CITIC Limited (267) Earnings Call Transcript & Summary

Distinguished investors and analysts, good afternoon. Welcome to CITIC Limited 2022 Half Year Results Release and Investor Briefing. I'm Zheng Xin with the Board Office of CITIC Limited. Due to the pandemic, today's briefing will be held by means of live webcast and telephone conference. We have Q&A session for today's briefing. [Operator Instructions] Please note that we are going to conduct the meeting in Mandarin, and we provide English interpretation and the contents and your questions will be recorded. First of all, please allow me to introduce the management attending today's briefing. They are Mr. Zhu Hexin, Chairman of CITIC Limited; Mr. Xi Guohua, Vice Chairman and General Manager; Mr. Zhenming Chang, Executive Director and Vice General Manager; Mr. Xu Zuo, Vice General Manager; Mr. Fang Heying, Vice General Manager; Mr. Cao Guoqiang, CFO. We also have Mr. Zeng Chen, Chairman of CITIC Pacific joining the meeting by telephone. Now announce the start of the 2022 half year results briefing and investor briefing. First of all, let's welcome Chairman, Zhu Hexin to address us.

Dear shareholders, investors, analysts and the friends, good afternoon. Welcome to CITIC Limited 2022 Half Year Results Release and Investor Briefing. As the current COVID-19 pandemic remains severe, we will continue to share with our shareholders, investors and analysts, our results in the first half of the year in terms of the reform, development, management and to communicate with you on the matters of your interest. In the first half of this year, in the face of a complex and challenging external environment, CITIC Limited has been able to maintain its momentum by working with one mind, coping with the situation and making progress in a stable manner and coordinating business development with pandemic prevention control. And in the first half of the year, so we had a revenue of HKD 391 billion -- HKD 392 billion and a profit of HKD 50.1 billion, a rise of 13%. So as of this morning's Board meeting, all the directors have recognized the company's achievements achieved in the first half of the year. And the Board is confident in the company's achievements of the annual results and high-quality development. In the past 6 months, the company's comprehensive financial service segment adhered to the philosophy of green finance, actively bolstered the real economy and continue to play the role as the cornerstone, with net profit increasing by 5.1% year-on-year, which is the largest contributor of profit. CITIC Financial Holdings was one of the first in the country that has been successfully awarded a license of financial holding company, and was established and started the business smoothly, creating a momentum for the comprehensive financial service segment, which will surely become the #1 engine, driving CITIC Limited high-quality development, CITIC Bank's net profit increased by 12% year-on-year. And the balance and ratio of nonperforming loans both decreased while the size of deposits and the loans exceeded RMB 5 trillion. CITIC Securities continue to maintain industry-leading position in its operating performance. CITIC-Prudential Life operated soundly, with a comprehensive solvency adequacy ratio higher than regulatory requirements. In the last 6 months, the company's nonfinancial business segment has withstood multiple pressures such as recurring pandemic, shrinking demand and poor industrial chain and it made every effort to ensure orderly production operation and continue to consolidate the good development momentum. Advanced intelligence manufacturing continue to increase investment in R&D and scientific and technological innovation and its performance rose against the market's downward trend. The Advanced Materials overcame the impact of commodity price fluctuations, effectively guarantee the stability of industrial chain and achieved an increase in the operating income. The new consumption sector as for the trend of organic integration online/offline consumption and the performance of digital companies maintained a year-over-year growth. A new type of organization segment actually promoted risk mitigation and the integration of businesses of key projects. And the performance continues to improve. Over the last 6 months, we continue to reform our efforts such as sliming down and building up some business, reducing hierarchies, increasing income and reducing expenditure, cutting costs, increasing efficiency, and decentralized fund management to reduce leverage by integrating finance and non-finance business. The company's risk governance structure continues to be improved. The risk management system has been improved, resulting in a more secure system to protect the involvement of the company, but the synergy has been develop and quality and efficiency has also been reinforced. And our ability in technology development has been grown significantly. ESG philosophies have been deeply integrated into the business of the company and the concept of green, low carbon sustainable development has been reinforced. Since the beginning of the year, CITIC Limited has performed well, closing at HKD 8.09 per share on August 29, up 10.95% from the beginning of the year and significantly outperforming the 14.42% decline in the Hong Kong Hang Seng Index over the same period since August. CITIC Limited has steadily improved its price-book ratio ranking from the middle and the lower level to the second highest among comparable companies, further demonstrating the company's investment value to further reward investors for their trust and support. The company's Board of Directors has decided to further increase the dividend ratio by recommending an interim dividend of HKD 0.20 per share, an increase of HKD 0.05 over the same period last year. Recently, CITIC formulated action plan for building a world-class enterprise and it pressed the fast-forward button for comprehensively deepening reform, thus starting the journey of building a world-class enterprise. We closely follow the 3 key issues of who to compare, what to compare and how to compare so as to base ourselves on the new situation and housing reforming development, adhere to the enterprise's policies, and measures that have severely pushed the company to become stronger, better and bigger. And constantly improve its competitiveness, innovation leading position and influence. The journey ahead is long and full of challenges. We should work even harder to accomplish what we aim for. This is -- this year marks the second year of CITIC Limited 14th Five-Year Plan. CITIC Limited will continue to enhance its competitive strength through integration, build integrated ecology through synergy and the strength in its development momentum through expansion. And we also -- we respond to the national strategy and the requirements renews and Fang Heying complete the annual targets and the target severely move forward. With the goal of becoming a world-class enterprise, we have arranged the 2 sessions. Next -- first of all, I want to give the floor to Mr. Cao Guoqiang of CITIC Limited to introduce the company's 2022 half year results. Thereafter, the management and I will share our views on the matters of your interest.

Thank you, Chairman. Dear investors and analysts, good afternoon. Next, I would like to present you the review of 2022 half year results of CITIC Limited. In the first half of the year, in the face of complex and challenging external environment and the pandemic, we have decided the targets. And our operations and production have been pushed forward smoothly, and our operation has been maintained very stable, and we have realized a revenue of HKD 392.4 billion, a profit attributable to ordinary shareholders of HKD 50.1 billion, rise 11% and 13% respectively year-on-year. And the earnings per share is HKD 1.72 and dividend per share of HKD 0.20, rise by 13% and 33%. At the end of June, the total assets exceeded HKD 12 trillion and rise by 13% compared to the beginning of the year. And the total ordinary shareholders' funds, HKD 752 billion, rise by 0.1%. And in terms of the segment information, 94% of total assets is the comprehensive financial services. And for revenue, the contribution is mainly from financial services as well as Advanced Materials business. So for revenue, so the comprehensive financial services contributed 40%. And for profit, it contributed 69% and Advanced Materials contributed 39% to revenue and 21% to profits. Next -- on the next slide, what you can see is the -- is the structures of shareholding of the 5 business segments of CITIC Limited for reference. The next slide, this is the summary of the earnings of the core subsidiaries of CITIC Limited. And you can see the changes of the earnings, and I'm going to talk into more details later. So let's look at the respective segments. In terms of comprehensive financial services realized revenue of HKD 159 billion with a net profit of HKD 51.9 billion. So a rise of 20% and 5.1% year-on-year, respectively. Its increase clearly supported the public and private enterprises in key areas such as green credits and strategic emerging industries. On March 17, CITIC Financial holding was the first one to be awarded a license and the company was officially started and established. And completed consolidation of the financial resources of CITIC Securities on April 13, laying a solid foundation for a world-class securities company. Let's look at the financial subsidiaries. First of all, CITIC Bank, it's recorded revenue of RMB 180 billion and the profit of RMB 32.5 billion, grew by 2.4% and the 12% year-on-year, respectively. And we have a higher bond yield that led to a year-on-year increase of 8.9% in noninterest income and contribution increased by 1.9 percentage point to 31.8%, interest earning assets increased by 4.6%, but the net interest margin narrowed by 10 basis points due to the market rate resulting in a decrease of 0.3% in net interest income as the quality continues to improve with decrease in both the NPL ratio and NPL balance. NPL balance decreased by RMB 1.9 billion to RMB 65.5 billion while the NPL ratio decreased by 0.08 percentage point to 1.3%. 1%, the provision coverage ratio increased by 17.08 percentage points to 197.15%, a 7-year high. And for CITIC Securities affected by the downs in the market, revenue was CNY 41.9 billion, and the profit was CNY 11.2 billion, a decrease of 4.4% and 8.2% year-on-year, respectively. It has maintained industry leadership and ranked first as the lead underwriter of equity and bonds value. Market share of investment banking business increased by 1.4 percentage points to 15.7% for CITIC Trust. It's recorded revenue of RMB 3.3 billion and the profit of RMB 1.5 billion, a decrease of 18% and 24% year-on-year, respectively, maintained top 3 peer ranking. To continue to enhance resistance of risk made a impairment, CITIC Trust made a RMB 1 billion impairment and increased provisions by 8% year-to-date. The provision coverage ratio reached 129%. It's proactively fostering new growth drivers, contribution of new businesses such as distressed asset management, family trust and enterprise annuity to increase significantly to 66%. For CITIC Prudential Life, we continue to enhance bancassurance as a major distribution channel while actively expanding online platforms and other emerging distribution channels. Premium income was RMB 15.8 billion, a year-on-year increase of 13%. However, affected by capital markets fluctuations, profit was RMB 460 million, a decrease of 60%. The comprehensive solvency adequacy ratio was maintained at a healthy 242%, remained the only domestic insurance company that has been rated Class A for 25 consecutive quarters beginning in 2016 in the quarterly Integrated Risk Ranking. So let's look at Advanced Intelligent Manufacturing segment, it's recorded revenue of HKD 29.1 billion compare year-on-year, it is 26% and a 15% increase. And for Advanced Intelligent & Manufacturing has increased investment in R&D and intensified market development efforts, continued growth momentum in operational performance. And for CITIC Dicastal, it has increased by 8.1%. And for the -- the company has recorded revenue of CITIC Dicastal of RMB 19.9 billion and profit of RMB 540 million, increase of 28% and 8.1% year-on-year, respectively. And deepened integration in the construction overseas basis and it's ranked the 50th in the Top 100 Global Auto Parts 2022, up 8 places from last year. And for CITIC Heavy Industries recorded revenue of RMB 4.3 billion and profit of RMB 180 million, growth 13% and 5.7%, respectively, fostered high-end industries and achieved a solid growth in major equipment and special equipment. And new orders increased by 31% year-on-year to a record high revenue of RMB 6.8 billion, successfully awarded as the 2021 Leader of China's heavy machinery industry. And for the Advanced Materials in overall, the revenue for the first half of the year, it is HKD 152 billion, increased by 6.8% year-on-year. And while profit was HKD 9.29 billion, a decrease of 31% year-on-year, and it focused on maintaining the stability of the supply chain, production operation remains stable with growth in revenue and profits declined mainly as a result of lower commodity prices as compared with the first half of the year in 2021. And for the CITIC Pacific Special Steel, revenue increased 5.6% year-on-year to RMB 51.8 billion, and profit declined 9.8% year-on-year to RMB 3.8 billion. Despite weak market demand, sales revenue of Special Steel products increased 2% to a record high of 7.68 million tonnes through the optimization of the product mix and continue to enhance procurement production technology and management to offset the impact of rising raw material prices remained as industry leader in profitability. And for Sino Iron, overcoming multiple challenges including the pandemic, bad weather, inflation and labor shortages, it is focused on reducing costs and improving efficiency, was able to maintain stable production operation and exported 10.1 million wet metric tonnes of iron ore concentrate, remain the world's largest seaborne supplier of magnetite concentrate to China. Profit declined 63% due to decrease in iron ore prices compared with last year. And for Advanced Materials, CITIC Metal Group, the revenue grew 12% year-to-year to HKD 76 billion, historical high for the period and profit decreased by 2%. And metal trading, revenue from the trading of non-ferrous metal and steel increased significantly. However, profit of the trading business decreased by 30% year-on-year due to higher iron ore trading profits recorded in 2021, first half of the year. Mining investments, the second phase of the KK Copper Mine Project in the Democratic Republic of Congo went into production ahead of schedule. And for the -- production copper in the second quarter reached a historical record of 87,000 tonnes. And for CITIC Resources benefiting from rising raw material prices. And CITIC Resources recorded revenue of HKD 3.2 billion and profit of HKD 893 million, increase of 83% and 109%. And for New Consumption, it has delivered revenue of HKD 30.6 billion and profit of HKD 466 million, a decrease of 7% or 41%. And for the CITIC Telecom International recorded revenue of HKD 4.98 billion and profit of HKD 572 million, for the increase of 3.8% and 7.1%. So it has also continued to enhance technological innovation and broadened scope of service. And for CITIC Press, recorded revenue of RMB 848 million and profit of RMB 90 million, a decrease of 11% and 38% year-on-year, respectively against the backdrop of the overall decline in the book market, CITIC Press continued to expand new media channels, achieving a market share of 3.08% by sales revenue, an increase of 0.25 bp over the '21 first half of the year and ranking the first in the published market. For Dah Chong Hong, recorded revenue of HKD 24.6 billion and profit of HKD 133 million, the rise of 7.8% and 53% year-on-year, respectively. Underlying profit was stable, excluding one-off items. Motor business was solid, while the food and the FMCG businesses focused on driving synergy. Healthcare distribution grew in profit and market share across Southeast Asia. And for the new-type Urbanisation, it has recorded -- its revenue decreased by 2.4% to HKD 21.7 billion and profit grew 14% to HKD 3.59 billion and it has successfully completed construction for the Winter Olympics. Revenue declined due to the weak market and epidemic and profit increased year-on-year due to a provision recorded in the first half of the year in 2021, and actively promoted risk mitigation for key projects and achieved substantial progress. And for the property development operation and management, recorded revenue increased by 7.7% year-on-year to HKD 3.7 billion while profit was HKD 3.3 billion, a decrease of 6% year-on-year. Despite the industry downturn and pandemic, key projects, including Ningbo Fenghua and Shanghai Nove Mansion were delivered smoothly. Profits booked from the stake in COLI declined year-on-year. For Construction Engineering, it has -- due to the delays on some overseas projects, the revenue decreased by 18% year-on-year to HKD 11.9 billion, and operation profit was HKD 440 million, a decrease of 57% year-on-year, excluding the provisions. New contracts signed amounted to RMB 15 billion, an increase of 5.5% year-on-year laying solid foundation for future development. And for urban operations, its revenue grew 46% to HKD 6.3 billion, mainly benefiting from the increase in the parallel imports of automobiles, and profit increased by 53% to HKD 220 million, mainly due to declines in the energy saving and environmental protection business. That's all for my briefing. Thank you.

Thank you very much for the briefing. Now we are going to move on to the Q&A session. [Operator Instructions]. Now let's welcome the first question.

I'm from Morgan Stanley. I'm Fang Dan, the researcher. I have 2 questions to ask management. First is about macro economy. In the first half of the year, we still see COVID-19 cases happened in different cities. Under such backdrop, what impact of the active economic policies in China have on CITIC? And second question is about Huarong. So I want to know that it's been half year since CITIC increased its investment? So how does CITIC Group view the performance of Huarong in the past half year?

Thank you for your question. About macro economy, as we know that -- this year, we see rising complexity severity and uncertainty of China's economic environment, but Central Committee and City Council have implemented timely and decisive measures and launched a package of measures to stabilize the economy. And we see that the effect of the policy appeared quickly. In the second quarter, we have seen the positive growth and it is at such a trend of stabilization and recovery. So this kind of trend for CITIC, it has reflected in its 3 aspects. First, the financial sector. It is related with our group's situation and our characteristics. The People's Bank of China maintains a reasonably sufficient liquidity and guide -- financial institutes increased loans to the real economy. CITIC Comprehensive Financial Services segment placed a more prominent position helping to stabilize growth and further increase the credit issuance and capital market support. Just now our -- someone has mentioned about our review of our first half results. For the first half of the year, we have seen a positive situation of the bank. And we have a consistent view about the market. And the second is the manufacturing sector. The relevant departments have proposed a number of measures to promote development and manufacturing industry. And for CITIC, it's positive because we have Dicastal, we have CITIC Heavy Industries and some products are actually supporting products for this. So in manufacturing, we -- it has a good influence and a positive influence to us. And for the real estate sector, the government emphasizes that we need to make sure the policy should be implemented according to the city, make folios as the policy and supports the housing needs. And so the CITIC Bank joined hands with CITIC Urban developments and China Huarong to keep fully the advantage of our industry finance synergy to continue to explore the coordination of business model innovation based on the principle of Roblox and we also have innovative solutions. So in the risk communication, it reflects our industry finance coordination. It has the positive effect as well. So we will continue to implement decisions and improvements of the CPC Central Committee and State Council to overall -- to answer, respond to the overall requirements of preventing COVID and stabilizing the economy and ensuring safety and development and adhere to the working principle, seeking progress while maintaining stability because you have seen that we have quite good performance. But at this time, we still need to keep a clear mind and to know the future development. We need to evaluate the difficulties ahead. And the aim is that to have a healthy and stable development for our group. So we expect that we will continue to -- continue our good momentum of development and we will complete the overall target of the year. So that's about the influence of macroeconomic policies on CITIC. And for Huarong, and Huarong is a hot topic. And every time when we meet with you, we talk about Huarong. So firstly, I'd like to take the opportunity to explain that the Huarong, it is CITIC Group, now CITIC Limited to invest in China Huarong. So but we still -- we will deliver our responsibilities. And we still have challenges while we take the stocks. But we continue to implement our responsibilities and shareholder to guide Huarong to kind of to mitigate its risks, and we have done a lot of work. And for the first half of the year, there are a lot of work, and there are a lot of pressures and challenges. But we think we have a lot of opportunities. And there are some very good changes. We -- it is like in March, but only less than half a year, and we see these good changes, which are mainly reflected in Huarong's risk have been continuously reduced and its structure has changed as well. The scale of the structure of liabilities have been substantially optimized. So the changes have reflected on optimization. In the meantime, we have seen that the disposal of nonperforming assets have maintained a leading position in the market. So Huarong has reflected its advantage in the market. And you can also refer to the information disclosed to Huarong's results release meeting. Lastly, I would like to share with you that -- so we have incorporated Huarong into our portfolio. And we are the biggest shareholder of Huarong because we are very optimistic about nonperforming Asset Management business. And also, we are going to complete the structure and the layout of comprehensive financial services of CITIC, and we're going to continue to serve the real economy and to improve our core competitiveness. In the future, CITIC will continue to actively respond to policy orientation of the party and the city council on preventing and resolving major financial risks and serving the real economy. And we're going to grasp the business opportunities, and we are going to fully support the development of Huarong and also to support the focus on this main business. And so that it can reflect and to realize its value of Huarong as well as the value of CITIC. So we're going to support Huarong and encourage it to become a new driver of the business of our financial holding or even beyond. Next, on to the second question.

I'm with Goldman Sachs. So we have 2 questions. The first question is, I would like to congratulate the good results achieved in the first half of the year. So I would like to ask our -- the management to look into the future to the performance of the CITIC Limited in the whole year. And there is this goal by 2025. So what is the future growth of the company? This is my first question. And my second question is I want to ask about the question of financial holding. After getting the license, it has attracted a lot of attention for the development of CITIC Financial Holdings. So I'd like to ask about the question on Wealth Management business. How the business will be conducted? Thank you.

Thank you very much for the question. And the first question will be answered by Xi Guohua. So please, so to answer your question, and we also have General Manager of CITIC Financial Holdings Madam Li is going to answer your second question.

So in the first half of the year, so when we had a very good start in the first quarter, we have also realized our goal. We have accounted half or already half of the targets in the second quarter -- by the second quarter. And also, we have laid a solid foundation for Q3 of realizing the whole year's targets as well as to looking to the future in the Q4. And our shares, the price of our shares has increased 48.76%. We hope we're going to reach a new high this year, and I would like to take this opportunity to thank all the analysts, investors for you to choose CITIC and CITIC will not fail you. So we will work together to create more possibilities. In the second half of this year, when the pandemic is under control and the policies have played their role in stabilizing the economy, so we believe that in Q3 and Q4, the growth rate will pick up. And CITIC will severely handle our own business, comprehensively deepen our reform and to focus on technological innovation, strengthen finance, and to support the real economy, prevent and resolve major risks, promote high-quality development. Just now Chairman has proposed the requirements. And we are very confident to achieve all the business targets this year. And we are going to ensure that the growth rates will outperform the average of the market. And now I would like to say to our investors and analysts for the whole year, the net profit target should be RMB 100 -- more than RMB 100 billion so as to realize the development goals of the CITIC. And in the future, we are also very confident to maintain stable growth of our business. The drivers are from 4 aspects. Firstly, financial business. For our financial business, the first engine is CITIC Financial Holdings. Financial Holdings will be the first engine to drive the growth of CITIC and establishment of CITIC Financial Holdings will help us to prevent and guard against the risks and to improve our Wealth Management business, Asset Management and Integrated Financing business as well as to contribute and to provide imaginative numerous possibilities of the industry. Similarly, the second driver is the CITIC Bank. The quality of the assets of CITIC Bank has been improved. And the 3 -- 342 core enhancement strategies have been implemented, maintaining a good momentum of growth, which has helped to stabilize the performance of the business. CITIC Securities' aim is to build a world-class securities company in the world. It's very important. And also it has contributed to the overall growth of the business. And the financial business sector of CITIC has incubated new businesses, which in the future will become new drivers of our business and performance. The second driver is from our nonfinancial business. The new Materials segment and the new-type Urbanization segment are going to contribute to new momentum of growth, achieving significant growth. Certainly, regarding the third aspect in terms of the management of CITIC Limited, we are going to ask for performance by improving our management. We're going to start our new journey to become a world-class enterprise to improve our business operation and the performance. And we are going to maintain a stable growth of our business and the performance. Firstly, to deepen reform, we are going to improve our performance by improving -- by deepening our reform. The first is our advantageous business will be divided and to be listed. And CITIC Metal is now under the review to be listed. And for the scattered business, will be integrated and packaged to apply for IPO. Some of the projects have been initiated. Thirdly, we are deeply study and discuss refinancing possibility for CITIC Financial Holdings to improve the adequacy supplementing our CITIC Financial Holding. Thank you.

I'm going to answer your second question. CITIC has a comprehensive financial corporation. It has a very large potential for Wealth Management business by the -- so we have 147 million individual users, and we have increased by 6.6% in our AUM. For the shareholding banks in China will be ranking the second. So we have a large potential in the management of the wealth. And we are the first in China to obtain the financial holding license. And we're going to tap into the potential because we have a very good platform. And in the future, we are going to control the risks and to build the platform and to build the system, mechanism and to improve synergy so as to unlock the potential of CITIC Financial Holdings. First of all, in terms of our strategy, according to the high quality of asset management, creating values, and we have developed Wealth Management 1314 strategy system, including 1 management committee so as to push forward the system and to serve our customers and to provide the high-quality products. Since this is 3 core, for production, some are going to build the platform so as to perform across the sales integration of data management and to manage the team performance, evaluation, brand management, channel management. Those are the 4 pillars of the industry -- of the business. And in terms of the organization, it has developed a wealth management committee, and we are going to manage at a macro level and do not interfere with the micro businesses, which should lead to plan a system and institutional arrangement. In terms of the model of operation, according to the one Class 3 operation model of the wealth management committee, we have set up the investing bank business, retail system and asset allocation subcommittee. In order to focus on wealth management under the asset allocation committee, we have developed 2 CITIC high-quality products and asset allocation, too. We have these 2 platforms and to focus on R&D as well as to seek the high-quality products, and we have developed the pool of sharing the resources for CITIC, which has such -- which has been recognized by the market. Looking into the future, the Blue Ocean Wealth Management business has great potential for development. And the CITIC is going to make sure -- make use of the advantages as a comprehensive financial company as well as our very solid base of customers to explore new connotations of financial holding and to create a new landscape in the comprehensive financial service.

Thank you, Mr. Xi and Madam Li. Let's welcome the next question.

I'm from Citi Bank. I'm [ Yang Haiyang ]. I want to congratulate on the achievement of the good results in the first half of the year. I have 2 questions. The first question is that for the real estate business, so it is under a lot of pressure and met a lot of difficulties. So there is a great potential on the banking business of CITIC. But I've seen that the NPL balance and ratio have both decreased. So I would like to ask the management of the business and risk exposure of CITIC's real estate business and how to mitigate the risk? Secondly, I would like -- so I have seen that. So CITIC Limited and the parent company increased investment into Huarong and also the shares allocation of the bank. So I would like to ask about the leverage ratio as well as how to respond to the challenges.

Thank you, [ Yang Haiyang ] for the questions. So for the first question, we have Xi Guohua here. So he's going to share with you on the first question. The second question is about the financial performance. So I'm going to -- I'll go to our CFO to answer the second question.

The analysts and investors are very interested in the business of CITIC and the real estate business as well as mitigation risks. We see to CITIC's own real estate business relatively stable. Our real estate business involve 2 subsidiaries, CITIC Pacific, Real Estate and the CITIC Urban Development and another a 10% stake in COLI. So the -- both of the subsidiaries adhere to the principle a prudent operation, adhere to differentiated positioning and to not conduct high leverage and high turnover businesses. The net profit in the first half of the year also exceeded the planned target. COLI also continue to maintain a steady development momentum outperforming the markets. So for the financial business in the real estate industry in the integrated financial sector, it has increased for the first half of the year, but the industry's concentration show the downward trends. And then nonperforming balance and nonperforming proportion of investment in the financial business has increased -- has decreased. The important progress has made in risk mitigation for banks and trust for real estate customers. So here, I also like to emphasize that in the process of resolving risk, we have played our advantages to mitigate the risks in the real estate. We know that CITIC is international and large-scale enterprise and to mitigate the risk, we have our own advantages to combine the industry and financing. And so it is systematic way. It's related with finance laws and also the asset management and a lot of special management. Under the maximization and to balance the risk and our revenue, we have played a good role of combining the industry and finance so that we could use the finance and also use the market and our real estate subsidiaries will evaluate the situation, and they will deliver their advantages. So the risk could be reduced and they will be managed by the subsidiaries to manage those risks. And with these advantages and under such basis, we could help to risk those exposures of risks. At the same time, we could help derisk real estate companies to risk their -- mitigate the risks and to help the livelihood of people. And in recent years, we have actively to reduce those risks and we have innovative ways to mitigate those risks and have many measures, implement different ways and use like the risk mitigation and some custody method and other methods. We could use different ways. And there are many representative cases has been made. It has stabled the market and retain people's confidence. And as just now have mentioned 1 project, which is the different -- this Zhejiang asset package project, which is a representative case. And it has been jointly operated by different parties. And we have used many different ways to help. With this package, it could be put into our packages, and we could have a debt payoff system, we could use different ways to use our assets and our capital and to better control risks and to have a better control about the certainty of payback of paying off those debts. Up to now, the project has been completed in June, and all the projects in the package has realized the payoff and some of the projects have got their capital returns so that we -- how successfully do a good job. We have also helped the government to solve some problems and some difficulties and to help to stable the market. It has helped to support livelihoods and support the stability. And in Handa, 2 projects of the Beijing because it's influenced by the Handa. So it has been the status of being stopped progression. And we do a lot of work to avoid -- this risk could be expanded. And we have cooperated and support the Beijing government to start the project and the asset. We have established the assets projects. We have also provided special custody services. And we realized they are to support the reasonable and legal rights of different parties. This also helped light platinum and maintain financial severity and safeguard social and people's livelihood. We have also have used -- maintained our main business and play the role of our ways, our special position to solve those problems. And in Shenzhen projects, we have realized shareholding segregation and to have a better custody of the capital so that we could have the return for the stock assets. And in Judo, we have also realized the health management custody method. We supported like 8,000 families who have both the assets.

Thank you for your question. And about leverage, CITIC Limited since 2016, we have paid great attention to the level of leverage ratio, and we have implemented a series of control measures, especially in 2017, we have done some reforms and the leverage management is an important part of it and with some institutions, including some evaluation and some policies, especially last year, we have used the industry finance coordination so that the leverage ratio has been reduced significantly. And the dynamic ratio has been reduced to half and the CITIC leverage level, it has been maintaining 27% in recent years. It reached the good, fine level defined by SASAC. And for the -- and also the -- for the asset liability ratio is also like 50% something. And it is supporting the strategic layout for the current economy situation. And this year, we can increase our allotment of the shares. And several years ago, we have reduced the leverage. And up to now, the leverage ratio is quite healthy and still have room. And in the future, we'll continue to have a better management for it so that it laid a good foundation for the future industry layout. In recent years, we also see smooth financial channels. And in Hong Kong, we have the -- like USD 9 billion medium-term cold quarter. And we have issued a public medium-term note of USD 1 billion this year. So it is a good control of the cost. And in July, we also have issued a private placement bond of USD 100 million. And in the future, we will prudently carry out external financing based on actual capital needs and market condition and strive to maintain a leverage ratio at a recent level.

I'm [ Tokyo Mary ]. I have 2 questions. The first is, we see some downward economic -- economy, and there are 2 challenges for the bank. So I'd like to know how is the operation of China CITIC Bank in the first half year of 2022? And what is your outlook for full year operating results? And also another is that we have seen the COVID cases also happens. It also have risks. So I'd like to know what is your quality of the capital and what is your expectation for the future?

So Mr. Heying is here who could answer this question.