. And for the traditional heavy capital business, it's important. Now NPL is 0.96%. So you cannot fall to a very low level but we still have a very large market for wealth management. It's a huge market. So if you can do well in terms of the wealth management, it decides how high we can go. So wealth manager decides how high we can go and risk management decides how far we can go. Recently, Credit Suisse has been acquired by UBS. So the basic problem is coming from risk management, not only the operation problem and also risk management and also from internal control problem. History of 176 years is already very far away to go, but it's still not far yet. It now has been acquired. So for CMB, very important is to go fast, go high and also to go long. So our strategy is always consistent, but we have new measures as well.

Next, we'll take a question from online participant. Please state your name and the agency you represent before you raise the question.

I'm Xiao Feifei from CITIC Security. I have a question from asset quality. I've noticed in the annual report that there was some increase in the special mention loan ratio as well as the NPL ratio for retail loan. I'd like to learn the reason behind. Does it mean that the bank will be faced with larger pressure in terms of your asset quality?

Thank you for your question. By the end of 2022, we do see an increase in the bank's special mention loan ratio as 1.15%, which is higher than that of last year, which is also influenced by several factors. Firstly, economic downturn; secondly, real estate industry risks increased. And secondly (sic) [ thirdly ], the bank's management -- internal management has applied a stricter standard in the risk identification and classification. So generally, the indicator is still at a relatively low level with controllable risks. As for the risk in the retail loan by the end of 2022, the retail loan NPL was 0.56%, and that for real estate is 0.35%. Special mention loan ratio, among which those from unexpected, account for 70%. And the risk-weighted pledged more of real estate industry was around 39%. And the loan for SME was 0.5%, with 81% of pledged rate. And at the same time, SME loans' weighted pledged ratio was also very considerably high. And as for consumption loan, the NPL ratio was 1.08%. Special mention loan among those, nonexpected portion accounts for 50%. So generally, the NPL ratio increased compared with the end of last year, So before answering your still remain at a relatively low level. And last but not least, credit card loan. The NPL ratio for credit card loan at the end of last year was 1.77%, and those entering into the collection phase was around 6%. It is actually lower than the level of 2019. However, influenced by the factors as some of our customers are not that willing to pay back their debt and also the change of policy in the collection, we believe that the peak in terms of the credit card loan NPL ratio will fall back a little bit in the year 2023. So generally, the bank's asset quality will remain stable. Thank you.

And next, we will take back to the questions from on-site. Lady from the second row.

I am Yan Meizhi from UBS. I have 2 questions. The first question I'd like to learn from President Wang on the operational strategy of 2023. We expect that after the pandemic, there will be rebounds of the operation, but we do not see a very strong rebound of the economy. And I'd like to learn from the bank, whether we will see larger credit demand from the real estate market and consumption loan and what is your strategy of this year's development. And next question is about the NIM. Last year, congratulate on CMB on a good performance of the quarter-on-quarter NIM, up by 1 bp. And for the first quarter this year, we do see some repricing on loan and LPR decrease and also some other challenges, factors coming from other areas. So I would like to learn whether we will be faced with even a 2-digit bp decrease of your repricing. And that is my question.

Thank you for your question. So before answering your question, I'd like to express that for the past year, for our friends from the media, for the investors and analysts, thank you for your support and trust in CMB. Last year, it is not a very easy year for CMB. It's is an extraordinary year for CMB. The bank's senior management, under the leadership of the Board of Directors, we have overcome multiple adverse factors and maintained an excellent performance. In last year, I've communicated multiple online meeting with our analysts and investors. For instance, our Q1 and half year and Q3 announcement, and there will be -- there were 3 online road show, and there are many face-to-face 1 versus 1 communication with our investors and analysts to answer to your questions. And through our frank communication and in-depth sharing, we have won your support and trust and understanding towards CMB. And also through last year's development, as we stabilize our strategy, operation and mechanism under the leadership of the Board, we realized a stable performance. And I remember that during our communication with our investors, they paid much attention to how CMB could stabilize our system and mechanism. And we will unremittingly stay firm to our stable mechanism and stable talent team and stable operating strategy in order to achieve a stable performance. I believe that through a year's development and as proved by our annual result, we have proved ourselves and fully showcased what we have achieved and our correctness in our strategy, culture, mechanism and our strengths. So in this year, in January 13, we have released our announcement in brief, and we can also see your confidence and recognition to CMB as our stock price rise accordingly, and we have stood back to our market cap of CNY 1 trillion milestone. So as -- I would like to take this face-to-face communication capability to thank you for your long support to CMB. And just now Chairman Miao has mentioned that, about our strategy as being the value creation bank and the balance between capital heavy and capital light business. And for the last year, we have acted accordingly as required by Chairman Miao, and I believe that the value creation bank itself is a very important idea since the very beginning of CMB's establishment. And I recall that in 2004, we -- '14, we proposed to be a light operation bank, a light model bank. And back then, we are faced with a question to select which will be our majority of development, retail or corporate finance. By then, we chose retail finance. We see the trend of its development, and we believe it is a correct path to develop by then. In 2014, we proposed the idea of light operational bank, light model bank. By then, we are targeting at the business structure of CMB. And our revenue structure is mostly from our net interest income, from our NIM. So light operation bank aimed at to save more capital and through years of development, we have upgraded our customer structure, revenue structure. We have realized capital endogenous growth. At present, we are faced with new development model, and we proposed the idea of value creation bank. It is our strategic direction. And it is developed based on retail banking strategy and light model bank strategy. It is an inheritance and also subliming to help CMB stood firm among our peers, stood industry leading among our peers. We have full confidence on our strategies. And I believe that it can help us to be a world-class first-tier bank. To be a good value creation bank, it means that we need to balance the value creation of multiple dimensions, create value for shareholder, customer, partners, employees and the society. To be a value-creation bank also requires us to follow the principle of operating a commercial bank. We should follow a systematic management philosophy to increase volume, efficiency, scale and value so as to achieve this goal. It also requires us to balance efficiency, scale and quality. To achieve a dynamically balanced development, quality comes first. We need to follow a prudent risk appetite. Efficiency will be prioritized. We need to create value for our clients and scale need to be appropriate. The asset scale shall not be too large so that we can maintain a steady progress. We will have to develop a very stable structure. We should balance the development of capital light and capital heavy business. And therefore, retail, corporate investment banking, global markets, wealth management and asset management, these 4 major areas will need to cooperate among each other. And to achieve balanced development with individual emphasis and to forge a coordinated development of flywheel. And to establish a business structure and revenue, both realize good results and create value for our shareholders. By doing these, can we realize our goal to be a value creation bank? And I believe that combining what Chairman Miao has mentioned, these are my understandings. For what you have asked regarding our plan of 2023, I believe that this year is a very challenging year for the Chinese banking industry. On the one hand, our GDP growth, as mentioned in the 2 sessions, will be 5% in terms of the growth goal. Remember that last year was 3%, and this year, the 5% represent a recovery growth target. The macroeconomic growth is -- provides a good foundation for the bank's development externally. Secondly, to see from the monetary policy, it is also a good contribution, a good external environment for the bank's development. A stable monetary policy will benefit the bank's development. We believe that the M2 growth will be 10% and the loan growth will be no less than that of last year. And I believe that for the whole market, the figure will be CNY 25 trillion. The bank's growth is definitely budgeted based on the M2 growth with 2% higher. And we will act accordingly with the macro and external environment and to achieve better planning and operation compared with our peer banks. This is our plans. To see from the loan side, we have persisted strict management over RWA and to avoid excessive growth of the assets. And therefore, we basically guaranteed a 10% growth of our RWA to realize a reasonable loan growth that align with the society. And these is our pace-offsetting target of growth. So basically, these are our plans of developing loan and deposits. And last year, the figure is 0.77%, and this year, we aim to strive for a healthier growth to shift last year's negative growth in terms of the noninterest income. So in order to maintain good growth in loan and deposit and good development in retail banking business, I have confidence that we will have a healthy development in 2023. And I believe that they can also assure you that the bank will not be that -- under that much influence under the macroeconomic situation. Frankly speaking, I believe that the loan repricing will be a major challenge faced by the bank as our NIM is under further pressure. So we are actually making plans to using our increment to offset the gap brought by NIM, narrowing NIM. So last year, the major challenge brought by the bank -- brought to the bank is about risk. This year, the major challenge will be revenue. And the major risk in revenue lies in the repricing and the narrower NIM. So I believe that the key to the question is to -- is the increment of our business and our active management. As we can maintain a very stable operating condition, we can maintain a good asset quality, a very stable allowance coverage ratio, and then we can also realize a good revenue growth. This is my understanding towards the bank's development strategy in 2023.

And I will answer the second question for NIM. At the beginning of last year, in our communication with you, I remember that we have done in a judgment, namely the whole banking industry will face great pressure in terms of NIM. So we think that the real situation is in line with our judgment last year, even though we know that many banks haven't disclosed their annual report yet. But we think that the whole banking industry is in line with the trend and CMB is also with -- is in line with the trend, but still, we think that beat our expectation. Last year is we have our NIM at 2.4% and is down by 8 bps year-on-year comparison. We think that it's better than our expectation. Last year, we are facing great pressure in terms of the cost control, especially the biggest pressure is coming from the repricing of assets and also the hidden pressure coming from the new loan pricing, especially there is kind of a lag of effective assets in the market, which lead to more fierce competition. And there's a changing demand in offer in the market, which lead to pricing of the new loans and further lead to a decline of the asset yield. Last year, it's 4.54% of the asset yield is down by -- compared on the same period of last year. The second pressure is coming from deposits when the market is down, but the deposit cost is not coming down. So -- and the competition for deposits is very fierce. So cost is more rigid. And secondly, from the customers' risk appetite, it's coming down. And customers tend to have more term deposits rather on demand deposit. So this has made our cost of deposit more rigid. Last year, it was around 1.42% of deposit cost as there's a price on a year-on-year basis. So if we can look at the asset yield and look at the deposit cost, it might lead to a NIM decline for around 20 bps, but we have done a lot of efforts in terms of active asset management. So this has squeezed down only to a bps decline last year. And also last year, we think that still our NIM has been quite resilient, and this resiliency can be shown in the following aspects. The first one is last year fourth quarter, 2.37%, 1 bps up sequentially as a hard-won result. And also the contraction of NIM decline is much smaller than the decline of LPR or the decline of the -- or the contraction of the NIS. And the performance of NIM, we think that -- according to our information, we think we are still leading the market. From this point, you can see that there is still a resiliency in our NIM. And just now, you also asked about our situation in the first quarter. So -- and I know that actually, we already can see some trend of the fourth quarter. In terms of the loan disbursement, it's better than our expectation, especially corporate loan. Micro loan, also consumption loan and credit card loan is better than the same period of last year. And we think that it's very closely related to the recovery of our economy, and these will help to sustain our income growth in the first quarter. And also last year, in fourth quarter, we have done some prearrangement. We have made asset -- loan assets and also investment assets to prepare for this year's first quarter. And some of the results will be shown in first quarter for our prepayment in the fourth quarter last year. But still, there is pressure in first quarter. One is coming from the mortgages and doesn't see much recovery sign on that. One pressure is from that. Second one is coming from deposit costs. There is no obvious decline in deposit cost, it's just more rigid. So I cannot share with you the exact number of NIM, but we think that is -- it might be better than your expectation. So in first quarter, second quarter, third quarter and fourth quarter, we're still facing great pressure in terms of NIM and is declining continuously. This might be the trend. I know you might want -- don't want to face this reality, but it might be -- the NIM still -- the NIM repricing -- the NIM decline factor -- or the trend might continue to come down. And also for loan pricing, it has followed the trend of coming down. So the trend is still there. And the market rate is also coming down. So overall speaking, for the whole year, we will continue to -- our management for NIM and continue to optimize the asset allocation. And we need to prepare ourselves for the NIM decline for the whole year, but to continue, we are confident that we can outperform our peers.

Gentleman there, please, the next question.

I'm Gary Lam from HSBC. My question is regarding the CMB Wealth Management. I noticed that in November and December, the AUM of CMB Wealth Management has come down a little bit. So how is the performance from the beginning of last -- from this year? What kind of measure does CMB to turn those term deposits into those financial products and to become the wealth management?

Thank you for your question. As you have said that last year, for the wealth management -- banking, wealth management subsidiary due to the interest rate volatility in the market, many products has the NAV fall below 1. And CMB Wealth Management and also our peers are facing the same situation. So last year -- at the end of last year -- at the beginning of last year, it is CNY 2.67 trillion. For the total AUM of CMB Wealth Management, it has declined a little bit. So even though there is a fall on that, but still the total AUM in terms of scale, we are still #1 among our peers. And because there's volatility in the NAV, many customers choose to redeem the products, and we have already reflect on this situation and made some conclusion. We think that the wealth management subsidiary of banks are kind of a new entity. It has just established being for 3 years. So our strategy is to stabilize the -- firstly, to stabilize the total AUM of CMB Wealth Management. We're not fully -- we were not only pursuing to enlarge the asset under management. And in the past, the major products are based on fixed income products. So when there's interest rate volatility or this volatility in the broad market, the recession of the products is quite big. Volatility is quite big. And many of our customers, they don't fully understand the NAV volatility of the wealth management products, WMPs. They think that it should be more stable than mutual funds. So customers' understanding is not very mature and doesn't fully understand the NAV of those WMPs. So firstly, we think that very important is to stabilize the total scale, and secondly, to optimize our product structure, namely to increase the proportion of equity products and also very importantly, to improve our capability for asset allocation for system and for product innovation and upgrading. And this will help to sustain our development in the long run. So last year, CMB Wealth Management itself, the profit they create is around CNY 3.6 billion. So it's in a sound momentum. And this year, we think that the scale is quite stable. And with those, we have already passed the worst time of the large scale of redemption and now the scale is more stable. And we have -- the budget is also -- for them is also reliable and more focusing on building their internal capabilities to maintain a stable growth -- to maintain a stable AUM. Secondly, just now the second question was said, some customers' term deposit, how can we turn them into wealth management products. Obviously, last year, the banking industry in China, the deposit -- customers' deposit -- retail customer deposit has grown very much and it's CNY 7.9 trillion, more than the growth of last year. This is mainly because there's less demand for consumption and also because of the real estate market and also volatility in the capital market. So many customers, they tend to deposit bank with a -- deposit with a bank rather invest in financial products. That is why last year, you also see we have a very high growth in terms of our customers' deposit last year. So for CMB, it's more settlement deposit and low-cost deposit. So for us, whether it's a deposit or other financial products, more important is which form is better for our customer, namely which form of the assets can we create value for our customer. We think that it's the top priority when we think about AUM. So asset allocation is a more important thing for us to create return for customers to avoid volatility coming from the one certain category of product to have more balanced allocation for our customer. Among different products like deposits, like wealth management -- like few mutual funds, like WMPs. That is why last year, we have launched a program asset allocation program called TREE system to help us to guarantee our customers investment safety and also to increase their return.

Our next question is coming from online.

I'm [ Malcolm Tong ] from CICT. Just now you have mentioned around the institutional mechanism and corporate governance about CMB. And I have another question for Chairman Miao. So if you have a view from the Board, so how can you create a mechanism or institution that will ensure that CMB can implement those strategy? From the Board, how can we ensure all this strategy can be implemented?

I think the fundamental thing is to implement a modern corporate governance structure. For the shareholding structure of CMB decides that CMB's corporate governance is different from those companies that is wholly owned by one big institution. The CMB group is a larger shareholder of CMB, but it doesn't have the absolute control or real control of CMB. We -- our shareholding CMB is less than 30%. So CMB doesn't have the -- have one -- doesn't have a real beneficiary of CMB. So it's a very diversified and scattered shareholding structure. And it's also the same structure of the Board, a very diversified scattered Board structure. This already ensure that the modern corporate governance can be implemented. The implementation of those corporate -- modern corporate governance decide -- already decides that our strategy can be implemented as long as our corporate governance remain unchanged, as long as the shareholding structure remain unchanged, which means our strategy and culture will remain unchanged. Thank you.

Now we'll have questions from on-site participants.

I am Xu Ran from Morgan Stanley. I'd like to learn from the senior management. How about the recovery of consumption loan? For credit card consumption loan, there will be recovery in their demand and I would like to know how much did they get back on their feet compared with previous years. And what is your expectation in this year's recovery? We also see that the corporate loan credit demand is stronger, and I'd like to learn from the senior management, what is your strategy in 2022 in your asset allocation?

Thank you for your question. I've mentioned as I answered a question regarding NIM that in asset allocation, along with the recovery in this year, to see from the end of 2022 and the beginning of 2023, consumption recovery is very obvious, especially on the credit card loan demand. To see from the January's performance, in terms of the transaction volume and trading, we have recorded a year-on-year increase, especially in catering industry and tourism industry. Consumption, as the pandemic control is -- restriction is removed, we see a blossoming in the catering industry, and we have to admit that it is a good sign entering into March. Take credit card loan as an example. We see a slower growth compared with that of January and February. So we believe that the recovery is rather a mild recovery to see from the credit card loan. However, it is just certain sectors representative in terms of credit card loan. I believe that consumption loan will be one of our major contribution of the retail banking business recovery. There will be 2 major factors contributing to our recovery: consumption and credit card consumption. Loan recovery has gapped back on its feet by a growth rate of 20%. Online consumption also demonstrate good momentum of growth. So credit card and consumption loan can both reflect a consumption recovery, both online and offline. Comparatively speaking, such mild recovery is more showcased on off-line, but I do see a strong momentum of recovery in terms of online consumption. And I believe that we do have a very strong strength in terms of our cross-border credit card transaction business. We rank among the first in our banking peers for the overseas credit card transaction volume. So as we see more and more cross-border tourism and consumption, these will all contribute to the bank's credit card loan growth and revenue.

The lady from the fourth row, please.

I am Shen Juan from Huatai Security. I'd like to learn from President Wang that we aim to expand capital-light business this year and our extensive wealth management AUM has increased by 13% year-on-year. But there will be a little -- there are a little slowdown in quarter-on-quarter growth. So what measures will the bank take to maintain the AUM growth rate? And we do see across the whole banking industry that I'd like to learn from the senior management, what is your outlook over the fee and commission income's growth from the wealth -- extensive wealth management business?

Thank you for your question. Just now the Chairman has mentioned to construct the 3 capabilities, and one of them is the wealth management capability. And I believe that CMB has established our own distinctive features and strengths in wealth management, business development. And last year, influenced by the external market, the capital market, our agency sales of mutual funds has decreased by over 40% in terms of our revenue and casting negative influence of our noninterest net income. And this year -- and by then, we have strived to leverage on our growth on the agency sale of insurance policies. And for that has become a new growth point amid the difficulties period. CNY 3.2 trillion AUM has contributed us to a very large scale of agency sales products. And influenced by the fluctuation in the market value, we have realized and secured our growth through different sectors of business with some of them increased and with some of them decreased. And therefore, we aim to deploy a more diversified segment of business to sell through the cycle to satisfy different customers' need and to guarantee a stable revenue from excessive wealth management business. And therefore, we are developing in our agency sales of both mutual fund products, trust scheme, insurance policies and et cetera, to make our product offering more obvious and to stabilize our business. And secondly, among different types of products, we need to choose good partners to cooperate. We aim to hold an open attitude to choose our partners to put them -- to put their products on shelf and to establish close partnership and communication relationship with top-tier asset managers. And these asset managers also value cooperation with China Merchants Bank. And we have made active measures to select quality FI cooperators and utilize these resources to provide good services and products to our clients and maintain our strength in our service quality. And thirdly, our customer base. Only by growing our AUM customer base can we provide more choices for our clients and strengthen our capability to provide value services to our clients. At present, CMB's Wealth Management customers was only 4 million or so, which is a very small proportion over our 184 million retail clients. And those holding wealth management products with us, what they actually select is very stable type of monetary products, and we do see potential in them to -- for further choices on other types of wealth management products. And we do see very healthy development of wealth management product sales online. And these are all standard products such as Zhao Zhao Bao, et cetera. We aim to provide more customized service for the public, for our people. Our relationship manager offline aims to provide companion services and experience to our clients. And these are targeted more at those NAV clients, clients with net asset value, high net asset value, and they can bring more revenue to the bank and give full play of our integrated strengths, combining both off-line and online service to reach more clients to enlarge the customer base. And one more point is that for these 2 years, we have noticed that private banking, family office, family trust, have also accelerated in their development. We have also enhanced our development and growth rate and showing good momentum. So we will give a balanced development of all these mentioned aspects and to realize growth in quantity and enhanced development efficiency. CNY 12.15 trillion is the base of our development, with a little bit of slowdown in the growth rate under the external environment of the last year. But I believe that along with the recovery of this year, we will still see a growth in our customer base of the Wealth Management business. We have full confidence of our service quality, our product quality, our customer-centric philosophy and to provide services aligned with customers' need to realize coordinated development between the bank and the customer. We will not purely increase the AUM scale itself and to avoid those customer experience that is not satisfying enough. So therefore, we will, on the one hand, place emphasis on the scale of AUM and at the same time, to enhance our capability and quality of our service.

I'd like to add one more point. Wealth management scale is fluctuated along with the market condition. Customers' risk preference is also fluctuated with the market condition. When the market is good, clients will have stronger demand for high-risk products and vice versa. So the risk appetite is actually fluctuated along with the market condition. And secondly, for us, CMB, Wealth Management's strengths lay mostly on ourselves. Ourselves is not that highly relevant with the market condition. However, what I think -- what I consider as our shortcoming is our asset management capability. So therefore, I believe this part will be what we emphasize in the next phase. Bank's Wealth Management business, to some extent, is actually under the guidance of the culture of being commercial bank. Actually, the bank's -- commercial bank operating philosophy emphasize mostly on the calculation under the amortized cost. So in the future, I believe that this is what we will solve in the future, that we will lay most emphasis on the product design and innovation. We are strong in sales, but we are weak in asset management. And I think for the mutual fund products, as they are calculated at the fair value, that's why they have good performances. But for the bank's wealth management, we -- even though have secured our leading position in the scale of AUM, we cannot say that we have -- we have done a good job in asset management capability. This is a process that will take us, and we need to cultivate such capability to grow and to satisfy the market and satisfy the customer. We will transfer our culture that -- under the calculation of amortized cost to the calculation under the fair value. It is a reshaping of the commercial bank's philosophy.

Thank you, Chairman. In order to guarantee the participating rights of our individual investors, we have also collected questions from online. And since this question has been overlapping with what we have just discussed, we will now pick another frequently asked question to answer. Dear senior management, this is a question from -- an individual question, individual investors. The question is, as the releasing of the new capital rules for the commercial bank, and if during the parallel period, the capital minimum requirement was removed, the CET capital adequacy -- CET1 capital adequacy ratio will increase by 2% for CMB. It's kind of like a waste for such abundant capital. And I'd like to learn whether CMB will increase to expand its asset or will it increase the dividend payout ratio.

I'll take the question first. And I'd like to introduce the new regulation. The new regulation is actually a consultation draft. But the content actually means that since the January 1, 2024, it will actually apply and what kind of influence will it have to commercial bank? Well, from our perspective, we believe that it will not bring huge impact on the commercial bank nor will it bring a lot of benefit to the bank. I think from the regulatory's perspective, the new regulation aims to remain a stable and healthy balance of the commercial bank. The new regulation is actually supporting -- is understanding an analysis of the risk sensitivity. So in general, it is contributing to preventing systematic risks. If a bank can embed the regulator's requirement within its own development, it is also good for its own structural transformation and healthy growth. For CMB, it is both advantageous and relatively disadvantaged adverse factors for CMB. What is advantages is that as the minimum requirement is removed, we all know that CMB adopt both the capital advanced -- the advanced measurement approach and also another approach. So our capital minimum requirement will be decreased from 80% to 72%, which is beneficiary to CMB. And secondly, we will act according to the history record to calculate the minimum requirement for CMB. So that's why CMB can benefit from it. And thirdly is from the retail side. For residential mortgage loan with high pledge ratio, we can also lower the RWA ratio to 45%. And last but not least, credit card loan. For normal repayment credit card loans, we can also lower the risk weight from 70% to 45%. It is also very beneficiary to SME loan. Government financing loans decreased from 20% risk weight to 10% risk weight. According to our internal calculation, we need to pay special attention to the adverse influences. Those retail revolving credit before that, we do not occupy credit risk. And now that will be put under risk-weighted approach, including some interbank clients. And now under the new regulation, the risk weights will be increased to a higher level. And also for those products that cannot be penetrated risks, you need to increase the risk weight applied on these type of assets. So generally speaking, I believe that to consider both the advantages and adverse effect, it is a very neutral influence casted on CMB. Well, according to my understanding, if we can embed the new regulation into our internal management, these short-term influences can all be digested by the bank. And if digested appropriately, this will be also good factors contributing to a healthy development of the bank. I believe that your question is basically -- it's basically about the 2 points. I believe that this will not influence CMB's long-term development. Will CMB increase our dividend payout? Will CMB increase our asset expansion? One thing for sure is that we will increase our capability of capital endogenous growth. I do think that the capital adequacy ratio is not the higher, the better. And therefore, I believe that the CAR ratio shall remain appropriate at a reasonable level, and I think that is a thing remain to be discussed. It is also an uncertainty for many banks in the Chinese banking industry. Even though we continue to realize capital endogenous growth, we are still having gap with the top-tier banks. Under the advanced weighted approach, we are not among the top in our banks -- in our peer banks. Sooner or later, we aim to become the G-SIB bank, which will pose a higher requirement of our capital adequacy ratio. These are all questions that we are going to face in the future. And what's for [ Sun ], we will remain capital endogenous growth. And what is -- what cannot be for sure is that we are not very clear about what kind of future requirement we are going to face. So this is basically our understanding. And to answer the second question regarding the cash dividend payout, according to our calculation, I believe that this year's cash dividend can guarantee a return of 5%. I think we are among the top group of banks that can return to shareholder with very high cash dividend. These are all achievements by the bank. And I would like to add a little more point on the cash dividend payout issue. As a listed bank, we need to guarantee a certain level of dividend payout to the shareholder. First of all, we believe that it is an appropriate advancement behavior for the shareholder. And secondly, cash dividend payout is quite certain for -- a certain return for the shareholder. It is also investors -- a starting point for their investors into the listed banks. On the other hand, the investors aim to realize more earnings from the capital, for the bank they invest. So for listed banks, they should be generous enough to pay back to their investors. And CMB has maintained a good momentum in paying back the cash dividend to their investors with no less than 30%. And we see strong capital endogenous growth in CMB, but that does not mean that we -- that does not mean that to simply increase the dividend payout ratio is advantageous to our investors. There are uncertainties in the future development. So therefore, we need to enhance our essence and our management that sell through the cycle and to accumulate more capital reserve for us to get prepared for the future challenges during the downward of the banking industry -- downward development of the banking industry. If the dividend payout is high, there are mainly 2 reasons behind. For the one thing, the company is rich. And for the secondly, leaving the money in the bank can guarantee a high ROAE. So therefore, capital adequacy ratio continue to increase. What we need to consider, whether or not to increase the dividend payout ratio is under the background when the banking industry is entering into an upward development trend. And only by then, can we -- but can we increase dividend payout ratio? And I believe that at current stage, we still need to accumulate us enough reserves to prepare for the future challenges.

Gentleman from the third row.

I'm from securities, China Securities. My question is regarding the corporate banking. Last year, the corporate banking customer has reached new high, but last year was quite a difficult environment. So management, could you please share with us how you can acquire a customer for corporate banking business? For the new corporate customers, is there any new characteristics for new corporate customer acquisition? What is your point in terms of corporate banking?

Thank you for your question. Last year, our corporate banking customer reached around 2.56 million. And during this quite difficult situation, has also maintained rapid growth. I think that this is mainly because we focus on corporate customer expansion -- corporate banking customer growth, and this has contributed to our liability. Corporate liability is mainly settlement deposit and with a larger amount, proportion of demand deposit. And it's a very major source for our deposit. And our corporate asset yield, we might have a lower yield on that. But because we have very low liability deposit around -- our cost -- deposit cost is around 1.52%. And even though our asset yield is not that high, but we still can maintain a very good NIM. We think that the advantage comes from customer base. And we offer diversified products to our customer, including settlement. This is mainly because we can leverage our own settlement products to help attract this low-cost deposit. And I think that every year, we have new strategies. This year, we will maintain a stable growth of corporate customer. And from customer regions, we will focus more on priority regions. And according to the national strategy like the Yangtze River Delta, it's a very active region and there are many manufacturing enterprises. And this has provided a very large market for our financial institutions. And like the Bay Area and experienced highest GDP growth among the country and also very good momentum like Haixi and also in Fujian and also Chengdu and Chongqing area, these are the major areas for us to develop our corporate banking business. So we are -- we think that these are the major area we want to grow our business on. And in terms of industries, we focus on green finance, like green energy, green construction, green projects focused on carbon emission reduction. And also for manufacturing, we're focused on the 9 categories like the medical, like the electronic products. We namely have very important industries. Actually, there are many subcategories among manufacturing, around 47 categories and over around 100 subcategories. We need to make sure that we do business with our industries that we are familiar with and to maintain asset quality and to develop our customer in this area. And thirdly is sci-tech business. Last year, we have 6 branches and 1 sub-branch to set up the -- sub-branch for the -- for -- to set up for sci-tech pilot branches because now there is a very good growth momentum for sci-tech companies. And also, there are around 9,000 specialized small enterprises in the whole country. So these are companies that are chosen by the provincial governments, which have their own characteristics and self-specialized in certain areas. So that is why we have designated 6 branches to provide professionalized service to them. And fourthly, for corporate banking business, we want to do inclusive finance to service those small, micro enterprises. In the past, our inclusive finance is mainly concentrated on retail. And now that is why our retail inclusive finance is around 620 -- around CNY 62 million, but our corporate micro loans is not that strong. So last year, we set up a separate inclusive finance department to do corporate micro loans for 3 years. We have specialized mechanism, risk management and also talents to hope that it will be a new driving force or driving point for our corporate banking business. So in terms of industries, in terms of the customers, we want to form our new competitive edge in terms of corporate banking. And also for technology in the past, we emphasize on digitalization. For digitalization service, we have already applied that to retail banking like we have APPs. We have online banking for retail customer. And for corporate banking, it's a little bit lagging behind the retail banking technology. Last year, we have already completed our own cloud transformation. And from now on, we are -- we want to be faster in terms of the digitalization of corporate banking, asset management, so as to improve the digitalizing process of corporate banking and to be more efficient and provide more convenient services to our customer and to empower our corporate enterprises.

I'm from [ Eco ]. So what is CMB's holding for Credit Suisse AT1?

Currently for Credit Suisse, we don't have line for them. But yes, we have some account services from Credit Suisse. Actually, it's quite continuous for Credit Suisse and we noticed the situation. And for other European and American banks, we are more concentrated on systemically important banks. We don't have any exposure to Credit Suisse AT1.

Last question from the media.

My question is about the asset quality in fourth quarter, that there's some volatility for asset quality. So what is the trend in first quarter of this year for asset quality? And also for property risk, what will be the trend this year? When will you see the turning point this year?

Thank you for your question. As for the first quarter of this year, I'm not able to share with you, but I can share with you some trend. Overly speaking, I know the major concern is about the special mention loan ratio and also overdue loan ratio compared to last year. We have seen some decline on that. And there's sort of uncertainties for the external environment. So last year, whether this will become the trend for the whole year, we still need to monitor. This is for your first question. Secondly, for corporate loan, the turning point for property sector. Last year for our -- the risk on book we think for property sector in 2022 is [ 3 uprise and one fall ]. Three uprise is the NPL formation. Last year was around CNY 13.8 billion for property loans. This has rise compared to what we have in 2021. And also, the NPL ratio for property has rise to 3.97% and is higher than the same period of last year. And also the provision for the property loans, it's already twofold of what we have for average corporate loans. So these are the 3 uprise. One decline is namely the proportion of our property loan to whole loan structure has declined. So over speaking, in 2022, the risk for property loans for CMB has been fully exposed. And for a business that we do not take on book, namely we do not bear risk, I think you may note -- you are more interested in the balance of the property-related assets for WMPs is only around 15 million assets and it's more concentrated in the standardized assets and has already reflected in our -- reflected in the NAV of the products. And for nonstandardized assets, they are categories as normal. And for agency sales of the products, for the private banking, is around CNY 28.5 billion; and for corporate, is only CNY 3.7 billion. So the risk has already been exposed last year. And as for the turning point, I think in 2023, for the real estate loans for the NPL formation, there will be big 4 compared to what we have in 2022. But sequentially, for every quarter, it might not be much balanced because this year, we need to deal with these products with the guarantee-type overseas lending products. So from quarter-to-quarter, there might be bigger changes. And for the disposal of the property loans, so disposal is more difficult this year. So it might lag be -- a little bit lagging in terms of the timing. So you might see some uprise of the NPL of the property loans this year. But still, you can see overall for the whole year, the NPL formation will see a big decline compared to what we have in 2022. So we think that all the risk of properties will be fully exposed in 2023.

Everyone, due to time constraint, now is the end of our annual results announcement. If you want to -- want more information, please go online and/or contact our IR team. Thank you very much for joining our conference today, and goodbye. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]