Industrial and Commercial Bank of China Limited (1398) Earnings Call Transcript & Summary

Dear investors, friends, good evening. Welcome to join ICBC 2020 annual results release. I'm the General Manager of Corporate Strategy and Investor Relations Department, Mr. Zou Xin. Thanks for joining today's conference. I would also like to thank the 690,000 shareholders for your support to ICBC. Our appreciation also extends to CBIRC, CSC, SSE, HKSE, China Association for Public Companies for your support. ICBC has always attached great importance to investor relations management. We have always maintained frequent, candid and professional communication with our investors. Today, our annual earnings call takes place in the form of on-site, global com conference as well as webcast. Before this call, we have collected questions from our investors. Today, we are joined by the Vice Chairman, President, Mr. Liao Lin of ICBC; Executive Vice President, Mr. Wang Jingwu; Executive Vice President, Mr. Zhang Wenwu; Executive Vice President, Mr. Xu Shouben; and Board Secretary, Mr. Guan Xueqing. I'm sure most of our analysts and investors are quite familiar with him. Our management will have -- take questions from our investors in a candid way. Today, we are also joined by our directors, including Mr. Lu Yongzhen; Feng Weidong; Cao Liqun; [indiscernible]; Shen Si; and Ms. Arnout Wellink who are joiners through webcast. We are also quite honored to have the [ Madame Liu ], Deputy Secretary General of China Association for Public Companies. The annual results of our bank has already been announced, and you can access it through our website. For the sake of time, we'll go directly to the Q&A session in order to save more time for more investors to raise questions. Every investor are advised to raise only one question, and please state your organization and name before raising the question. Thank you.

The first question goes to the investors and analyst on site.

I'm from E Fund. I'm the Vice President, [ Ma Xing ]. First of all, I would like to congratulate the management. We are quite glad to see against a backdrop of the negative impact brought by the COVID-19 in 2020, ICBC still delivered hard-earned positive growth of profits. So I would also like to thank the efforts made by the management of the bank. Could you please introduce the highlights and features of 2020's performance?

I would like to avail myself this opportunity to express my appreciation for the trust and support from our global investors and analysts. And also, I would like to thank [ Mr. Ma Xing ], for your first question. 2020, indeed, was a year which was quite extraordinary. We have coordinated pandemic relief response and operation, and we delivered fairly sound results, which has kept a strong momentum among stability and all performance can be summarized as true stability and true elevation. True stability, namely, the stability of the performance of operation has been maintained. For the whole year, net profit totaled CNY 317.7 billion, a growth of 1.4%, which indeed was a hard-earned results against the backdrop of COVID-19. The operating revenue exceeded RMB 800 billion and fees and commissions income was CNY 131.2 billion. The size of earnings has maintained the outperformance compared to our peers. The second stability is our asset quality. Against an area of pressures, we have managed to keep the asset quality basically stable, with all metrics ranging in a reasonable range. At the year-end, the NPL ratio of the group was 1.58%, which was in appropriate range. And the gap between the overdue loans and NPL loans was negative CNY 26.5 billion, a decrease of CNY 54.5 billion compared to the beginning of the year. And the balance and the ratio of both overdue loans and special-mention loans realized decline compared to the beginning of the year. True elevation, namely the elevation and improvement of our competitiveness, which can be demonstrated in the total volume of customer deposit exceeding CNY 2 trillion with the balance reaching CNY 25.1 trillion, an increase of CNY 2.2 trillion compared to the beginning of the year. And RMB customer loans increased -- the increase of the loans also outperformed our years -- our peers, with a total increase for the year of CNY 1.88 trillion, a growth rate of 12.6%. And our assets under management assets under administration also maintained a leading position and as the largest financial group in China. The second elevation is the customer number and quality, customer service quality. At the year-end, the total number of our personal customers reached 680 million, an increase of 30.24 million, and our legal customer numbers reached 8.64 million, which I would like to mention, in particular, is the number of our personal mobile banking customers exceeded 420 million and online monthly active users also exceeded 100 million, which was the first bank among our peers. All those metrics represents the remarkable elevation of our growth quality and vitality. What counts the most for our success and results is the large number of our customer and our stable operation capacity as well as the risk management capacity, which always are ahead of the market curve. So in the new year, we will seize the opportunity to maintain this momentum. Thank you.

Thank you, President Liao. Next question from the on-site.

I'm [ Yuan Xue ] from CITIC Securities. My question is about what kind of achievements has ICBC gained in terms of prevention and control of risk. In 2020, ICBC's NPL ratio has raised a little bit. Is the deterioration of asset quality bottomed out against the impact of pandemic? And is the loans with deferred principal and interest payment been fully exposed of risks? And what's ICBC's judgment for the future trend of asset quality and how is the arrangement of the NPLs?

Vice President, Mr. Xu Shouben will answer the question.

Thank you for your question. Asset quality is a lifeline of bank. ICBC has always attached great importance to the quality of assets. And in 2020, various risks are under control for ICBC. In terms of risk -- of credit risks, the asset quality remains stable. The core indicators, balance of overdue loans and special mention loans, ratio of overdue loans and special management loans, both decreased. The figures difference between overdue loans and nonperforming loans achieved negative figures for the first of recent years. The NPL balance and ratio maintained within stable range. In terms of market risks, despite of the volatility in bond, equity and the commodities market, ICBC stick to stable and prudential investment and transaction strategies, strengthened market risk management and achieved decrease of foreign exchange risk exposure, achieved exchange earnings positive. In terms of liquidity risks, we strengthened judgment for market capital, optimized capital resources in the arrangement of scale structure and tempo, maintained the overall stable of liquidity and retained reasonable buffer space. Besides, we also strengthened management of various categories of risks such as operation risk. And our achievement has been gained with the establishment of comprehensive risk management system, from four aspects: manage of people; money; hold of the defense line, three lines of defense; and manage well of the bottom line. We adhered to the bottom line of regulators. ICBC adhere to proactive prevention, intelligent control and comprehensive management of risk. By improving risk strategies, appetite, limit, policies, procedures, et cetera, we positively and proactively prevent various risks. By establishing big data intelligent risk control platform, we improved the accuracy timeliness and efficiency of risk monitoring and warning. The risk management covers various risks: institutions, businesses and staffs. In terms of loans, we postponed interest and principal payment. The overall risk is under control. Since the third quarter of 2020, the amount -- the application for postpone has decreased and with the recovery of pandemic and the resumption of work of enterprises, part of this kind of loans, interest has been paid back. In terms of disposal of nonperforming loans, we have established disposal plans according to the trend of asset quality in the strict categorization standards to eliminate the credit risks. Despite of all kinds of risks, we believe we see recovery growth of global economy, especially China's economy. Our capacity of risk identification in management will gradually show its effect. We have confident capacity and the strength to maintain stable of asset quality and achieve sound development and stable development of ICBC.

Next question.

I'm from Southern Fund. I'm Head of the Equities Investment [ Shibo ]. My question for the management is about fintech. Recent years, we've seen continuous efforts has made by ICBC on fintech. And it was also advocated to create value driven by fintech and we have seen a lot of Internet firms and tech firms rising in China. Can you tell us the input of ICBC own tech? And what is the differences and the similarities between ICBC and other fintech companies? And what is your plan and achievement in this regard while competing with other tech companies? What is your unique advantages? How are you going to make use of fintech to improve customer experience in the future?

You asked about fintech, but it involves a lot of respects. I would like to invite Mr. Zhang Wenwu to take your question.

Thank you for your question. I'd like to answer your question from 3 aspects. Firstly, about the comparison between ICBC and other tech companies, what we have in common is the great importance all of us has given to the fintech. For ICBC, we have been well-known for our advantage in fintech. Another aspect, we share in common is that we also focus on the service for our customers. What distincts ICBC from other tech companies include the following aspects. Firstly, ICBC made -- created a lot of scenarios for -- to serve the real economy and to serve our customers, including the deposits, settlement, wealth management. Our services are quite comprehensive, which can also create a lot of drivers for us to continue to innovate our fintech. The second difference is that ICBC has better integration of our online and offline platforms. The total number of our personal customers exceeded 400 million, and we have altogether 160 -- 16,000 offline branches. So by integrating the online and offline platforms, we can provide better service to our customers. The third difference is that we can better integrate our tech capability with our businesses. Besides boasting a large number of talents in the fintech, we have also a strong team in banking business, based on which we can continue to better integrate the business with fintech and try to make more breakthroughs in this regard. And fourthly, we excel in our compliance management. For ICBC, we are famous for our prudence culture based on which the innovation of fintech has been realized. So in risk management and capacity, we have developed -- we have made a lot of investment in R&D in this regard, which has not only been used by ICBC ourselves, we have also exported our products and technology to our peers to the market, which has been quite well received by the market ranging from risk management and anti-money laundering. Such kind of products from ICBC, including [ Rong An Yi Xing ], which can provide security services for our customers and the peers. The secondly, I would also like to introduce the achievement we have made in this regard. We have not only built the hard power driven by technology with ICBC [ Jinx ], we have heavily invested on R&D of fintech and on core technology, the development and the research mainly relies on ourselves internally. And we have made the breakthroughs in upgrading our IT architecture and built a large number of tech platforms, which outperformed our peers. I will not elaborate all of those advantages in this regard. Our tech power have been given a large number of awards by authorities. For example, we have ranked #1 for 7 consecutive years for the ranking made by CBIRC in total number of awards and the level of our awards given by PBOC for our tech, also outperformed all of our peers and the number of our patents also outperformed our peers. Secondly, we have also built our thought power driven by innovation with ICBC characters. We have built 1 fintech department, 3 fintech centers, 1 company and 1 research institute with 35,000 versatile talents. With our thought power of fintech, we have enabled the transformation of our strategic end businesses, so that our services to our customers can be improved and more and more industrial ecology, ecosystems and scenarios can be built. And the service coverage has also been -- become wider. So fintech has become a new engine for our breakthroughs of innovation. Last year, the ECOS smart banking information system of our bank has made substantial progress and opened a new chapter in the digital transformation course of our bank. As to our plan for future development, I will introduce from 5 points. Now we are working on the new 3-year plan for our bank. I will introduce mainly about the direction of our future fintech development plan. The first focus for our future plan is to build ICBC to become a safe bank, which our customers can trust in. We will try to improve our self-reliant tech capacity, while paying more attention to safeguarding the security of our customers' data. The second plan is to build our bank to be a digital bank with deep embedment of our business with the digital transformation. The third plan is to build our bank to be an open bank, an ecological bank, speeding up the construction of scenarios and open banking. The fourth plan is to build our bank to be a smart bank, covering all processes and strengthening our innovation capability. And the fifth plan is to build our bank to be agile bank, driven by innovation and technology with our mechanism in the system, more agile and be capable of integrating our system and response to our customers' demand. So with customer-centric from the internal response to external service supply, how to realize more effective integration, we have to give priority to the response to our customers. This is a demanding task. It involves a lot of efforts. Thank you.

Next question, still from on-site.

I'm [ Wan Sau Hue ] from China Life Asset Management. First, I would like to congrats ICBC on the performance. In last year's Annual Shareholders' meeting in June, we have noticed that ICBC's new generation of leadership has established and started to implement 3 major strategies, including #1 personal banking, preferred bank for domestic foreign exchange business, sharpening competitiveness edge for key regions. And these strategies are connected with ICBC's existing advantages. How do ICBC coordinate and connect these strategies with ICBC's existing advantages? What kind of achievements has ICBC received in 2020? And what will be the focus for the next step, execution? Is there any plan for ICBC in serving rejuvenation of countryside?

President Liao Lin?

Thank you for your question, and thank you for your concern on ICBC's major strategy. Last year, we have issued the strategies, and it's time for us to deliver answer sheet to investors and analysts. We proposed 3 major strategies last year. For #1, personal banking industry, we have overcome the difficulties. By the end of last year, ICBC has managed RMB 16 trillion financial assets for 680 million personal clients, ranking first among peers. The pre-profit of personal banking business reached RMB 174.5 billion, contributing 44.5% to total pre-profit of ICBC, up by 0.8 percentage points. That's the achievements in the first strategy. In terms of the strategy for preferred bank for domestic foreign exchange business, it has a good start. Over -- nearly 9,000 outlets have launched a foreign exchange business. The active corporate foreign exchange clients increased by over 10%. It's an important indicator. The increment of foreign exchange loans and deposits achieved first among peers, among which, the balance of foreign exchange loans has grown by nearly 30%. That's the achievements of the second strategy. Third, the strategy of sharpening competitiveness edge for key areas in the regions. For the 5 major regions, namely Beijing-Tianjin, Hubei area Delta, Yangzi Delta area, Greater Bay Area, Central Region and the Sichuan region, by the end of last year, the increment of loans account for 78% of domestic branches, and that of deposits accounting for 79%. So the 5 major regions have contributed a lot to our loan and deposit business. In terms of rejuvenating countryside, we are establishing urban rural interconnection strategy to serve the rejuvenation of countryside. As you know, ICBC has advantage in urban finance. As Vice President, Mr. Zhang has mentioned, how to take advantage of our fintech and empower the rejuvenation of countryside is the major work of us. We have already drafted the strategy, and we will try our best to increase the accessibility and convenience of financial services in vast countryside area. You also asked about how to coordinate and connect ICBC's existing competitiveness and advantages with these strategies. I think it's a good question. ICBC are confident in areas with competitive advantages, namely corporate finance, institutional finance, transaction finance and the settlement finance. These 4 sections are our traditional advantageous sections and we will further play the role of these strengths. In terms of corporate finance, we have about 8 million corporate clients, mainly high-quality clients and global clients. Besides, we also have advantages in corporate deposits and loans and globalized structuralized investment and financing. In terms of institutional finance, we have about 500,000 clients and over [ 3,000 ] financial clients. We have maintained obvious advantages in this section. In terms of transaction finance, we have notable advantages in underwriting and investment of bonds. In global financial market business, RMB bond investment balance, we have notable advantages. In terms of settlement finance, since ICBC's depart from the Central Bank, we have maintained advantages in settlement business. In terms of personal and corporate settlement account, transaction, settlement clearing, global cash management, wealth management, ICBC has leading advantages, and these advantageous sections will become our new strategic pillars and contribute to our value-creation capacity and deliver a sound answer sheet to global long-term investors, value investors and green investors. These are our traditional advantages. Besides, we will also consolidate our foundation and strengthen the infrastructure. We will enhance our fintech system and overall and comprehensive risk management system. In terms of strengthened infrastructure, we will increase GBC interconnection and coordination efficiency. This will help us establish a sound client ecosystem. We will also promote digitalized development of channels and increased competitiveness of our human resources. And the above-mentioned 4 aspects give full play to our advantages, supplement our shortages, consolidate our infrastructure and strengthen our foundation is the major measures we will adopt. And we will launch some new thoughts and new strategies for each year and promote further development, high-quality development of ICBC.

Next question.

My name is [ Cha Wei ]. I'm an individual investor. We notice that ICBC and MIIT signed a strategic cooperation agreement on supporting manufacturing high-quality development. As the largest commercial bank, in supporting the real economy, what has ICBC done in manufacturing loans, inclusive loans and green finance? What's your arrangement? These measures on ICBC's value-creation capability, what impacts do we have? And are there any results you have achieved in this regard?

Vice President, Mr. Xu will answer this question.

Thank you for your question, and thank you for noticing the signing of this strategic cooperation agreement. In supporting the real economy, for ICBC, it is our responsibility, and we have done a lot. In industrial finance, livelihood finance and cross-border finance, we have yielded fruitful results, especially in manufacturing finance and green-inclusive finance. My priorities would be lying on manufacturing inclusive and green finance. In supporting manufacturing high-quality development, ICBC and enterprises have natural and historical relationship. In 2020, corporate loans for manufacturing has increased more than CNY 200 billion with a balance of CNY 1.65 trillion. Plus bond leasing and other comprehensive financing services, the aggregate would be over CNY 2 trillion. The growth and the balance in mid and long-term sense, both hit a new record high. We support the upgrading of traditional manufacturing. And also, we support the new technology enterprises. Our customers are leading companies and also small and medium enterprises. These support brought us a lot of opportunities in terms of retailing and other areas, the development of manufacturing. In support of this, we need comprehensive risk-management technologies. For the new high-tech enterprises and new industries, we need to explore new risk-management models. In 2020, ICBC in systems and risk management, we have made active explorations. In this year, we will continue such endeavor. In manufacturing, we have rich experience. This is also our advantage. In the future, we will continue to support manufacturing and supply chain and industrial chain. In loans, debt, equity, agency leasing and advisory services, we will upgrade our services for manufacturing. And secondly, I'd like to introduce inclusive finance. Our priorities are inclusiveness and commercial sustainability. In 2020, we achieved great results in inclusiveness. Our inclusive finance increased by 58%. The small and micro enterprises with loan balances grew by 43%. In loan interest rate, the new loans average interest rate was 4.13%, down by 39 bp. In achieving commercial sustainability, we strive to establish digital and professional inclusiveness. We upgrade and improve operational quick loans, online loans and digital supply chain. We create a digital-inclusive product system to improve the inclusive services in its convenience and accuracy. Last year, the growth in this regard was over 90%. We make these products tailored for customers' need. For professional inclusiveness, we need to control risk and operation costs. We established full procedural and penetrating digital risk-management system. We improved intensive operation and improve efficiency and reduce costs. Thirdly, based on finance, we expand intelligence and commerce. We combine the 3 aspects to improve our finance service capabilities. The NPL ratio in this regard was 1.09%. In green finance, we have made efforts for many years. The green finance balance was CNY 1.85 trillion, up by CNY 200 billion. Green debts totaled CNY 9.8 trillion, receiving 10 international awards. In measures, we printed green credit policies covering 16 sectors and 50 industries. We innovated related ratings and we lead the draft of related disclosures guidance. These 3 fields are important ones with which we face the future. It is also enriching our ecosystem. It is good for the upgrading of our RWA. ICBC's RWA grew by 8.1%, down by 2.6 percentage points compared with that of assets. We are using higher efficiency to serve the real economy. These are our efforts. Thank you.

Thank you, Vice President, Mr. Xu. We answered 5 questions from analysts and investors from online. Now let's leave some opportunities for those online, on the telephone line. First questions through telephone, please.

Mr. [ Clement Leikocar ] from [ Securities & Asset Co. ]

With the new wealth management product rules transition period extended, will ICBC clean up all WMPs by the end of 2021? What's the size of the off-balance sheet assets which need to be moved back to balance sheet? And in addition, what's the development of WMP subsidiary? How about the market demand of an EV-type product?

Would you please wait a minute for the Chinese translation, and then we'll have the answer?

Wealth management new regulation and wealth management products, I'll ask Mr. Xu to give a response.

Now this is Mr. Xu speaking. The wealth management new regulation is very important for the wealth management products to return to its own origin. It's quite important regulation. You asked about our wealth management subsidiary. How is it doing? Our subsidiary at its foundation, our products compliant with the new rule is developing quite good. That's for -- by the end of last year, we have more than RMB 1 trillion such products. And market response is good, and customers liked these products. So we can say that we have very good progress in terms of the transformation in WMP. Our existing products is being carried out. We have handled all this existing products, its existing assets. Since -- for last year, we accomplished -- we accomplished the regulator's requirement, and we had held a stress test for that. And we expect the -- only a small proportion of the products will be back on the balance sheet. It has a very limited influence on our CAR. Besides, the transition period, our remediation arrangements have taken consideration of the market capacity and market expectation and products to replace the old products. So there will be no huge impact on the market. ICBC will continue to do a good job in terms of management products and provide high-quality products to meet customer needs. In the transitional period, it could also be our growth period. Thank you.

Next question.

Xu Ran from Morgan Stanley

What's your strategy for loan pricing? We have seen with economic resumption, the loans resumption is also growing. The systemic institutions may grow as well, which may limit the extension of loans for some banks. For ICBC, with adequate capital, in your strategies for pricing loans, what's your outlook?

Mr. Xu will answer this question.

For this year, our loans will be extended stably. The scale will follow our strategy and the industry's arrangement. Our priorities would be 3 news, including manufacturing, tertiary industries related to livelihood, and new infrastructure, especially in IT infrastructure, and 1 high, this is high-tech industries and enterprises. In these areas, these are important fields for our future expansion of loans. For demand, we think it is ample, and we are fully confident in this regard.

Now, next question, please.

Mr. [ Phillip ] from Citi.

I have a question about the better understanding about your dividend payout ratio. Help us understand how the dividend payout ratio can improve the valuation. I just want to check if you want to consider to increase the dividend payment ratio. So what are the tools to increase the valuation of your shares?

Would you please wait a minute for the Chinese translation?

The dividend issue, we'll ask Mr. Guan, Board Secretary, to respond to this question, since Mr. Ghan is quite familiar with investors.

Thank you for your question. This question is familiar to me, especially for the past 2 years. And I answered this question in different environment. ICBC's dividend payout ratio is always stable. Until June of this year, ICBC's cash dividend to shareholders will reach RMB 1.09 trillion. That is the listed company with the largest amount of cash dividend payout. It shows our short-term return for investors for our excellent listed company. We also think about our long-term development. And the reasonable proper dividend payout ratio could, on the one hand, meet the need for long-term investors and on the other hand, meet the need of value investors. The investor and analysts ask whether we will increase the dividend payout ratio so as to increase our valuation. I think for the banking sector, the valuation is a result of many factors, especially for Chinese banking sector. Make a comparison: the global evaluation, it is also shows different features of different markets. So it is our opinion that a proper dividend payout ratio could meet the short-term -- investment requirement for short-term return. This ratio is quite high. No matter a H-Share market or in Hong Kong market, our dividend payout ratio and a payout ratio are higher than the return of a fixed-term deposit. So a reasonable dividend payout ratio could help ICBC to maintain its indigenous capital replenishment ability. With better indigenous capital replenishment, we could better serve our clients and lay a more solid foundation for our future development so that our shareholders could have more opportunities to attain long-term strategic benefits and push forwards the value increase of ICBC. Thank you.

Next question, please.

Fan Hans from CLSA.

My question concerns Personal Banking. Since last year, ICBC has launched #1 personal bank strategy. Mr. Liao also mentioned some achievements of last year. For this strategy, we have high expectations. You have natural advantages. Could you share with us in implementing this strategy, what are the indicators that you prioritize in the future? Do you have any quantitative targets?

I have answered some questions from friends from media. For the indicators and future development, I believe Board Secretary, Mr. Guan, would answer this question. Thank you.

In 2019, when we formulating the strategy, you have been asking this question. I know your long-term notice. 2020 is the first steepening year of the strategy of ICBC. Its operating income contribution is relatively high. In implementing the strategy, we have achieved several aspects. The penetration and implementation are strong. Second, the personal wealth managed by ICBC has led the world totaling RMB 16 trillion excluding the customers' share assets. Thirdly, our personal customers totaled 680 million. Mobile banking customers totaled 416 million. All these indicators lead the industry. Fourth, our personal loans totaled CNY 7.1 trillion, featuring personal mortgage loans. The first home loans accounts for 90%. And the NPL ratio of -- in this regard, is only 0.28% with 50% of LTV. The credit card business, private banking business are developing fast. The private banking customers accounted for more than 180,000. We have provided services in a high-quality way. In this regard, ICBC is the first #1 wealth management bank. What's the future indicators that we prioritize? Well, first, the extension of customer base, we will strengthen this aspect, especially the development of high-end customers and upgrade the holistic structure. Second, we strengthen wealth management capabilities to create the dreams for those customers, even buying a house or finding a job. Thirdly, we will continue to improve online digital construct with different scenarios so as to improve our competitiveness in all dimensions. Fourth, we will manage well the credit risks, operational risks and contra risks in implementing the strategy. Thank you.

Thank you to Mr. Guan. Now we will take questions from the mailbox we have collected from our investors. All these questions can be categorized into 3 types, namely fintech, offline branches and serving the real economy. For the first 2, Mr. Zhang and Xu have already answered. So now we will respond to the question of the offline branches. The question is the large number of the offline branches is one of the advantages of ICBC. However, fintech is transforming the conventional banking industry. More and more businesses have transferred to the online platform. So will this cause the function of the offline branch -- offline branches of bank be lost? Particularly more and more young people now are used to making businesses via online platforms, so will this tendency cause a burden of the offline branches of ICBC? Is there any necessity for the existence of our offline branches? We have a total number of around 16,000 offline branches. Currently, around 98% of our business are transacted by online platforms. Indeed, this is a question given a lot of attention. I would like to invite Mr. Zhang Wenwu to take your question.

In the beginning, I would like to point out that the offline branches will always be one of the precious assets of ICBC, because the offline branches serve as a window for ICBC to serve the mass common. With such a large number of business and diversified structure, and customer franchise, despite of a lot of business transferred to online platforms, 86% of the new account opening has been completed in our offline platforms. And our offline branches have provided services to over 100,000 SMEs. Last year, in the course of COVID-19, part of our offline branches have shut up, but some of them remained open to our customers and a lot of customers paid visits to our offline branches during that time. Second point I would like to mention is that the functions of our offline branches have also been transforming. The offline branches have not only engaged in the conventional business of transferring, transmittance, most of which have already been shifted to the online platforms. However, for some high value-added business like wealth management, most of them still remained in the offline branches. And in the future, we expect more and more business. We're also including the business of ForEx and corporate customer and personal customers. Some functions to serve them will also be shifted, be remained in our offline platform with relevant function and services improved. And a large -- an increasing number of our offline branches have also been equipped with some new functions, for example, the ForEx remittance. So this is a bidirectional transformation for the offline to online platforms. So we don't think the number of our offline branches will completely eliminated in the future. We will continue to improve the comprehensive functions and the services in our offline platforms. Thirdly, I would like to introduce our arrangement made to be layout and the changes of the layout of our offline platforms. While the total number of our offline platforms have been -- remained unchanged, the location, geographical location in different cities have been changed according to the actual situations. And it is also a change dependent on the changes of the local economic development. On the back of the new national strategy of coordination of the urban and the rural development, like Mr. Liao just now introduced, ICBC is also making efforts in this regard. So the synergy between urban and the rural development cannot be only completed by online platforms. Assistance from all of our offline physical branches is also of great importance to this strategy, and their services will also be improved in the future. The offline branches is also an important and core point of our integration of the online/offline services. Currently, there is some dispute concerning the online to offline channels. For some online platforms, a lot of commercial banks have quite developed services and the business, so is our offline branches. So how can we deliver synergy, more synergy of our online and offline platforms; how to build capacity of our relationship managers of these branches? Our goal is to provide more comprehensive service and more immediate response to our customers' demands. We will continue to make efforts in this regard based on past experiences. Within less than 2 years, 27 scenarios have been substitute which has delivered very good effects. And we have also delivered progress on improving the conventional functions and services of our offline branches. The offline branches of commercial banks is not only the offline branches of banks, but also on offline platform for the society, which has not only showed the banking business, but also non-banking business, for example, consumption scenarios and some government-related scenarios have been established in these offline branches, you can -- which all those offline branches have some social and government and tax functions which links both the internal and external functions of our bank. In the future, we will continue to reform and optimize our channels and to change the conventional image of our offline branches. Empowered by fintech, we can liberate more employees behind the counter and build those offline branches to become a transactional center and bring more vitality to these offline branches. So they will continue to be of great importance and remain a precious asset to our bank. Thank you.

President Liao Lin would like to make some supplement.

For ICBC, outlets will never disappear. It's ICBC's traditional advantage and will not disappear as well. We have [ 1 trillion ] physical outlets. Through structural adjustment, it will provide a strong impetus for our value creation. We will optimize the distribution of outlets between automatic channels and channels still with the help of people and staff and the distribution between urban and the countryside as well as distribution between new and old areas and different communities of the urban areas. Second in terms of empowerment. In the future, outlets no longer only serve the clients of banks, but also the clients of the banks' clients. It will become a platform or an occasion for communication. For example, there is a banker theory: as long as we have the mobility of people, we can have service sources. Third, in terms of our corporate finance, we rely on high-level customer relationship managers to manage the relationship. Now, as we're developing more and more personal clients and SMEs, who should be responsible for these clients? This will be a major topic for us to study. Fourth, we aimed at establishing highly competitive, adaptive and inclusive financial system. To achieve this goal, we should lower the threshold of outlets to achieve inclusiveness. There is a lot of space for optimization and imagination in the future for the development of physical outlets. This is a point I would like to supplement.

Thank President Liao Lin and Vice President Zhang Wenwu for your answer. Besides the channels of on-site mail, we have another channel that is webcast. The staff told me that there are about 5,000 audiences watching our results announcement through the webcast platform.

The first question from [ Guo Chang Hou ] of Guotai Junan Securities.

I would like to ask President Liao Lin, after you took office, what kind of achievements would you like to lead ICBC to achieve in the future? And what kind of plan do you have for the next step of ICBC's development?

Just now friends from media also asked the similar question. As the President of ICBC, I will lead the senior management and [ CNY 46 trillion ] and 460,000 staff of ICBC to achieve high-quality development of ICBC. I think there will be 2 major focuses, which can be summarized as implementation and promotion. In terms of implementation, we will carry forward strategic arrangement of the state, the regulators and the Board of Directors. Second, in terms of promotion, we will promote high-quality development and that is: fully serve the real economy by way of strengthening strengths; supplement shortages; consolidate the foundation; and strengthen the infrastructure, besides, to promote high-quality, comprehensive risk management. The commercial bank pays a lot of attention to loan risks and then to credit risks and now, comprehensive risks. We have established 9 plus X categories of risk systems, including credit risks, market risks, operational risks, reputational risks, et cetera. We will manage well the people, the money, the three lines of defense and the bottom line. The bottom line means the regulatory requirements. We will not cross the lines and promote our implementation of comprehensive risk management. Through 1 to 2 years implementation, we have already had some fruits. Third, promote high-quality transformation. ICBC is such a large bank. The direction is to deepen reform, establish highly adaptive and inclusive ecosystem with the customers at its core. We will establish sound bank and client ecosystem. As long as we can establish such kind of ecosystem, we can achieve high-quality development. These are the 2 major focuses after I took office.

Next question from webcast.

From CMS, analyst Mr. [ Ho Chung Ming ].

As the commercial bank with the largest number of personal customers, what is your plan to grow your fee-based income within next 3 to 5 years? Particularly in the WMP, how will we respond to the decline of the percentage of deposits to the total personal financial assets? And what is the outlook for your -- for the percentage of wealth management to the total revenue within 3 years?

This question involves a prediction of the fee-based income in next 3 to 5 years. Now we are working on the new 3-year plan. Fee-based income business is always an important aspect of our business. So I'd like to invite Dr. Guan, the Board Secretary, to take your question.

While I answered the question of our first #1 personal finance bank strategy, I also -- I have already partially answered this question. Among the total personal assets of CNY 16 trillion we manage for our personal customers, CNY 5 trillion are from the wealth management and asset management. So we have a well-structured business for our wealth management business. In the future, we will continue to make efforts to grow our private banking business, particularly to improve our business for the high net worth individuals to provide them with more value-added services and products. Secondly, by fully leverage of our wealth management subsidiary platform and other asset management platforms, including ICBC Wealth Management Subsidiary, ICBC Credit Suisse Mutual Fund, ICBC AXA Insurance Company, which has also established an asset management, and we have also established some offshore asset management platforms, so with an area of diversified asset management platforms, we can provide more efficient wealth management services. The feature of our asset management business is the prudence and security with reasonable and effective value increase of our customers' wealth. In the future, we will continue to strengthen our competitiveness in the asset management, particularly to strengthen the R&D of our wealth management platforms so that we can attract more personal customers' deposits and other types of products and services. Like Mr. Liao just now mentioned, we have advantage in the G end and B end services and customers, that can also help us with reinforcing our advantages in the C end. So our revenue from the wealth management business can also be improved, driving the increase of our fee and commissions income. You asked us about the percentage of the wealth management business to the total revenue within next 3 to 5 years. You can pay attention to the total volume of our fee and based income within next 3 to 5 years.

We have a lot of investors and analysts online and off-line. The time goes fast. It's already 1 and 15 minutes. The analysts and investors have a lot of questions. Could you just give us more opportunities for questions? I think we can give 1 question to onsite investors and analysts.

My question actually is about President Liao Lin's new term and it has already been answered. I would like to ask another question. In government's work report, it requires the further lowering of real interest rate of loans. This year, the big background may be recovery of PPI. And the government asks further lowering down of real interest rate of loans. How can we interpret the word real?

We will ask Vice President Zhang Wenwu to answer your question.

I will not go detail into the work report. I would like to explain from the perspective of Commercial Bank. Analysts concerned a lot about the downward trend of NIM. The calculation standards for NIM has been adjusted according to the requirement of Ministry of Finance. The fee- and the credit card-related income has been adjusted from fee and commission-based income to interest income. First, we will reflect on the reasons for downward trend NIM in 2020. Our asset yield and the cost are both decreasing. However, the asset yield is decreasing relatively faster than the cost of liabilities. However, our situation, the decrease of NIM is much better than our international peers. ICBC witnessed a 15 bp downward of NIM, but international peers decreased by 40 to 60 bps. There will be more disclosure of performance of different peers. And I think all banks face pressure in its NIM trend. Besides, I believe you cared a lot about the trend of NIM. It's hard to expect the trend. But I would like to share with you several aspects. Since 2019, the beginning of 2019, the yield of asset has decreased quarter-by-quarter. But since the fourth quarter of last year, the decrease has slowed down and gradually stabilized. In terms of liability end, the competitiveness is very fierce. And the price is -- and cost is being elastic. The LPR has been stabilized for several quarters. On the other hand, the interest rate of 10-year treasury bond of U.S. is increasing fast. So combining domestic and international market factors, it's hard to define -- it's hard to come to the conclusion that there is a one-side rise or decrease. So these are all information to help us judge the trend, but it's hard to come to a single conclusion. ICBC has adopted comprehensive measures, for example, the advantage of combination of online and offline; the fintech advantages. We will leverage on these advantages, including financial and nonfinancial measures to do this core work well; that is to manage the NIM well and to give good return to investors.

I would like to supplement. There is 1 analyst asked about the pricing of loans and how to understand the real interest rate. I think your focus is on the pricing. But for a large bank as us, we pay more attention to balance than pricing. Balance the competitiveness, the management of risks and the capital constraint as well as the management of scale. I think these aspects, 4 aspects are most important. In terms of competitiveness, you will see the cost of liabilities, the market share and the noninterest income proportion. In terms of risk management, you will look at provision coverage ratio and NPL ratio. In terms of capital constraint, you will look at capital adequacy ratio. In your analyst models, you will balance these indicators. And the most important indicate -- aspect you pay attention to must be the value-creation capacity.

Today, the Q&A session is concluded. Thank you for your participation.

Today's earnings call is quite successful. In the past call, we have answered questions of risk management, fintech, strategic transformation, serving the real economy and transformation of our outlets as well as the new WMP regulation, credit extension, NIM and also personal finance, which totaled 13 types. We have conducted a candid discussion and all of our management members have been quite frank while answering your questions. And I think all of their answers have answered your concerns and showed you the comprehensive picture of our strategic system and development outlook. Some questions via webcast were unanswered due to the time limit. Welcome to communicate with our IR team after this meeting. In the future, ICBC will be striving to become a world first-class financial group, conforming to relevant regulations, create value in a sustainable way for our investors and analysts. Thank you again. Wish you good health. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]