China Merchants Bank Co Ltd

SSE:600036

Earnings Call Transcript 2023-Q1

[Xia Yangfang, executive]

Dear investor, analysts. Good morning. CMB 2023 First Quarter Results Announcement will now begin. I am CMB Securities Affairs Representative, Head of the Office of BoD, Xia Yangfang.

On behalf of China Merchants Bank, I'd like to extend a warm welcome to your participation and thank you for your long support, interest and investment in CMB. The conference will be held online.

First of all, please allow me to introduce the bank's attendee today. They are Mr. Peng Jiawen, Executive Assistant President and CFO of the bank; Ms. [ Li Li ], General Manager of the Finance and Accounting Department; Mr. [indiscernible], the General Manager of Corporate Finance Group; Ms. [indiscernible], the General Manager of Retail Finance Group; Mr. [indiscernible], General Manager of Risk Management Department.

There will be 2 sessions in today's meeting. The first session will be introduction of the 2023 first quarter results given by Mr. Peng, takes around 15 minutes.

The second session is Q&A session takes around 1 hour and 15 minutes. We expect to conclude the session by 11:00 a.m. and the meeting is supported by the simultaneous interpretation from Chinese to English. Now let's give the floor to Mr. Wang on the introduction of the 2023 first quarter results.

[Jiawen Peng, executive]

Dear investors, analysts, good morning. This Wednesday night, we released 2023 first quarter report. And together with the general managers of relevant head of this department, I'd like to communicate with you.

Thank you, first of all, for your long support and interest in CMB, and I am very happy to have communication with you today. What needs to be specified that we will take the IFRS calibre for the above -- below mentioned financial statistics. Since this year, we have take to build a value creation bank as our strategic goal and uphold a dynamically balanced development philosophy of quality, efficiency and scale and secure steady growth in our balance sheet, net profit and our asset quality.

Our Quarter 1 operation is made basically featured by the following 5 characteristics. First of all, we maintained very stable profitability and high level of ROAA and ROAE. Net operating revenue, RMB 90.6 billion, down by 1.49%. Net profit attributable to the bank's shareholder, RMB 38.8 billion, up by 7.82%. ROAA and ROAE was 1.5% and 18.43%, down by 0.04 and down by 0.81 percentage point year-on-year.

We have secured stable profitability, forming effective support on our CAR. Our core capital adequacy ratio of Tier 1 under the events and weighted approach were 13.41% and 11.36%. Secondly, we have strengthened effective allocation of asset and liability and secure the steady growth of our net interest income.

We have actively grasped the recovery opportunity of Chinese economy and achieved RMB 10.51 trillion of our total assets, up by 3.65%. Total loans and advances, RMB 6.34 trillion, up by 4.7%, among which retail was RMB 3.24 trillion and was up by 2.39% compared with the end of last year. Corporate loan, RMB 2.55 trillion, up by 7.46% compared with the end of last year.

Financial net investment, RMB 2.94 trillion and the group's total liability was RMB 9.52 trillion, up by 3.64%, among which total customer deposit was RMB 7.77 trillion, up by 3.13%. The company's -- the group NIM was 2.29%, down by 22 bps and down by 8 bps year-on-year -- quarter-on-quarter.

The main reason is due to the multiple LPR cut and the decrease of interest earning assets yield along with the increasing customer deposit costs. We will continue to optimize our interest-earning assets and interest-bearing liability structure and to some extent, offset those kind of negative influence. And we have recorded the proportion of our demand deposit average daily balance of 60% and maintain our net interest income at RMB 55.4 billion.

And thirdly, we have overcome those kind of negative influence and recorded net noninterest income at a high level, which is RMB 35 billion, down by 6.18% year-on-year. And we see its proportion at 38% of the total net interest -- net operating income. And this reason is mainly influenced by the fluctuated capital market and the lower investment willingness of our capital -- of our customers.

Other noninterest net operating income was RMB 10.1 billion, mainly influenced by the bond and fund investment yield. And fourthly, we have made very effective risk management and maintain good quality in our assets. We have stick to our strict classification of assets and truly reflects our asset quality.

Our NPL ratio was 0.95%, down by 0.01 percentage point. New formation of NPL was RMB 16 billion, up by RMB 587 million. The annual NPL ratio formation ratio was 1.09%. Along with the recovery of our economy, we see a decrease in the early indicator of asset quality, such as special mention, overdue, low ends and balance and their proportions.

The group's special mention loan balance is RMB 70.7 billion, down by RMB 2.7 billion; special mention loan ratio, 1.12%. The overdue loan balance was RMB 77.8 billion, down by RMB 415 million compared with the end of last year with a ratio of 1.23%. We continue to stick to prudent and stable allowance making policy and makes sufficient allowance to strengthen our risk compensation capability. The group's allowance coverage ratio was 448.32%, loan allowance ratio 4.27% and annualized credit cost was 1.04%. We continue to promote extensive wealth management business and our retail customer base and AUM continue to grow.

Retail customer number, RMB 187 million, up by 1.63%. Sunflower and above customer number, RMB 4.32 million, up by 4.49% compared with the end of last year. PB client 138,000, up by 2.81%. Under the backdrop of the market with volatile capital -- volatile capital market, we still maintain resilient extensive wealth management business with a retail AUM of RMB 12.54 trillion, up by RMB 412 billion. Sunflower and above client AUM RMB 10.19 trillion, up by 3.27% compared to the end of last year. PB client AUM RMB 3.89 trillion.

The asset management business totaled RMB 4.28 trillion, down by 2.95%, among which we achieved growth in China Merchants Fund, China Merchants International and CMB CIGNA Asset Management business. And CMB Wealth Management product totaled RMB 2.46 trillion, down by 7.87% compared with the end of last year.

Looking into the full year, we still see very complicated external environment. We see -- we can see recovery momentum, but the foundation is still not solid. We will continue our strategic goal of building the value creation bank to remain the 3 unchanged principle that is to let the President assume responsibility under the leadership of BOD, the unchanged and market-oriented mechanism, the stability of our talent team and to construct our 3 capability to create value and to achieve growth in volume, revenue, profit value and to promote the high-quality development of the bank and create better value for our shareholders, employees, partners and society.

Thank you. Now let's move on to the Q&A session. Please state your name and the agency you represent before you raise the question. Now we'll have the first question.

[Meizhi Yan, analyst]

Please allow me to introduce myself first. I am Yan Meizhi from UBS. I'd like to ask senior management a question regarding the revenue and profit growth. We understand that the current external environment is very challenging. And I see CMB's performance is actually outperforming your peers in the first quarter. So I have a question that for the Chinese Banking industry, the revenues have recorded a negative growth compared with the same period of last year. And also, we see the same situation for the profit before allocation.

And I would like to understand whether it is the sharpest drop along the full year. And will we see any kind of changes improvement after the second quarter? I'd like to learn from the senior management, how would you see the revenue growth for the full year? And I also learned from the report that you have maintained a relatively high allowance coverage ratio of over 400%.

So do we regard that we will still have a double-digit growth for the net revenue for the following quarters of the full year and to maintain our high level of ROE. These are basically my questions. Thank you.

[Jiawen Peng, executive]

So after we released the first quarter results, we have the responses from our investors and analysts and their interest in the revenue and profit growth, and they have all given us very good advances and suggestions. So today, it's a very good opportunity for us to share with you our point of view. And it is also beneficial to our internal analysis for our performance. And I'd like to share my point of view taking today's opportunity.

As for profits, I've also seen some comments from our analysts that you have not expect our single-digit growth of our profit. So 7.9% is under the group's calibre and 9.2% is under the bank's caliber, which is single-digit growth instead of double-digit growth. I think it's a normal reflection of our performance. And it is within the normal range of operation. The bank's operation performance is also a reflection, a part of the Chinese economic performance. As the external environment shows that Chinese economic development is under pressure and to some extent, it will definitely be reflected in the bank's operation as well.

We have to admit that there are some lag effects for the bank's performance compared with that of the Chinese economy performance. And I think it is also a very normal reflection of the economic development condition for the past year. It is not a single case that you can see in CMB, but also what you can see from our banking peers in the Chinese banking industry. This is my answer to your first question.

The second is that whether it is a double-digit growth, I think it is not a very big matter. I think for our single-digit growth, it is relatively a large figure. It is not that far from a double-digit growth. It is not a big base number. So I think we can -- our attitude is that as we can stick to our strategy, as we can stick to our planning, we can maintain our organic growth in our general development. And basically, I'd like to also take this opportunity to share my point of view regarding our development trend.

Although for the revenue, under whatever caliber we adopted, we undoubtedly recorded a negative growth of either 1.49% or 1.47% of our revenue growth. I've also seen concern from the market, and it is totally understandable. We are paying special attention to the revenue condition. And since last year, including the annual result conference we held this year for 2022 full year, we have also communicated with our investors and analysts that we admit the revenue growth tend to be one of our major concerns for this year. And in our point of view, this year's result is within our expectation.

Actually, the revenue is consisting of NII and net noninterest income. And we see some pressure in our NII growth, and we have taken measures to enlarge loan extension to offset the disadvantages from the interest rate declining trend. And to offset the pressure brought by narrow NIM. A major reason of our overall declining in revenue is mainly due to the development of net noninterest income. And one of the major concern of yours would be lying in extensive wealth management revenue.

And many of you have mentioned that why we cannot record significant growth in expensive wealth management business. And I'd like to share with you my point of view regarding this matter. We'd like to say that wealth management business, regardless of its changes in the revenue, CMB still maintain a good growth momentum. We think that the major indicator to measure whether a bank's wealth management business or not, is basically the customer base growth. There will be changes brought by products, brought by our revenue metrics. These are all very natural external factors that influence our revenue. As seen, we always play customers within our center and always take customer-centric philosophy.

We can see that for the past periods of time, what our customer is actually interested in is deposit-oriented products. And we have also catered to their needs and increase our support of deposit products.

In order to follow our customers' needs to some extent, we have sacrificed our pursuant of revenue, of income. For myself, I am the Chief Financial Officer. And personally, I tend to be reluctant to sacrifice our revenue to cater to customers' needs. But internally, we have always followed the customer-centric philosophy as long as it is what their need, we will provide such kind of solutions and products to our customers.

We can see that the proportion of deposits in our total AUM is increased by over 4%, and we see a large number of wealth management product scale transformed into deposits. So therefore, it is a reflection of the demand of our customers. So the change of as large as over RMB 500 billion amount of volume will definitely lead to a decline in our revenue.

If we put all saving deposit products into consideration as part of our AUM, we do not see such large and sharp decline in the net noninterest income. So therefore, I think we need to take a holistic point of view in this matter. And I believe that along with the change of the external environment, customer needs for products and the supply of products will also be changing. So therefore, I believe the trend will be reversed as well. And I'm happy to conduct further communication with you. Based on the above explanation I provide, we can fill other figures indicating the good growth momentum of CMB's wealth management business such as the growth of our customer base.

And now we have around 187 million customers, up by 1.63% compared with the end of last year and our AUM was grown by RMB 400 billion around compared with the end of last year, even under such adverse external environment. We indeed see changes in customer demand. And on the one hand, we have been catering to their needs; deposit, insurance policies. These are what our customers actually need and this is also areas we increase our supply.

This is what we have -- this is what we have strengthened our capabilities. Our sales of mutual funds has increased by over RMB 100 billion in terms of the volume. So if you look back to our performance, if you take a multiple point of view and compare it with that of our peers, you may see a difference with our peers. And I think that is what we can outperform in terms of this area. And I believe that the above explanation can answer your questions.

Our exports and consumption has been recovering in a good momentum. In the annual result announcement, we achieved that I have predicted a relatively positive trend. And based on my prediction, we have a better outcome according to the national statistics. So we have -- we can confirm that the recovery momentum is trending towards a good momentum. So this is my confidence over the external environment, and secondly, to see from the business operation perspective.

Our [indiscernible] performance was showing momentum, such as saving deposits. Some investors noticed that our deposit growth is only around 3% and think it's quite weak. But what I want to share with you is that I think you can more emphasize on the annual average amount of the deposit rather than on deposit balance on point of time.

So as you can see, the annual average growth rate for deposits is over 11% is such a good growth.

And if you look at loans, including retail and also corporate loans. On our annual results conference, I also shared with you that loan growth is better than last year, especially for corporate loans. And the incremental amount for corporate side is over RMB 90 billion compared to the amount of last year. And also for retail, the growth of retail is also more than the same period of last year.

And for credit cards, now is declined by around RMB 2 billion, but the decline amount is smaller than what we have in the same period of last year. These are the signs that shows better performance of the bank. But for mortgage, we are still facing pressure, still seeing negative growth. And we think that it can be the shortfall for mortgage can be supplemented by the growth from micro and also consumption loan.

And if we look at the customers, we have sound growth for retail and also corporate customer. Later on, we will have more review on that. And also for business side for wealth management, it shows quite a good momentum for wealth management. In the first quarter, even though if we are seeing decline year-on-year, if we look at from a quarter-on-quarter basis and a month-on-month basis, it's all showing better momentum.

And also for credit cards compared to the same period of last year, the transaction volume is not is also negative growth, but it has been positive since March and also better in April. So these signs also showing a better performance indicator and also for asset quality is still quite stable, and we are seeing declining NPL ratio. And the early risk indicators like the special mention overdue loan or in-collection loan ratio or are seeing they are turning better. We cannot say that it's a confirmed turnover trend but these early signs and indicators are showing better signs.

And as for your question regarding whether profit can grow in double digit, I cannot give you the exact number, what I can say is, as long as Chinese economy is certain, we are confident to maintain a sound profit growth and maintain stable OE level. Thank you very much. Next question, please.

[Operator]

Next question coming from Huatai Asset Management, Mr. [indiscernible].

[Unknown Analyst]

My question is regarding fee income. Just now Mr. Peng has touched on some points. I think we can divide fee income to 2 parts. One is related to wealth management. The other one is the bank card fees relating to consumption. In your first quarter report, we have seen decline in both parts to a certain level. I know that wealth management fee is relating to capital market. Also, you have given us some positive signs. But in an objective way, we think that still, you are seeing decline in your fee income. So looking forward in your mid-run, what's your forecast? Or what is your strategy to better form your capability to generate more fee income and to outperform your peers?

[Jiawen Peng, executive]

Mr. [indiscernible] will answer your question.

[Unknown Executive]

Thank you for your question. Just now, Mr. Peng has shared with you the reasons behind the changes in our fee income. Just now, you said fee income can be divided into different categories, one is wealth management. In first quarter, we have recorded a fee income for Wealth Management around RMB 9.1 billion and even though we are seeing decline in fee income in wealth management, as we're seeing growth in AUM. And the annual AUM -- annual average AUM for the first quarter has grown by over RMB 10.5 billion and for a total gross amount around RMB 1.2 trillion, amounting 64% of deposits is a significant structural change.

And this structural change of our AUM definitely pose some pressure on the fee income. But the amount -- total amount of AUM is still growing. And if we look at the mutual fund side, we are also seeing the sales fee is declining to around 12% decline, but the amount of the total sales of mutual funds is growing. The decline is because of the structure of the new sales of mutual funds. This year, we have more selling of the money market fund and it's almost 6.5x of the money market funds compared to the same period of last year. But for equity-related funds, it's less than 29% of what we have last year. Fixed income fund is quite the same as the same period of last year.

So as you can see, the total amount of the sales of mutual fund is growing, but the structural is different. That is why we are seeing growth in selling amount, a decline in revenue. But still, our capability for mutual fund is still there. It's only -- the change only reflected changes of customers' demand. And secondly, for insurance down by around 6%. There are some special reasons.

Last year to this year, we actually set up our efforts to allocate more insurance for our customer and our growth volume of insurance is very good and very strong. Last year, the growth of the sales of insurance is around 60% -- over 60%. This year, the growth rate of the sales of insurance is around 50%.

But some of the revenue will be delayed when you are selling the insurance. Last year, we have posted more stricter revenue policies for the income of the policies and also -- that is why last year, we have recorded a higher revenue growth for insurers.

And for wealth management products, this year, you can see that fee income for wealth management has down by around 24% compared to the same period of last year. One is the risk appetite for customer has changed, and peoples' risk appetite for wealth management and demand for wealth management also declined. And customers are preferred more short-term wealth management products or cash management -- wealth management deposits -- wealth management product, but less demand for fixed income wealth management products. And this structural change also led to a decline in the fee income for wealth management. And for trust products, it's also the same.

As you can see that the real estate-related customer product, we are actively reducing the amount, which also led to a decline in net income. What I want to emphasize is that our capability for wealth management is still growing and the decline in the fee income for wealth management only shows the changes of customers' risk appetite and with more better performance of the capital market, our performance in fee income can also be improved.

Secondly, as for bank card fees, you also see the change is down by around 6% year-on-year. It's mainly really because of the income from credit card. Two reasons behind the decline of credit card, first one is the transactional volume. This year, we are seeing a recovery of transaction volume. But compared to the same period last year, the transaction volume still down around 3%.

Second reason is because of the new rules of credit card. This also have some impact on credit-card card fees, is a problem that is facing the whole industry. And with the recovery of consumption, we are expecting a better performance for card fees -- bank card fees. Thirdly, for settlement and clearing down by around 14%. It's also because of the special accounting measure last year. Last year, we also included some of the historical revenues into our fee income for settlement and clearing. So if we exclude this, it's onetime and special reason, we are seeing positive growth this year.

So overall speaking, we think that last year, fee income has been affected by customers' demand or capital market change and have seen some negative growth for fee income in the first quarter. But if we look ahead, if we look on a Q-on-Q basis, the momentum is showing better performance.

And if we exclude the accounting reasons from last year, we are seeing that the performance is better compared to the same period of last year. And when the economy recover, we think that we will see gradual improvement in our fee income.

[Operator]

Next question is from [indiscernible]

[Unknown Analyst]

Just now, the two questions regarding the financial indicators and my question is regarding long-term objectives on CMB [indiscernible]. Since Q4 last year and this year Q1, we see many banks have all experiencing a condition that is to record a negative growth in revenue. I think it is of some periodic factors influence. But generally, this also will be brought by the changes in the external environment and the digital transformation.

I understand that CMB has experienced [indiscernible]. So as we release the quarterly report this time, I think the market is also [indiscernible] from CMB. I would like to learn from Peng Ji that during the transformation of industry and the external environment, from the perspective of the company strategy and operational strategy, how will CMB cope with the current condition and how will you respond to the challenges and to maintain your profitability?

[Unknown Executive]

Thank you for your question. I can understand what you have asked, and thank you for your question again. As we release these quarterly reports, we have learned from some of the investors and analysts that they have shown interest and some concerns on the financial indicators, financial statistics. And I'd like to thank you for your attention that actually leads us to a more focused and analysts on our internal operation. It is just because of your attention on us that makes us strive to deliver better returns to our shareholders, our customers.

As we look into the future, I totally agree with you that not only should we lay attention to short-term financial indicators, but also we need to focus more on our long-term goal, our strategy and our planning. So I'd like to give you a brief introduction over your question. And as for the strategy on how we're going to maintain our growth rate, I will introduce other senior management or other general managers to further introduce.

So previously, in our annual results conference, we have already explained a bit. So I would like to illustrate further today. In the value creation bank, as we have taken it as our strategic goal, we need to maintain a balance between capital light and capital heavy business. Previously, the Chairman and President Peng have both explained. And as for the capital heavy and capital light business, we've mentioned we need to strengthen the capital heavy business and to optimize it. We need to optimize and expand the capital heavy business.

And as for capital heavy business, we understand it as an operation on our existing business. It is highly correlated with our net interest income. So for this business, we'll not cover every asset. We need to strengthen it, optimize it. So therefore, capital heavy business has a very clear emphasis, for instance. In category asset allocation, retail assets will still be our strategic focus. That is undoubtful.

Even though there will be some slight changes in the asset structure, however, retail assets will still be a very clear strategic focus. And as for corporate business, we focus on the 6 major areas. And later, the general office -- head office will explain further of corporate finance. We need to plow deep into the 6 major areas in the corporate finance business. It is related to our noninterest income.

As for our development in the capital light business, the key is wealth Management and asset Management, including custody, financial market and investment banking. As these businesses have all so been introduced in our previous communications, so we need to further expand and optimize the capital heavy business within this field. This is the first aspect. In the long run, we need to make good integration of the capital heavy and capital light business. I recall that previously, we have heard question that whether -- as we mentioned, the capital heavy and capital light business integration, it does not mean to coordinate the full major business area and lay equal emphasis on it.

For us, I think we have different -- differentiated emphasis on different business, as mentioned above. For capital heavy, we need to strengthen and we need to optimize. And for capital heavy, we need to expand and need to optimize . Along with the development of fintech, we see emerging new business opportunities, and we need to cloud deep and to develop our insights in those emerging industries, for instance, pension fund, automobile finance, et cetera, these niche markets require us to make more efforts and carry out our planning accordingly.

And the third direction is that we need to pay special attention to develop key areas business. For instance, Yangtze River Delta, the Greater Bay Area and et cetera. Internally, we have a calculation that within the CMB's business structure, we have a 4-2-4 structure. Beijing, Shanghai, Shenzhen contributes -- these 3 branches contributes to 40% of our business and revenue.

The 20% revenue and business were contributed by the Yangtze River Delta and Pearl River Delta. And the rest 40% were contributed by the following branches.

Therefore, we'd like to adjust our structure into a new one to enlarge our middle-level customer base and branch strength to make it into a 4-3-3 construction, 40%, 30% and 30%. And these branches within these areas have shown good growing momentum. However, they have still large room to grow to have more market share within the local market. So this will also be one of our importance.

The fourth aspect is about risk, regardless of whatever kind of development risk is still one of the major topics. We emphasize our value creation chain to increase the volume to increase the revenue. And I think if we can make risks under control, we'll deliver a good result in terms of our profitability. So in the future, we'll definitely maintain our risk preference, as always. It is covering in every aspect of our risk management. We'll illustrate further and introduce the General Manager of Risk & Management Department.

So generally, I do not see any large changes in terms of our strategy. We'll continue to take retail as our main focus and to pay special attention to key areas, key business and to further strengthen our strength -- our advantages in retail finance business.

And I'd like to give the floor to 2 of my colleagues to further illustrate our consideration of each business line.

[Unknown Executive]

Thank you. I'd like to make some addition ideas on corporate finance. Just now as President Peng mentioned, we we'll stick to the acquisition of quality clients and operations. Firstly, acquiring these kind of clients, we have established a set of factors to acquire these kind of clients. We have list -- make clear list of these clients bank-wise. For instance, to find the connection of these quality clients of our existing clients to deliver these useful information for our frontline relationship managers to reach to these clients.

On the other hand, for the operations of -- for the in-depth operation of existing clients, I think we have also delivered good results. And we have also made new great breakthrough in the first quarter. And for -- we have reached a 50% growth of customer number for daily deposits of over RMB 500,000. We'll continue to give full play of CMB's wholesale finance strengths. We have accumulated 6 characteristics that is customer classification and segmentation management including the strategic client operation under the head office level and branch level, including inclusive finance operation, we have cultivated specific talent teams to operate these different types of clients.

The second is the integration of investment banking and commercial banking business. The third is that we seek to our industry-oriented professional operation. For this year, we have acted further based on the 14 key industries. We have carried out in-depth understanding and research and enhance our understanding towards the industry and to take an active participation into the customers' operation and to follow a new principle of one bank for -- all bank for one client operational mechanism so that we can realize an in-depth operation of these key customers.

Of course, we can also extend our operation throughout the key customers, core customers, industrial chain and supply chain. And of course, we have also made good results in digital transformation for corporate finance and also the market and risk business line have extended great coordination with each other. Therefore, we realized good growth in our customer base even though under the backdrop of quick asset volume growth, we can still guarantee a good risk management condition. In a later period, we'll pay further attention to several key areas.

Firstly, according to the national policy, we'll strengthen our support to real economy, including manufacturing industry, SI tech enterprises, inclusive enterprises and also cross-border finance business, this is also one of our traditional strengths. And also cater to the enterprises' needs in digitalized transformation and provide relevant comprehensive solution to them.

And last year -- and last month, we have launched a new digital finance platform, and we believe by focusing on these key areas and combining what we have developed in terms of our strength, we can better deliver solutions to these selected customers to outperform ourselves among our peers. This is my introduction.

[Unknown Executive]

And under the current market circumstances, I think it's quite a difficult situation for all the wealth management to achieve that. For CMB for years of accumulation, we have already formed our systemic advantage and today importantly we have a [indiscernible] team. Of course, with a market change, we'll upgrade our systemic advantage. Specifically, I'll like to share with you on the following aspects. The first one to upgrade wealth management customer base is so important and also a new acquisition of new customers. Last year, we have combined the advantage from our corporate business client and also to proceed with our integration advantage with our corporate banking and the targeting and employees [indiscernible] corporate strategic customer is very precise marketing and reemphasize the acquisition of new and young customers. And secondly after following new customers, how we manage all the customer to maintain the relationship with our customers.

Very importantly, as you can see on wealth management customer of CMB last year was over RMB 43 million. And in first quarter, we continued to see rapid growth at least 12 new customers a month. And we're providing digital services to our customers from -- and also providing the comfort for the mix to our customers. Last year for FET, sales of FET product given our decline in whole market our sales of FET products have seen double-digit growth last year. So you can see people -- our customers recognize our online and off-line integrated service business models. And this year for our customer above 70% of our customers have seen rapid growth as well as private banking customer. This all reflects the high-end customers, especially private customers, they trust CMB and are very loyal to the bank. This is also one of our advantage.

Secondly, besides customer work, asset allocation is another important capability for the bank, especially now we're entering full [indiscernible] area and the institutions who can really create value for customers and we continue in the market. So the professionality in asset allocation becomes more and more important. And we actually have long-term accumulation -- accumulated experience in that. And we -- our talented professionals. We have formed a [indiscernible] asset allocation system. With this systems, we can understand our customer and their image and asset allocation plan for our customer, which is accommodate different demands. And for investment products, we're improving customer education and help customers to review their assets and try to rebalance their assets.

Well, I think investment is something against human nature. And they are important by reviewing we can help choose our customers to better allocate their assets in different banks and say that we are accompanying our customers to watch with their cycles. Lastly, customers [indiscernible] as well by over 16%. As we can see the [indiscernible] has become even stronger. As just now, Mr. Li has introduced for neutral platform for insurance and also for AUM, our market share are all improving. This shows our competitiveness is still there and is still improving. And thirdly, for our competitiveness [indiscernible] product selection, we're -- and deeper cooperation with other third party wealth management platforms including mutual funds [indiscernible] funds to select better products for our customers.

Next question please.

[Wenjing Jiang, executive]

Next question is coming from Katherine from JPMorgan.

[Katherine Lei, analyst]

I think this sounds that the wealth management [indiscernible] market share is [indiscernible] as different package one, we have seen that in the core so from a deposits, especially the most carried [indiscernible] down, slowing down. Do you have some experience to share? [indiscernible] for I know that also in talent. And also arise on the rate higher than year. And last year, I remember that Mr. Wang said that our income ratio remains down in the trends. So what is your projection right now? Are you seeing a flatter [indiscernible] income with slowing growth rate and revenue or what is your projection on that?

First one, has changed on wealth management. I think there is something new and something old. Something unchanged. A lot has changed is the total amount [indiscernible].

[Unknown Executive]

[indiscernible] just now your question not to mention what you are seeing financial products.[indiscernible] transition from the past and we always emphasize that deposits also [indiscernible] we can allocate on also in [indiscernible] and we are seeing some of that estimate to expansion and in. And we're seeing some of the customer deposits still consider cashless [indiscernible] financial products. And foreign deposits has taken [indiscernible] annual on of our market is very strong at certain small.

It doesn't mean that outflow of our AUM, but it's flowing into the cash management products with a low volatility or some of the cash management mutual fund?

[Liang Wang, executive]

These are the things that have changed, but I think the customers' risk appetite hasn't changed much. This is to your first question. Secondly, just cost-to-income ratio in first quarter, what you are seeing a negative growth of revenue, but fee income continued to grow. So I think you are concerned about the rising cost-to-income ratio. And I want to assure you that, overall speaking, for the annual budget, we want to maintain stable cost to income ratio.

And last year, we have consecutive 2 years reduction of cost-to-income ratio. So this year, our plan is to maintain a stable one. I don't -- I think you do not need to be bothered by fluctuations by sequential cost-to-income ratio. Some of the costs will be shown and will be allocated in first quarter or is -- only some quarterly disturbance. So I don't think you should need to be bothered by that.

Next question, please.

[Wenjing Jiang, executive]

Next question is coming from Mr. Mark [indiscernible]

[Unknown Analyst]

I'm very glad to see that no one is concerned about the asset quality. So I think my question is from the risk side. For the first quarter, the property loan NPL, the exposure on new NPL formation is slowing down. So what is your projection on the property loan -- from the property loan?

Sorry, I was offline. I want to repeat my question. Would you please share with us your projection on the risk situation of the property loan and especially for the first quarter, your provision for loan is much faster than the growth of loan in the first quarter. So whether you want to expose or the risk in your first quarter? This is my question.

[Jia Wei Lam, analyst]

Mr. [indiscernible] will answer the question.

[Unknown Executive]

Thank you very much. Finally, its comes to risk. I think that you are quite assured by -- you are more confident about the asset quality of us. I think your question is regarding 3 aspects. The first one is overall asset quality. Second one for product market and third one for credit costs. First to credit costs. First quarter, as you can see the credit cost is around 1% in the first quarter up by 0.22 percentage points from the same period of last year. And this is mainly because of the growth of asset size. It's not related to the deterioration of asset quality. And I think that when times goes on for the whole year, we're quite confident that credit costs will remain stable.

Secondly, for the overall situation and also for the property market. For first quarter, I think, shows the following characteristics. The first one, overall asset quality is still sound. Last year, our NPL ratio is 0.95%. It's quite good among the peers. And this year, in first quarter, we have seen 1 rise and 5 declines except from the balance of NPL up by RMB 2.3 billion. NPL ratio, special mention loan ratio and amount of special mention loan overdue loan ratio and amount are all declining. So we can see asset quality is overly stable.

And secondly, for retail asset quality is also stable. And the trend is turning better. We're also seeing 1 rise and 5 declines except the balance of NPL amount has raised by over RMB 200 million. All the others are declining, including NPL ratio, special mention loan ratio and balance overdue loan ratio and amount are all declining.

And if also for micro loan, mortgage loan and credit card loan, the overdue loan amount are all declining and consumption loan, we have a slight increase around RMB 100 million for consumption loan NPL. It's a very slight increase. And I think one of your concerns is the mortgage, whether we can surpass the test of external environment and for overdue loan for mortgage is around RMB 6.1 billion, less than the same period of -- less than last year. And for credit card, I think that risk is declining. All the risk indicators are showing declining trend, including NPL, special mention or overdue loan and balance are seeing declining trend.

And we're following very closely on the macro situation. In first quarter, we're seeing recovering signs and including transaction volume and also the indicators for asset quality are turning better. And we think that the NPL -- we think the ratios above have rooms to further decline if there is no big deterioration in the economy. And it's highly possible that the NPL formation of credit card will be the highest. We'll reach the peak in first quarter, if there is no further deterioration of macro economy.

Thirdly for property market, I think we -- the peak has already passed us. Namely, the NPL formation, peak has already passed. And if we look at the asset quality, it's now stablizing. And actually, we have already in-depth study about the underlying assets relating to property the CMB has. We think that this year, the NPL formation amount will be smaller than what we have last year. And we think that within this year, we can expose all the potential NPLs relating to property market this year. And next year, you will not have negative disturbance or impact on the total overall asset quality of CMB, but property loans are usually product loans.

So for the disposal of these NPL-related loans usually it takes a longer time because it involves different parties. Since it's very difficult to dispose of them, it may result in even higher NPL ratio for property loans. Overall speaking, our risk culture continues to be prudent and stable as we follow strict classification of risk and to fully expose the portable risk and also to have the right provision in place for potential risk.

So to make sure we have sufficient risk buffer in place, bank is an industry, like -- running a bank is like running a marathon. If we need to run longer, it depends how well you can manage risk. And with the efforts we made, we hope that we can create a fortress risk and compliance system to create value for customers.

[Wenjing Jiang, executive]

Thank you, Mr. Xu. We'll have the next question. The next question is from [indiscernible] from Morgan Stanley.

[Unknown Analyst]

I am [indiscernible] from Morgan Stanley. I have 2 questions. The first is about our loan pricing and NIMs expectation. We see from many pressures of many banking peers that loan pricing is still one of the biggest challenge. What is the trend of the loan pricing for CMB in the following quarters, especially in the retail loan perspective?

You see from the deposit perspective, we see from external news that many banks have tend to lower the deposit interest rate. Will there be any further space to narrow the cost for CMB? What is your outlook?

The second question is that is on capacity building. We see that capacity building is one of the important requirement for the banks' operation, for instance, the manufacturing industry loan and for the wealth management capability, and we see many of your peers are running after you and they are trying to catch up with CMB. I'd like to learn from CMB that what CMB has obtained in terms of your strength as you can lead the industry, especially under the environment of the NAV transformation of the WMP and how can we demonstrate our capability to manage this kind of WMP?

[Unknown Executive]

I will take the first question of NIM. I think NIM is one of your major interest in today's communication. As we can see in the first quarter report, some of you may consider it, the figure is out of your expectation. I recall in the annual conference meeting, and I've predicted by then that we're actually facing a downward pressure in terms of the NIM. Year-on-year, our NIM was declined by 25 bps, which is beyond some of your expectation. And under the group's caliber quarter-on-quarter, it is down by 8 bps. And under the bank calibrated figure, it's 6 bps.

So there will be some difference between the group's caliber and between the bank's caliber as there are some differences among our subsidiaries, which is quite natural. Regardless of quarter-on-quarter or year-on-year comparison, we both see drops because of -- the reason in SSI because of the lower asset yield.

By then, I've mentioned that loan pricing is influenced by 2 factors. The LPR cut is one of the reasons, which is aroused by both corporate loan and retail loan, such as the recession mortgage loan. That is one of the factors. And the second factor is the newly granted loan influence factor. The newly granted loan is extended under the current loan pricing situation, which is decreasing compared with the same period of last year. So along with the 2 factors adding together, our overall loan pricing goes down and the loan yield also decreases. This is the major factor we see.

On the liability side, there are also influences. Our liability cost has increased year-on-year, but the main reason of the increase is because of 2 factors. Firstly, we have taken a deposit products as part of our wealth management arrangement and provide relevant supply to our customers. So to some extent, it will influence our cost and deposit. And we also see some other facts showing that there are higher proportion of deposits in our retail AUM.

The second influencing factor is about foreign currency. Foreign currency interest rate costs increased. Compared with our banking peers, we do not have a high proportion of foreign currency assets. The deposit costs increased by 13 bps year-on-year for foreign currency deposit assets. But as we exclude the foreign currency factor and just take a look at the RMB deposit is not that high. I think the interest rate hike in the European and the U.S. countries have also cast influence on our portfolio. So this will also be one of the factors.

These factors adding together, leads to the current condition, and I have mentioned in our previous meeting that NIM narrowing is not just what we can see in the first quarter, so is LPR cut, loan repricing, these factors will go through the full year. In the second, third and fourth quarter, these are all the trends we see.

It will, comparatively speaking, be lower and be better than that of last year, but they will be still existing in the following quarters. We will not see a quick rebound of our NIM in the second quarter. That is not what we see.

But we have positive attitude towards the long-term development of NIM. And I'd like to share with you some of our perspective regarding the overall trend.

First of all, corporate loan pricing. The base is generally consolidated. Even though it is low, but comparatively, it is getting higher, we see an uptick. To see from the nationwide newly loan granted figure is RMB 10.6 trillion which we see that full year the figure will be around like RMB 24 trillion or so. And for the first quarter, it has already taken around 40% of it. So we think that the corporate loan yield will be increasing in the following period. Even though the increase will not be sharp, it is still moderately getting higher.

The secondly is that the very challenging external environment is getting better. That is the first trending we see. The second is that deposit costs, which I have mentioned earlier, it is influenced by 2 factors. On the one hand, some of our saving deposits have been actively allocated to our client, and we tend to guide our customers to choose those low volatile low-risk fixed income or cash management type of wealth management products instead of deposit products. That is one factor. The other factor is that foreign currency influence. According to our overall assessment, I -- we consider -- we already see the peak of the USD interest rate hike. And the U.S. dollar benchmark rate will continue to maintain at the current level or go down.

And for commercial banks, I think the banking peers are developing common sense and a better understanding over the deposit rate. For many commercial banks and the suburban and rural commercial banks, their understanding towards having high deposit rate to attract corporate or retail customer deposits have changed, and they have taken initiatives, proactive initiatives to lower their deposit rate to attract deposits from corporate customers.

So I think through the self-disciplined mechanism developed among the banking peers, among the banking industries, we can see some cost cut for the deposits along the market. That is the second trend we see.

The third is that to see from the structure, asset structure will also be correspondingly adjusted. For instance, we have always taken retail loan as one of our major focus. So objectively, we are subjecting to the change of the market and see some decline in the overall growth of the retail AUM. And indeed, we have to admit the retail AUM growth for last year is moderate. And for the first quarter, we still see a good momentum in the growth. And generally speaking, for the first quarter, corporate loan extension will be better than that of retail loans because of the underlying seasonal factors.

So in the following quarters, we will see a higher proportion on the growth of retail loan. Of course, these will all subject to the external environment factors. However, we are looking forward to the increase of the retail loan proportion, which will lead to the increase of the general revenue. For instance, the credit card, loans, et cetera. Since the beginning of April, we also see some good growth in the credit card business, credit card loan business, which can go beyond our expectations.

And we also see good recovery in terms of the credit card transaction and credit card consumption. So therefore, this is a positive factor.

And the fourth factor we witnessed is that the PBOC's regulation and monetary policy issued. These will all contribute to the bank's situation to delay the narrow of the NIM. This is contributing to the bank's cost control. In March, for instance, the reserve ratio cuts, which is beneficiary to the bank, especially commercial banks. So under these laws of regulations and policies, I think the bank is facing less pressure in the NIM.

Therefore, generally speaking, the bank will also be under pressure in terms of the NIM management. This year might be the hardest year we go through as we can sail through this difficult time and do a good job in asset management, case management and et cetera and leverage on our strength in the overall business management and to overcome external challenging factors, we can maintain our leading position among the banking industry.

It is not an absolute figure, but a relative leading position in the banking industry.

For the second question, I will answer to your question according to my understanding. As for capacity building, maybe you are mentioning about the capacity building of wealth management business. So for wealth management capacity, it is one of the major topic we pay special attention to. Many financial performance or business performance results, behind them are our capacity, are our capability. Take wealth management, as an example. In a short run, the product mix needs not too much attention. What's really worth mentioning and paying special attention to is our capacity. The short-term financial performance is basically a reflection of some changes of the proportion of our product mix.

What's really important is that we are customer-focused. We can always attract our customer and let them be loyal to CMB and that is supported by the CMB strength, our capacity. And by mentioning capacity, I think there are following aspects. Firstly, our professionalism that is very essential. For instance, our investment and research capability, our product design capability, asset origination capability, the RM's asset allocation capability, these are all reflections of our professionalism. That is for a long run, one of our major focus.

Apart from wealth management's professionalism, we have also developed special indicators evaluation for our wealth management subsidiary. For instance, we have developed indicators to the product yield for our wealth management subsidiaries to compare with its wealth management subsidiary peers to benchmark and see the results, whether it is above the average, whether it is outperforming its peers. This is one of the most important capability.

The second aspect is fintech capability. For CMB, I think fintech is one of our special emphasis. We have put out our -- our IT input is as many as RMB 14.1 billion, which is 4.5% of our overall revenue. We have developed the One Cloud, the [ formatted ] office and several driving engines, and this is our mechanism that we have adopted. I think we are the only systematically important bank that has actually fully migrated our business on cloud. It is one of the very important thing that we develop.

The 2 middle office, the data office and tech office, it refers to the case where we can let our employees to leverage on the cloud and make very convenient development to provide better solution and offerings to our clients. The data office refer to in-depth analysis and digging into our underlying database.

We can develop very accurate customer portrait and recommend corresponding products to our clients. The full engine, intelligent marketing, finance, operation, engine, et cetera, these are all reflection and demonstration of our fintech capabilities.

For Wealth Management business, I think it is a great integration of online and offline operation, human plus digitalization, fintech capability, professionalism, these are all capabilities we developed.

And the third aspect is the capability of our internal coordination. We have talked a lot with our banking peers. And you have also communicated with other commercial banks, or state-owned banks in the industry, you may find that what differentiates CMB from other banks is that we have strong capability of internal coordination, and it is everywhere. It is lying in every corner of our business, and it is embedded within the gene of CMB and CMBers. We have just mentioned Wealth Management sector, it is coordinating well with the asset management, the investment banking, commercial banking and custody segment, et cetera.

That is also reflected in the coordination between departments, between head office and branches, between head office and subsidiaries, et cetera. We have laid a solid foundation of coordination, and it is still an area we will keep investing, keep strengthening and to generate actual productivity from it.

For instance, the wealth management subsidiaries product increment is highly related to the increment of our AUM of our custody business. These segments are of strong level of coordination among each other. If one segment is influenced, other segments will also be reflected in terms of their figures.

We see some large redemption of the retail AUM in terms of the Wealth Management sector. And to some extent, that will also lead to the decrease of our AUM, the decrease of growth of our AUM and also the custody business. So therefore, we will continue to strengthen our capability in the level of coordination, in the level of our professionalism and et cetera.

We do see pressures among the banking industry of the Wealth Management subsidiaries. It is an industry trend. And for CMB, we are one of the entities that experience such kind of challenges. But I do see we have secured our leading position as well. Thank you.

[Operator]

Next question is from an individual investor.

[Unknown Attendee]

My question goes back to Wealth Management. I follow China Merchants Bank for a very long time. China Merchants Bank place Wealth Management at a very important place. But from first quarter, there are some fluctuations in your fee income and you have explained some of that. But if we take a longer view, CMB seems that doesn't have a very strong advantage in the overall wealth [indiscernible] bank is very strong in insurance and [ CABank ] is very strong in the higher yield of the WMPs. So what is CMB's advantage except from very big AUM? So what is your strongest advantage except from a large size? It seems that you don't have a special characteristic.

So in first quarter, against this unfriendly environment, you have seen quite a worse performance. So in the future, how can you build your advantage? How can you build your -- even though I know that wealth management is very related to external environment. So how can you relieve the burden or impact coming from the external environment?

[Unknown Executive]

I will try to answer briefly my understanding. First, thank you very much for your question. I know I actually read your report as someone who is not working in a bank or who is not a professional analyst, you have such a profound and deep understanding of CMB and also for other banks. And you very timely respond to bank's performance, really I am so much impressed by you. And I read your report and our Executive Vice President, who is in charge of the retail side also highly emphasize your report. And also, it has provoked some of our thinking. So what is our strongest point? Or what is our strongest characteristic?

You mentioned our peers. I think one of the major advantage of us, you may not notice that is asset allocation. It's a kind of strategy. It's not a certain product, but it's how we do wealth management. We are not selling one certain product or selling a product. Selling is not our motive. So I think the fee income is now the top priority for us.

Our priority for us is customers demand and customer satisfactory. So we think that asset allocation is very important. It's like we are a doctor writing subscriptions for our clients, but not a medicine shop selling only medicines to our customer. So to be a doctor, you need to fully understand our customer. And asset allocation is not [ horror saying ] but it should be supported by product system, by product design system, product -- origination product, and it should be supported by the professional talents team and also supported by system.

And asset allocation means that you need to have a complex platform of products and also, it should be supported by technology and also by online and offline services. That is why currently for asset allocation we have a TREE system and a highly agreed to the philosophy of asset allocation. So I think I really hope that investors can understand our philosophy of asset allocation. I think this is one of our major principles. But at the same time, we need to balance asset allocation and also the profit growth of the bank.

Without profit growth, the bank is not sustainable. Sustainable business model is to strike a balance amount as -- among customers' demands and profit -- reasonable profit growth of a bank, so I think we need to strike the balance of a win-win situation of both creating value for customer and also creating value for the bank.

How can we balance that? The key is diversified asset allocation. Allocation in one unique product that will definitely lead to a problem if you sell -- are strong in sell one certain type of product but when external environment changes, how can you survive? Asset allocation means that no matter what external environment is, you can survive.

So that is why just now I say that fee income of wealth management cannot fully reflect the whole performance of wealth management. I think it should also include more extensive definition of income contributed from wealth management, including deposit contribution, including other wealth products. It's not a good way to measure the performance of whole overall performance of wealth management by only using the fee income of wealth management.

If we take in the contribution from deposit, we are seeing year-on-year growth of around 8%. So if we can do better performance of better asset allocation, we can wait for a better market and now our current asset allocation system help us to position better to embrace the spring.

[Unknown Executive]

Thank you. Just now, Mr. Peng has elaborated on our core competitiveness, namely asset allocation. For asset allocation, it's very important for us and the pre-condition is you should believe in asset allocation. In the past 2 years, we have seen much volatilities in the market. But we continue to expand our base of our wealth management customer, and we are having on different products, including cash management products and equity products to nurture our customer and expand our customer, the base of wealth management customer is quite a tough process. In the most difficult time of selling mutual funds, we should insist on allocating equity products to customer.

And during the same period of time, we are continuing to face market volatility. So very importantly, it's the bank from top to down, continue to help to allocate equity mutual funds to the customer even facing a very bad performance of capital market and volatility in the market.

So we have seen our increasing share -- market share of our equity mutual funds.

With the continuous efforts, I think many customers, especially the ones who hasn't banked with us before and has been persuaded for us to allocate more to equity products in the worst time of capital markets, now they benefit from that, and they are very satisfied with the bank's suggestion of asset allocation.

Secondly important is the capability of our RM team, and we actually have internal analysis on the market and also internal study of different products and research on product strategy and at the same time, provide online or offline service to empower our RMs because online service in power is also empowering our offline relationship managers.

So in conclusion, one is we -- from top to down, we need to trust the power of allocation. Secondly, from different aspects, we are empowering our relationship manager to help them to be more professional. So from last year and also this first quarter, we are following our -- continue our consistent strategies. And we think that is taking effect. And when the market is better, we definitely believe we will perform better.

And thank you very much. Due to time constraint. Now we are going to close our conference, so we'll have one last question. One last question.

[Unknown Analyst]

[indiscernible] Securities. My question is about the selection of assets. From industries [ values ] you can see that whole industry is facing NIM pressure. You just also mentioned some [ positive signs from an insight ] and from CMB's goal for corporate loans like asset yield average fee is quite the same of the big state-owns and even less than some of our big state-own banks. I understand that you have very strict risk management in place and you have a lower deposit costs so you choose to allocate to these low risky assets.

So looking ahead, when the whole banking industry is facing NIM pressure, so how can you select the corporate loans will change your risk appetite for corporate loans, especially for customers who can contribute to the bank from other fee income. So with these, whether you will change your risk appetite or increase your asset yield?

[Unknown Executive]

As for asset selection, this also means asset allocation, a bank asset allocation structure decides your risk appetite, decides your profit level. So for asset allocation, this should be based on the constraints from capital RWA constraint and also liquidity requirements and some other constraints. We made highest return on capital plan where we are making annual budget, including how we allocate to investment assets, loan assets and other interbank assets.

So your question is mainly on the assets from corporate loans. So annually, we will have a budget for that. And yes, from this point of time, we can see that the budget is well proceeded that's for asset yield, I think we can -- every coin has 2 sides. Just now you mentioned we have a lower deposit cost and also lower risk appetite. So we choose the assets which have a lower yield. Yes, it's true.

And secondly, but what you have said doesn't reflect only the full picture. We think that service we provide to the customers should not be only loan but other settlement service, investment banking service. We hope that we can have comprehensive contribution from customers from all aspects, including loan and other investment banking and other transaction banking business.

And even though we have a lower loan yield, but it can contribute to deposit and also salary payroll services to contribute to the growth of our retail customer. So when we are evaluating contribution from customer, the [indiscernible] comes to emphasize on the loan yield. Except from loan yield, we also contribute deposit and also fee-based income. This is how we value the full income contribution from customer.

And the second aspect is customer -- maybe a group company, they also have subsidiaries and we evaluated the full contribution from the group from a group level. And thirdly, we're also seeing a contribution from the customer who contribute to our retail business like whether it's our payroll service customer, whether it contributes to the growth of our retail customer.

So these are the 3 major aspects when we are measuring contribution from our corporates. Corporate banking customers also contribute to our retail customer growth by taking our payroll services. And definitely, we will have adjustments in our structure of our corporate banking customer. And I will ask Mr. [indiscernible] help answer the question.

[Unknown Executive]

Just now your question regarding how we can increase our asset pricing capability. And what we are trying to do is to levy on our existing advantage until embrace the challenge from the market. Directions are as follows: first one is to better optimize our customer structure. In the past, we are very strong in providing service to the large-sized corporate customer but in first quarter, the pricing for those large customers is falling down very rapidly. So for those large-sized corporate customer, we are following their supply chain customers surrounding these large ones so as to have loans to the supply chain companies surrounding the large one, which can issue a higher yield and also maintain a lower risk.

Secondly, for group companies, we are kind of looking at its subsidiaries, second level and third level subsidiaries and sub-subsidiaries even though we have a lower rating, but yield definitely is higher.

And thirdly, is for in corporate inclusive financing we set up the corporate inclusive financing department, and we designated certain important regions and branches such as [ tailor ] financing, namely to use our [indiscernible] for providing digitalized service to cover more micro corporate companies. This is also a way to help to increase our pricing capability.

And fourthly, very important to levy on our professionalism to provide services to middle-sized corporate customers. This middle-sized corporate customers have actually posted higher requirement on banks risk management capability. So we're mainly focusing on industries and have deep down knowledge on industry and select middle-sized customer and to provide loan to them based on our risk management knowledge. And for business structure, we are also adjusting our business structure, such as for medium, long-term loans, such as for project loan and also M&A loan, yes, so the pricing for this kind of loan is also higher.

And thirdly, how can we better provide comprehensive service to customer, except from loans. I know that investors may look at the loan's growth from corporate side. But for CMB, for us, when we are originating assets, we want to be strong and also be bigger in terms of the capital light business. So for corporate side, our philosophy is to meet our customers' demand and provide a proper product to them. Namely, our definition for services we provide to customers can be described as FPA, namely providing both home loans and also other investment banking services, loans to our customers. So this business can contribute it not only can be shown in interest income, but also fee income.

Last year, we have a mutual risk project, very famous one. We have conducted one. It required a bank to provide a bridge loan to them but the yield is very low because of very fierce competition. But why we are the -- we have gained the custodian business from the risk project and this has better help us to have a fee income to make up the shortfall from the loan yield.

And when we are looking at a comprehensive contribution from customer, sometimes it's not only shown in retail customer but also is shown in our retail business unit, such as for developer loan, the competition is very fierce, but our -- the benefit is shown in our retail side, actually.

Overall speaking, we are actively taking measures and to optimize our asset structure and to improve our pricing capability. From these 2 months, we think that we are seeing better size and at the same time, very important to seeing comprehensive service to customers to generate more revenue from customer. Actually, for -- we are saying we want to go deep down into a loyalty of customers, but we don't want to lower down our risk appetite by optimizing the product structure we provide that we can -- such as we can have a better risk return on that.

And for middle class -- middle-sized customer, we are more emphasizing on the tech ones, on the ones we have specific technologies and such as for inclusive financing, we are more on [ tailor ] financing to have a more standardized product and for corporate side, we also set up just as Mr. [indiscernible] set up the inclusive financing department and it's growing [indiscernible] more quite good. So that is why I want to have a more balanced asset structure to strike a balance among risk and profit.

Thank you very much. Due to time constraint, now we are going to close our first quarter results conference. You are very welcome to contact our IR team or to go to our website for further information. Thank you very much for taking time to join today's conference. Thank you. We will try our best to better provide service.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]