China Merchants Bank Co Ltd

SSE:600036

Earnings Call Analysis

CMB's Q3 Performance Shows Stability Amidst Challenges

In Q3 2024, China Merchants Bank (CMB) reported a net operating income of CNY 252.6 billion, down 2.93% year-on-year, while net profit attributable to shareholders decreased by 0.62% to CNY 113.2 billion. The bank's ROAA and ROAE remained robust at 1.33% and 15.38%, respectively. Total assets rose 5.68% to CNY 11.65 trillion, with loans increasing by 3.84%. CMB expects to stabilize NIM at around 1.99%, while aiming for fee income recovery. The ongoing government policies since late September are anticipated to gradually improve loan growth and wealth management performance going forward.

Financial Performance Overview

In the third quarter of 2024, China Merchants Bank (CMB) reported a net operating income of CNY 252.6 billion, marking a year-over-year decrease of 2.93%. Despite this decline, the drop in net profit attributable to shareholders was contained at 0.62%, amounting to CNY 113.184 billion. This shows that while the overall income is down, the bank is effectively managing costs and maintaining profitability. The return on average assets (ROAA) and return on average equity (ROAE) remained strong at 1.33% and 15.38%, respectively, indicating a stable performance in a challenging environment.

Growth and Capital Management

CMB has been focusing on enhancing its asset-liability management, which has resulted in stable growth in both loans and deposits. Total assets reached CNY 11.65 trillion, an uptick of 5.68% from the previous year. Total loans increased by 3.84% to CNY 6.76 trillion, with retail loans comprising CNY 3.57 trillion. Importantly, corporate loans rose significantly by 6.7% to CNY 2.77 trillion, suggesting a robust expansion in lending activities, particularly in key sectors supported by national policies.

Challenges in Net Interest Income (NII) and Margins

CMB's net interest income (NII) was CNY 157.3 billion, reflecting a narrowing decline of 1.1 percentage points due to falling interest rates and insufficient demand for credit. The net interest margin (NIM) for the first three quarters decreased year-on-year by 20 basis points, settling at 1.99%. Looking forward, management indicated that while NIM is expected to face downward pressure next year, the magnitude of decline may lessen due to better cost management and potential market stabilization.

Asset Quality and Risk Management

CMB's non-performing loan (NPL) ratio stood at 0.94%, with a notable allowance coverage ratio of 432.15%. The bank is diligent in risk management, having implemented strategies to mitigate risks in critical areas such as real estate and manufacturing. Despite minor increases in overdue loans, asset quality remained stable overall, positioning CMB favorably against peers in managing credit risk amid a challenging economic backdrop.

Outlook and Strategic Initiatives

Management expressed optimism regarding future growth prospects following a series of government policies aimed at stimulating domestic demand. The emphasis will be placed on expanding retail loan growth, especially in the secondhand housing market, which currently represents about 46% of new loans. CMB is also set to continue its focus on enhancing the wealth management business, as it has seen growth in customer numbers and assets under management (AUM), reflecting ongoing demand for financial products despite challenges.

Guidance for Future Performance

For the fourth quarter, management has indicated expectations for improved loan origination, along with a cautious outlook on NIM, which is projected to stabilize despite continued policy pressures. The bank aims for net profit growth in the fourth quarter to be above current levels, signaling confidence in recovering market conditions and strategic implementation. Additionally, guidance suggests that revenues could stabilize as fee-based income begins to show signs of recovery following the declining trend seen earlier due to regulatory changes in fee structures.

Earnings Call Transcript 2024-Q3

[Xia Yangfang, executive]

Dear investors, analysts, good morning. CMB 2024 Third Quarter Results Conference will now begin. I'm Xia Yangfang, General Manager of the Office of the Board of Directors.

CMB has announced its 2024 third quarter results on October 29. Today's event is being conducted via a live audio webcast. I would now like to introduce the participants of today's conference. They are Mr. Peng Jiawen, Executive Vice President, CFO and Secretary of the Board of Directors, and the General Managers of Asset and Liability Management department, finance and accounting department, risk management department at other relevant departments. We also have invited independent nonexecutive directors, Mr. Wansheng, Mr. Liang Wang Gang, Mr. Zhu Jiangtao,, Mr. Tian Huns, Mr. Li Chase and Mr. Sungdong to participate in the event online. On behalf of China Merchants Bank, I would like to welcome you all to the conference. And thank you for your interest in support of an investment in China Merchants Bank.

Today's meeting includes 2 sessions. In first session, Mr. Peng will review our financial highlights and operational performance for the third quarter of 2024. It takes around 15 minutes. We'll then move on to a Q&A session, which will last around 75 minutes. Simultaneous interpretation in English will be provided for both the sessions.

Now I will give the floor to Mr. Peng on the introduction of the Q3 performance.

[Jiawen Peng, executive]

Dear investors, analysts, good morning. This Tuesday, we released the 2024 third quarter report, and I'm happy that I can have the opportunity to communicate with you together with the department heads from several departments of CMB head office. And I would like to take this opportunity to thank you for your long-term attention and support.

So now I would like to briefly introduce our performance for the first 3 quarters. According to our traditional practice, we are reporting the financial statistical [indiscernible] under the IFRS standard. Since this year, as we are faced by the complicated environment. We stick to our value creation bank strategy and stick to our dynamically balanced development, featuring quality, profitability and scale, pursue progress and its stability and our first 3 quarters are presented with the following 5 features.

First, our decrease in the net operating income and net profit both narrowed. Our ROAA and ROAE remained at a high level. The group's net operating income, CNY 252.6 billion, year-on-year decrease of 2.93%. Net profit attributable to the bank's shareholder CNY 113.184 billion, year-on-year decrease of 0.62%, down by [ 0.18 and 0.7 ] percentage points compared with the end of the first half. ROAA and ROAE, 1.33% and 15.38%, respectively.

We continue to maintain sufficient and high capital level or tiers of CAR increased compared with that at the end of last year under the advanced measurement approach our core CET CAR was 14.73%, CAR 16.99%, CAR 18.67%, up by 1 percentage point, 0.98 and 0.79 percentage points, respectively. We enhanced our refined management over cost and show initial results in fee reduction.

Our operating expense was CNY 82.17 billion. Our cost-to-income ratio of 29.59%, year-on-year decrease of 0.5 percentage points. Secondly, we enhanced asset liability management and achieved stable growth in both loan and deposit. We strive to overcome different challenges and take multiple measures to improve the growth of our low-cost core deposits.

We strengthened high-quality liability development. And as of the end of September, our total asset was CNY 11.65 trillion, up by 5.68%. Total loans and advances, CNY 6.76 trillion, up by 3.84% compared with the end of last year, among which retail loan was CNY 3.57 trillion and accounting to [ 2.8% ] of the total.

Corporate loan, CNY 2.77 trillion, up by 6.7% compared with the end of last year. Total liability, CNY 10.5 trillion, up by 5.5% compared with the end of last year. Total customer deposit, CNY 8.73 trillion, up by 7.08% compared with the end of this year. As we see deposit trending towards time deposits, our demand deposits proportionate total was 50.6%, still at a high level.

Thirdly, the decline in our NII and NIM, both decreased. We continue to be influenced by the LPR cut, existing mortgage rate reduction and insufficient effective credit demand and loan yield decrease for the newly granted loan, our total asset yield were put under pressure. For that, we continue to drive the decline of our cost of the liability and to some extent, offset such influence of the narrower spread.

For the first 3 quarters, our interest-bearing liability cost ratio was 1.69% and our customer deposit ratio was 1.58%. Our NII was CNY 157.3 billion, whose decline was narrowed by 1.1 percentage point. Our NIM year-on-year decrease and quarter-on-quarter decreased both narrow remaining at a high level among the industry. Our NIM for the first 3 quarters was 1.99%, year-on-year decrease of 20 bps.

And fourthly, we continue to have even more solid foundation for Wealth Management business. Since this year, although we are faced by a series of challenges, such as of the continual of fee reduction, fluctuated capital market and et cetera, we still maintain a good growth in terms of our customer base and AUM. As of the end of September, the number of retail customer was 206 million.

Golden Sunflower and above customer 5.06 million, up by 9.16%. Retail AUM, CNY 14.34 trillion, an increment of CNY 1.02 trillion compared with the end of last year. The AUM from Golden Sunflower and above customer, CNY 11.7 trillion, up by 8.15% compared with the end of last year, both contributing to laying a solid foundation for our healthy net noninterest growth.

Our fee and commission income was CNY 55.7 billion, down by 16.9%, among which wealth management fee and commission income was CNY 17.4 billion, a year-on-year decrease of 27%, whose declines narrowed by [ 4.88 ] percentage points. Key items such as agency distribution income from wealth management products, insurance policies, both narrowed in terms of this decline.

We see synergies in the bond market. Noninterest net income was CNY 39.6 billion. So for the first 3 quarters, our net income from noninterest was CNY 95.3 billion and remain at a high level.

Fifthly, our asset quality remained stable and having a healthy and robust risk absorption capability. As of the end the -- as of the end of September, our NPL was CNY 63.5 billion. Our NPL ratio was 0.94%, special-mentioned loan ratio was 1.3%, up by 0.2 percentage points over due lower ratio, 1.36%, and the company's new formation of NPL was CNY 48.2 billion, year-on-year increase of CNY 2.71 billion. The NPL formation ratio was 1.02%.

The company closely followed external changes and continue to prevent and mitigate risks in key areas. Real estate and manufacturing, loan and NPL were [ 4.8% and 0.46 percentage ]. Influenced by the external environment, retail NPL ratio was 0.94% and retail overdue loan ratio and special-mentioned loan ratio both increased, but the risks are controllable.

We continue to follow risk and prudent strategy to make allocation. Our allowance coverage ratio was 432.15%, loan provision ratio 4.06%. For the first 3 quarters, the company's credit cost was 0.71%. This is our financial performances for the first 3 quarters and also our operational characteristics.

Since this year, we see a lot of uncertainties in the external environment. The economics are generally stable, but we are still faced with challenges such as insufficient effective credit demand and weak social expectations. Since the end of September, we see a package of policies intensively introduced. And looking into the full year, we will continue to focus on our strategic target and stick to our operation philosophy to put priority in quality and efficiency, take active action and provide better value for our customers employees, shareholders, partners and society. Thank you.

[Xia Yangfang, executive]

Thank you for the introduction, Mr. Peng, now we will enter into the Q&A session. Please follow the induction given by the operator to raise questions. Please state your name and the agency you present before you raise the question. Now we will enter into the Q&A session. [Operator Instructions] Now we will have the first question.

[Operator]

The first question coming from May from UBS.

[Meizhi Yan, analyst]

My question is for Mr. Peng. We are very happy to see that the third quarter profit has seen positive growth for around 0.8%, whether is it a sustainable trend? And all the banks have released the third quarter results, we have seen that salon banks, they have seen positive net profit growth. for third quarter, even over 3%. So I know CMB is a bank with very fundamentals. And is it possible for the fourth quarter for CMB to see higher net profit growth rather than only below 1%. Is it possible?

And just now Mr. Peng said that since 24th September, there are a series of policies have been launched. And from that point of time, does CMB have seen any recovery in terms of loan growth and also agency sales of wealth management-related products what would be impact on the fourth quarter's performance and the next year performance of CMB ?

[Jiawen Peng, executive]

I think your question can be concluded on 2 aspects. One is our forward-looking or the trend of our profit and operating income growth. Second question is for since 24th September, a series of policy launched, what will be the impact on CMB. And I think it's most concerned questions by many investors, and I would like to give you a briefing on that.

So firstly, the impact from the policy is on CMB and what will be our considerations for the next step. And secondly, I will share with you my views on the forward-looking trends. And since the end of September, I think, a lot of changes have taken place from the policy side, which have posed a big impact on the capital market, definitely also on the banking's operating environment.

And I think the impact can be concluded as follows: First one, the policies are trying to expand the domestic demand like to emphasis on investment into strategic and important areas and also into important regions. And secondly, it has injected vitality into the capital market to revitalize the capital markets. And so as to stabilize the property and also the stock market. And thirdly is to mitigate risk, a serious policy has been taken to mitigate risk in property area and also in local government financing vehicles.

And we think that the signals sent out and the policies are very strong. And the attitude from the government is very direct -- and actually, I think everyone can feel the changes from the dilution of the policies. And I think very importantly, it's a coordinated policies. And thirdly, it's very targeted and weak points and difficulties in the society trying to solve the problem. So that is why I think the impact will be there.

And as for CMB, we have done some analysis. And the impact will be as follows, including challenges and also opportunities. But more is more positive, overall speaking, is more positive for CMB. Firstly, CME, one of the backbone of CMB is extensive growth management business. And now we have seen recovery in the capital market and our extensive wealth management business is highly related to capital market performance, including our fee-based income, including our business like wealth management, asset management, as long as we think that the trend in the capital market will be good and that will be beneficial to our wealth management business with a newly launched fund, A500. And our sales volume is around CNY 20 billion. So we have a large market share. That is why from this point of view, I think we can benefit from that.

And secondly, in terms of consumption, now the policies are trying to rise the market confidence. This definitely will help to recover some of the consumption confidence so that will be beneficial to CMB's business like credit card, like consumption loan as long as the consumption recovers, warms up again. And I think definitely will be positive for our retail loan business.

And thirdly, I think when capital market turns better, it means that people's risk appetite will also see some changes, and that is -- we can see some changes in the trend for term deposit actually, when we are seeing the demand deposit, we have seen some big changes. We don't know whether it's a very certain trend. It's quite difficult to say that currently. But I think that -- once the capital market turns better, then we will definitely have a higher advantage in terms of the demand deposit ratio.

And fourthly, I think we can benefit from the risk mitigate policies. There are a lot of policies targeting in the property market like the local government debt areas. I think all the bank benefited from that to mitigate the potential risk. So these are the 4 areas, I think, will be more beneficial for CMB.

But definitely, there will be pressures on challenges in the following 3 aspects: Firstly, even though there will be better demand deposit ratios, but the volatilities will also be big. And we have seen the first day after the national holiday, there is a big outflow from the demand deposit. And at the same time, we are seeing higher demand deposits, but it's more volatile. If the capital market turns better, I think we will face more volatility in the deposit side and even have some challenges on the deposit growth.

And secondly is for NIM. This time, we are seeing adjustments on the backlog of the mortgage loans and also the adjustment of LPR, definitely, you have seen PBOC have down were adjusted by deposit rate as well. And overall speaking, we don't know whether there will be a continuous adjustment of the rate. So that will be quite a challenge for the bank.

I think later on, there will be more specific questions on NIM. We can share with that [indiscernible] is a pressure. And thirdly is for our investment book. Normally, there are more volatility in the debt market. So I think NIM will be more volatile next year for the debt market. So that will definitely affect our income from the investment book. So this year, we have seen a growth rate of 28%, but that will be quite uncertain next year. That is also a risk.

And definitely, we have done forward-looking analysis, and I think we will take the following steps, firstly, to embrace the new changes from the market and to proceed with our extensive wealth management business, this has been the advantage of CMB, and I think it will continue to be so in the future.

In terms of the product side, we're preparing products and also to prepare our capability to service customer especially in terms of asset allocation, we are more -- doing more preparation on that. And also not only the wealth fund but also investment banking, asset management and also wealth management, we are all doing preparations.

And secondly, for our investment book is for the volatility in the debt market, we need to seize opportunities. And we think next year even though there are volatility in the market, I think there will still be opportunities for us to see the periodic opportunities and structural opportunities. Hopefully, that we can achieve good results.

And thirdly, I think we need to do better in terms of asset management and especially for NIM management, and most importantly is for structural of the asset and liability. I think in terms of NIM, we will see challenges on the NIMs. I think structure is an even more important factor compared to pricing, including structure of our asset book, structure of our loan book and how we can allocate resources to corporate and retail and how we can allocate resources to credit card each and also other retail loans.

And in terms of liabilities to make sure -- now we maintain a high ratio of core deposits and also to increase the demand deposit ratio so to lower down the funding cost. And fourthly, in terms of risk management, we will follow the policies to mitigate risk in major areas like property like LGFV and also retail risk. And I think later on, there will be also questions touching around this retail risk, and we have seen some rising in risk in the retail side. Definitely, we are following this very closely.

And fifthly, we are thinking that we are strictly management and to be better in terms of innovation. And we consolidate our business considerations to -- these are some considerations when we're facing a new opportunity. And secondly, I would like to share with you how I see the trend. Definitely, I cannot share with you the specific data, overly speaking, I think our operation will be stable, and it will be moving towards a better condition.

And in the third quarter, it's each of the most of the banks. I think to be positive or negative profit growth, it's -- I think you might -- you do not need to lay too much emphasis on the data, but the trend is even more important because for CMB, we have seen a trend that is turning better. But definitely, there are also uncertainties, including opportunities and also challenges there are more uncertainty, as I just shared with you the uncertainties in the policies and also the challenges.

In terms of opportunity, I think the biggest opportunity is the fundamental of the economy is turning better in a very certain things, and it's the most important backdrop of CMB's operation. And I think the PMI is now over 50. So it has been rising for consecutive 2 months. So we are sure that when the economy is getting better, this will be a definite trend.

And secondly, the capital market, I think we'll see some positive change. This will also be beneficial for CMB. And thirdly, as real estate and LGFV, the risk on these major areas will be mitigated. This will be also helpful. And fourthly, now the risk appetite of people's risk appetite will also change. This will have influence on our loan and also wealth management business. But uncertainties like I just said, like the NIM, like the debt market volatility, these are uncertainties.

So overly speaking, I think there are uncertainties. We are making our plans I don't have specific figures to share with you, but the overall judgment is that we hope that we can make in progress while maintaining stable operating and hopefully, the results will turn better.

[Operator]

Next question is from Guotai Junan Asset Management, Mr. [indiscernible].

[Unknown Analyst]

My question is about asset quality. Just now Mr. Peng also said something about the asset quality on the retail side. And we are seeing on the property side, there are some positive changes. But from the third quarter, we are seeing that we won't see much turnaround on the risk on your retail loans, whether that still is under control, I know, but there is -- the trend is not good. So could you please share what with some of the forward-looking [indiscernible] or the experience that you have been through in the past when you were seeing the volatilities in the retail loan book and how do you see the new trend?

[Jiawen Peng, executive]

So firstly, I think that Mr. Wang from our risk management can share with you the overall asset quality. And secondly, I will invite our Mr. Wang from our retail loan department to shop with a specific data. CMB's risk culture has always been stable and we try to consolidate our risk management system. So our logic or principle is to dispose the nonpotential loans early on first and then to dispose them as early as possible, and our NPL was 0.94% and it's down by 0.1 percentage point compared to the beginning of the year.

And the special-mentioned loan ratio is also down compared to the beginning of the year. And our coverage ratio and also loan provision ratio are still ahead of our peers. And I think that for overall asset quality will remain to be stable.

In terms of corporate loan for the first 3 quarters, asset quality has been stable, with NPL ratio, 1.05% and down by 0.1 percentage point compared year-over-year. NPL Formation ratio is 0.43% year-on-year, down by 0.1 percentage point. So I think for the whole year, corporate banking loan asset quality will be stable and CMB definitely follow very closely on new policies and adjust our credit policies with the new [indiscernible] and also, we are optimizing our structure policies now for our regional and our industry credit policy, and to be prudent in terms of manufacturing loan. And so this is a very good view on that.

And next, I will share with you my views on the retail loan. So this year, we are more affected by the overall environment. For the whole banking industry, we have seen uprising for the risk in retail loans, and CMB shared the same trend for the industry. By the end of September, since we are seeing continuous recovery in the external environment. So there are some volatilities for NPL, special-mentioned loan ratio for retail loan has rise compared to the half of the year. But still, I think that the data are still ahead of the -- or better than our peers.

And for special-mentioned loan ratio, it's because we have included the loans that the customers will have defaulted in other banks into our special-mentioned loan. That is why we have seen up price. It's more related impact. By the end of September, the serious policies have been launched, and we have seen -- it's possible that the economy can be better. So banks are highly related to overall macro economy. So the performance of the retail loan in the past 3 quarters, it's quite the same as it was the macro economy.

I think that definitely when the policy launch will turn better, but it takes time. So in the short run, still the asset quality of returns under pressure. But in the long run, when the policy effects taking effect, I definitely, I think that will -- our asset quality will turn better in the long run.

And for CMB, for us, 2 things are important as to expand our business scale. And secondly is to control the risk at the same time. So we fit. We have 3 priorities then prioritized customer and prioritize the region, and we are using dates to optimize our risk system.

We have connected traders for around 300 or 4 kinds of data to analyze the risk of the asset and after loan disbursement for regions, which we have seen more volatilities, we will try to focus more on these regions and do more in terms of the disposal of NPLs. So no matter is from the onboarding of customer. And secondly, to following the risk and after risk for disposal or workout process, we have done a lot of things and to maintain sound retail loan asset quality.

[Operator]

The question will be from Richard Xu land.

[Unknown Analyst]

You've just mentioned that some improved expectation of the business, for instance, in the investment opportunities, investment real in terms of the retail business, but we still see some uncertainties in the future. For instance, the yield of deposit, the yield of fixed income products and at the same time, we still see the uptake of risks in terms of the credit risk and also the other risks in key areas.

So for CMB, I would like to understand your mindset and strategies to the retail customer operation. And has there been any changes? And how can you maintain your leading advantages among the peers under such external circumstances?

[Xia Yangfang, executive]

Thank you for your question. And this question will be answered by Mr. [indiscernible] from the wealth management platform department.

[Unknown Executive]

Thank you for your question. As for your question, this is indeed something that we have continued to having a deep thought. Well, first of all, we have seen that in the market, there are a lot of volatilities happening. And from the client side, we can see that their risk appetite has experienced changes.

On the one hand, changes are happening within their risk appetite. And actually, the appetite is quite low. And the such circumstances, they prefer more stable and the products with more certainties. So correspondingly, in terms of asset allocation strategy, and the structure, we have also experienced changes, for instance, in the third quarter in the AUM growth. Wealth management products has accounted for 39%. And for deposit, it accounts for 32%. This is what we have been doing to adapt to the requirement of the clients and also the market. That's what we have been doing to adjust our product mix, but we cannot avoid that the fee income from these products were under pressure.

As we are with certain difficulties, we think that our coking tactics and our mindset of operating could be answered by the following 3 aspects. So firstly, as we are faced with difficult market condition, we intended to be back to the origin to provide better service to our clients. So for these 2 years, we continue to satisfy their need in deposit in loan and in settlement business.

We continue to take -- our final goal, our fundamental goal to cultivate the growth of AUM of our customer base. So you can see that the balance of AUM represent an incremental CNY 1.02 trillion, up by over 7%. Our market share also continued to grow. For retail clients, we have already got 206 million clients with a growth rate of around 5%.

We believe that as the AUM and the customer numbers continue to grow, we are confident to seize market opportunities and to provide corresponding products and services to these clients as the market develops and we can synchronize with such pace.

Just now Mr. Peng also mentioned that we are actually seizing these kind of opportunities. And the second aspect I would like to answer is that to expand our customer base, to expand our relationship manager base, I believe that -- what we have provided is already quality services. However, in order to reach to even larger customer base, having quality relationship manager is not enough. It will be limited by the distance we have with our clients. So we need to leverage our fintech system. And therefore, we have leveraged our digitalization to develop our business.

And we will be furthermore guided by the fintech development strategy and promote the combination and integration of online and offline operations and leverage the large language model to enlarge the customer base that we can serve. This is the second aspect I would like to answer that is to expand our customer base.

The third aspect I would like to say is that how to dig deeper into our business. The difficulties we are faced is that the AUM yield under such external circumstances based on customers' appetite, it tends to be low. However, we could admit that the market are having opportunities and customers' risk appetite is also changing. It is dynamic. We will have the opportunity to provide them with professional and in-depth services. So we wish that we can do more work in the following 2 aspects.

Firstly, I'd leave that through our professional service. Through our 3 asset allocation service system, we could help clients to make better asset allocation to sell through the cycle to obtain a steady return. The second aspect is that we will further enhance our capability of investment to help our clients to grasp base based opportunities.

Return to origin to dig deeper into the business and to expand our customers, these 3 aspects is what I would like to conclude to answer your question. I believe that through these 3 aspects, we can [indiscernible] better, return better to the external environment. And this is basically my mindset. Thank you.

[Operator]

The next question is from Citi, Judy.

[Judy Zhang, analyst]

Thank you for giving me this opportunity. I am Judy Zhang from Citi. I have a question regarding NIM and about the lower growth. We see the repricing, loan and repricing, casting some influences on the banking industry and the CMB to the fourth quarter and to the next year. I would like to learn from the senior management about the NIM and loan growth of the next year. I would like to see more about details about the loan growth and key sectors that you would like to extend loans to.

[Xia Yangfang, executive]

The asset will be taken by Ms. Li.

[Unknown Executive]

to see from the first 3 quarters, our NIM is [ 1.99% ] under the group-wise down by 20 bps year-on-year, but we still remain a good level among our peers to see the absolute figure. So to see from the factors that influences our NIM, it's basically in the downward trend of the yield of our assets. Of course, it is influenced by the policy fundamentals, the LPR cut, the existing mortgage rate cut. These are all policy side, the factors and also insufficient effective credit demand, it is also related to lower NIM.

In order to look into the NIM of the fourth quarter and the next year, we see that since the new policies launched after late September, this will definitely influence our structure and our development of the NIM. And generally, I believe the impact could be, say, neutral.

The existing mortgage rate, CMB has quite a large proportion along with the LPR cut and other influences and also the recovery of the credit demand also takes time. For the next year, our loan pricing is still in a downward trend, which also will cut influences on the NIM. Generally, we will take active asset liability measures to guarantee a stable growth of our NIM. So generally, to see our mindset, firstly, we will maintain quality asset origination to maintain stable asset growth. This is from the scale perspective. And just now you have also mentioned that our loan growth has experienced some changes, for sure, under the external environment, the demand of credit is quite weak. And the renminbi loan is also experiencing year-on-year decrease in terms of the increment.

I think that the major decrease in increment is basically from retail low end and from mortgage loans to specify. And also for credit card loan, it is also influenced by the weaker demand in consumption. It is also decreased in terms of the scale. So we believe that this is for this year. But for the corporate loan, its performance is better than that of the last year.

To see from the demand side of the whole society, there are some positive changes. The residence consumption transaction volume is experiencing some increase and especially the transaction volume in the National Day holiday has also approved. That increase. And for the property market, there are some new policies introduced and so the transaction volume has also increased. There are some marginal changes.

We also see some support from the national policy to corporate loans. For instance, that stock repurchase relending facilities, some stimulus related to the upgrade of large equipment about the consumption policies. So the general credit growth, I believe 2024 is a year that is under huge influence of the policy. But looking into the next year, I think the outlook is quite good.

On the second aspect for asset and liability management, I think the key for us work is to manage a good structure to maintain a good growth of quality assets to high-yield assets. For the loan structure, bill financing proportion and the yield is quite high. And we will guarantee the growth of general loan with less growth on the build business. And for the corporate loans, we will put our focus on key areas that is under the National Policy support and key regions.

And for liability management, we have realized some optimization. It has benefited from the policy factors and also benefited from our active management to obtain low-cost funding and low-cost deposits. So in the next year's liability management, we will continue to promote customer acquisition to extend our business in some scenario-based business. For instance, the growth of deposits in the low-cost funding from settlement scenarios and et cetera, and seize the opportunities to increase the proportion of our demand deposits and also manage the terms In terms of the duration of different liabilities and further optimize the overall structure and maintain stable NIM development.

I have one point to add. You have mentioned about that you would like to more understand more about loan growth. I think CMB is following the trend of the whole society. The growth rate is quite -- the growth rate decrease and it's a little bit down compared with the expectation. There are some backdrop that is to avoid funding going not to the real economy, et cetera. So in my opinion, for the year 2025, CMB's loan growth will still be similar to that of the external environment.

And if I would say, our low-end growth performance will be better than that of this year in the year 2025. That is the first one. For the second one the retail loans proportion, we also will aim to increase. We will continue for the next year to guarantee the growth momentum of the retail loan for the year 2025.

[Operator]

Next question is coming from China Merchants Securities, Mr. [indiscernible].

[Unknown Analyst]

My question is for the operating expense. I think one of the key advantage of CMB is fee-based income and also the funding cost. But in the long run, I think the advantage coming from your investment into technology and human resources. So these are more reliant or have more reliance on the operating expense. But now we have seen the third quarter on a year-on-year basis, the operating expense has been down by over 10%. So this kind of very obvious decline, whether it will affect your investment into digital and into financial technology and into our human resources.

[Unknown Executive]

In this low interest rate and low fee-based income environment. One of the experience that we have learned from other very international banks is to control cost in more precise way. We have done investigation and also have an investigation into the international advanced peers. So this year, I think very importantly for us is to how we can better manage cost so to go through this difficult cycle. And this year, we have set up a small team in the bank to proceed with the work of the reduced cost and to improve efficiency.

So on the first 3 quarters, we have seen the operating income has been done by 4.56%. And for the third quarter, a lower stand-alone quarterly is year-on-year basis, it's down by over 10%. The decline is also benefit from the work that we've done to better and more precisely control cost. And secondly, I think the cost is quite in line with the operating income. When operating income as difficulties, definitely, there will be a decline from the cost side.

And thirdly, I think for a quarterly basis, the expense -- the speed of the expense is different. So some quarters with speed up and some quarters, you might see some slowdown. But one thing I want to clarify is that when we are precisely manage costs, but we're not sacrificed the experience of our customer. And also we were a very example is not to stem out or shut down the light in our outlets, so the customers will not be good with us. This is not the way that we do manage cost.

Then what we are trying to do is to use technology to replace some of the traditional ways of doing work. So this is how we manage cost. We don't sacrifice customers' experience. And secondly, we also do not sacrifice our employees experience with the bank. An example with you, such as for discount, for when our employees are traveling, when they're [indiscernible], we are seeing -- we encourage our employees to buy more by air tickets with a lower discount.

But definitely, it will not -- it's the same air ticket, but just because we have more bargaining power to lower down the trailing cost. So we do sacrifice the customer experience and also the stops experience with the bank. So to maintain the cost and to improve efficiency. And it will not be a short-term strategy I think we want to embed this philosophy into all workflows and also including our culture. So here's a brief answer to your question.

[Operator]

Ms. [indiscernible], Citi.

[Unknown Analyst]

A follow-up question on Mr. Peng. Just now, Mr. Peng you said that you will continue to make efforts on growing the retail loan. So -- but from the demand side and also from the risk side, I think that we don't see much recovery or turning point on that. So is it possible for you to clarify on what's your strategy on rationality behind your strategy to increase your retail loan?

And secondly, I think investors think CMB's business are highly related to capital market. And since 24th September, there's a very obvious improvement on capital market. So what will be CMB's strategy in terms of wealth management, in terms of the asset management, asset allocation after the new changes has been taken place?

[Jiawen Peng, executive]

So your question -- I think there are 2 points. First one is retail loans. So retail loan includes both retail loans and also credit card business. And I will invite Mr. Wang to share the view on you.

[Liang Wang, executive]

For retail loan strategy, I think for the past years, we have been emphasizing retail loan for all the time. including risk management, including investment into technology. So by the end of September, our retail loan, no matter is for the incremental loan growth of the stock loan book we are quite ahead of peers in terms of scale. And secondly, I think we will follow the following aspects. Firstly, in a more volatile external environment, asset quality is the top priority. So I think that to regard against the bottom line of risk is a very important things so we will put more resources on better areas and better customers.

And secondly, at the same time, to make sure that the asset quality will remain ahead of peers. Secondly, following closely on the dynamics of the market sees the short-term -- to exist the opportunities like after 24th of September, there are some very positive changes like in Beijing, Shanghai, Guangzhou and Chengdu. The transaction volume has been growing quite much.

I think we will see the structural opportunities to extend more loans. For October, I think that for October alone, the business that we have new business have come in to us have been up by around 50%. And at the same time, we are making prearrangements for next year's strategy in terms of secondhand houses.

In the past, the secondhand loans -- loans for secondhand loans the proportion has increased continuously recently. And this year for incremental loan, around 46 are coming from -- 46% are coming from second half. And next year, I think we will take these structural opportunities. Definitely, we'll increase the proportion of the loan growth in a secondhand home.

And next year, I think when interest rate is down, it's very important to do early this loan disbursement and to -- and thirdly, very important is to apply big data to risk management and strengthen risk management. So for all the [indiscernible] emphasis risk management is the top priority. And I think we will continue to connect to different data to monitor the asset quality and to do better in terms of prewarning. I think in these circumstances, strengthened risk management is the top priority for us. So I think that by doing all this, it will help us to maintain our asset quality to be ahead of peers.

In terms of pricing or the risk pricing to reclassify the customer and have a differentiated pricing for different customer by mitigate risk, have a different pricing strategy. This will also help. And as for credit card, I think two aspects: one is asset quality; and the second one is business growth.

First one is for asset quality, credit card. I think the asset quality is quite stable currently. And for some indicators are also slowing down. The NPL [ 1.77% ] is down a little bit compared to the end of the second half. And for NPL formation ratio, year-on-year basis, it's down -- is over -- is down by over 10 bps. So it's all within our expectation for early indicators. You may have noticed that special machine loan ratio and also the over-duration has been up a little bit compared to the end of second half.

The main reason is because we are very strict in terms of how we classify risk because we think the external environment is more complicated affected by jobs, by income ratio. So I think that risk is still at quite a high level with more volatility. That is why we have done more in terms of prewarning for some customers, how we classify them. We have even more strict rules. So that can be reflected on the up price for overdue and also special-mentioned loan ratio. But over speaking, I think it's stable. And I think in the future, our asset quality will remain stable. By the end of this year, I think for and also NPL formation will -- is trending good this year.

And secondly, for loan growth. Our credit card loan growth is still down compared to the beginning of the year, by the end of September. But for 3 consecutive quarters, things are turning better. Trend is good. So even though we are seeing negative growth in loan, but in terms of structure, we are seeing more growth in terms of installment loans. For transaction-related loans, is more affected by transaction volume is quite in trend of the overall facility.

In terms of -- when we compare to the industry our -- the decline level is lower than the industry level. And now we have seen policies have been launched. And I think it will take effect -- and with these all the new policies coming out, I think that the transaction-related loans, will see new momentum. In October, we have seen already positive growth for credit card loans. So for the next step, I think we will continue to optimize the customer structure and to have a more balanced portfolio.

In terms of customers, we focus on value customers dynamically adjust our customer structure and to acquire more quality customers. In terms of asset quality, we will lay more emphasis on mid- and low-risk assets. And in terms of the workout process, I think workout is a very important area, I think we will definitely use states and also technology to improve the efficiency to make sure that we have a balanced development amount asset quality, efficiency and profit and asset quality will be the top priority.

And as for the capital market, for capital markets, there are some -- it affects many areas. One is for the relending loan for the purchase -- repurchase of the stocks, PBOC have released the policies. We acted very fast and swiftly. So really, I think it's important to service customer for listed companies. That is why we are very sensitive to this policy.

I think in on 20th October, there are 23 listed companies say they will repurchase the stock from the market. At that time, we have already extended loans to 6 of them, including companies under China Merchants Group and also companies outside China Merchants Group. And from now, I think currently is moving quite and we are making progress -- continue to make progress because we act fast and exactly -- this definitely have brought some opportunities to us. It's been quite smoothly.

And secondly for Wealth Management, just now I have said quite a lot about that. The CMB has pushed extensive wealth management at our emphasis and early emphasis on building the capability in this regard. So including how we select products, like the mutual funds, how we select the products and also in terms of the team building and customer, we have quite a solid foundation that once the trend is confirmed, definitely, it will help us in terms of the customer base, in terms of our AUM growth and also fee-based income. But I think that the impact on capital market definitely will also have positive impact on custodian businesses.

For the new 2 batches of new A500 fund. I think CMB is the bank that have acquired the biggest share in terms of a custodian in this regard. So capital markets impact will be on all fronts. So definitely CMB's business is more related to capital market. Once the trend is confirmed, we definitely can benefit from that. Thank you.

[Operator]

The next question is from Goldman Sachs, Claire .

[Unknown Analyst]

For the third quarter, we see an overall stable asset quality. I would like to learn more about the overall trends which side would be under more pressure of risk exposure. Is it retail or corporate? And what is the real estate sector's risk exposure condition? We see some quarter-on-quarter growth in terms of the NPL condition? And what is your outlook towards the asset quality? And what is the turning point of it?

[Unknown Executive]

Thank you for your question. The real estate sector is indeed a very key area that everyone pays attention to. CMB has been very acute to the real estate sector. And we have an early exposed such kind of risk early since the year 2021 and act in time to dispose assets and make sure that we have sufficient provision by the end of September, as Mr. [indiscernible] introduced under the bank's calibrate, we have CNY 294.2 billion corporate real estate loan. And the proportion was 11.6% The NPL ratio was 4.8%, 2 bps higher than the last quarter, but it's also already declined compared with the end of last year. It is mainly because that the real estate sectors lower scale generally decreased.

Our NPL ratio for the real estate sector increased a little bit compared with the end of last year. So generally, for the real estate sector and the package of serious policy stimulus, we believe that the formation trend will be stable. For the provision of the real estate sectors loan end, it is 2.5x higher than general corporate loans.

What you see from the policy side, they both provide stimulus in the demand side and supply side. We pay special attention to the demand side. It is also a core for the future development of the real estate sector. So that we continue to make deep analysis on a regional basis on the industry basis and because we believe that in this region, it is China -- for Chinese commercial banks, it is a key area that we should attach importance to attach strict management to focus more on the market to focus on the construction of affordable housing and to focus on the new models that the central government aim to develop the real estate sector and further develop our business in a steady profitability driven and stable manner. And firstly, we will further deepen our strategies. And distinguish the risks arising from the real estate, enterprise and real estate projects.

As long as the project is compliant, we will provide corresponding support. And secondly, we will satisfy the financing need of these compliant and qualified projects. On the second aspect, combining with this time's policy launched, we will continue to focus on key clients and first-tier and second-tier cities because this real estate sector is highly relevant to read.

And for the third aspect, we will strengthen our management. Since the year 2021, we have been emphasized on these aspects to make strict control and management over large exposure clients, and through a full cycle risk management to realize a safe management of our exposure. For the fourth aspect, the real estate sector has experienced ups and downs, and we see some existing risks arising from the previous period for these type of clients, we will act accordingly based on different clients' risk profile and see more on the project.

It sees more on the effective rights of the projects to revitalize these projects and reduce the exposure arising from the bank and to better help the delivery of those housings. This is basically our strategies that is going to adopt in future development.

I think there is another question from the previously asked one. I have something to add. So currently, our asset quality pressure. Real estate is still 1 of the key areas that we attach great in force to. For instance, the infrastructure construction industry that is relevant to the real estate industry. And just now department heads from the retail loan business and from credit card business, consumer loan, small micro size lower. These areas are running from the real loan are also key risk areas that we will pay attention to from NPL formation perspective and from the perspective of the balance and ratio of NPL. These are all aspects that we will pay more attention to.

And of course, the faster disposal of NPL, the compliant and fast disposals of these NPL is also what we will take in terms of our measures to better settle this kind of -- this kind of assets. We will continue to maintain what we have been do. And for the first 3 quarters, we have already disposed of CNY 46.7 billion NPL, which is CNY 3.1 billion more than the previous quarter.

[Operator]

The next question is from CICC. [indiscernible].

[Unknown Analyst]

I'm Wang Zubi from CICC. I have a question about the competitiveness of the corporate finance business. We see weak demand in the retail sector. And we see some news report that the corporate clients of CMB has already surpassed 3 million. Some investors have already have an impression that CMB is doing good in retail business, but they don't have many -- much idea about our corporate business. So I would like to learn more about the competitiveness and the development condition of our corporate finance business.

[Unknown Executive]

Thank you for your question. Indeed, the market might not have many impressions regarding the corporate finance business rather than the retail finance business. As we are facing with fierce market competition, our corporate finance has experienced some transformation. And in such process, we have formed our competitive and differentiated strength.

On the one hand, we have developed a service mechanism that is based on the segmentation and classification. For corporate customers, it is quite obvious that they are belonging to different groups and different segments. And for some special clients, for instance, listed companies, we believe that by focusing on segmented based operational philosophy, that we can better exemplify the value of clients.

In terms of customer operations, we have summarized some experience based on the communication with our clients. And we even developed more accurate customer portrait that help us to better seize the opportunity arise from our customers so that our solution could be more accurate, could be more competitive and could be more satisfied and received by our clients.

And during the whole process, we have also made good achievements, as just you have mentioned that our customer number of corporate customer has already over past 3 million. But at the same time, we are also optimizing the structure and quality of our clients, corporate clients. And second, the integration of our investment banking and commercial banking business, the integration. So based on our understanding and accurate understanding of customers' need for the past years, we have further refined our products and develop relevant competitiveness in niche areas.

And third aspect is our professionalism, industry-based professionalism. We have established a special department called Strategic Client department that specifically focusing on top-tier clients within the industry. And strive to build an advantage of our customer operation that is based on industry-wise.

If we can grasp the trend of industry upgrading and grasp the need from the top-tier clients of the industry, we are able to deliver and cultivate our capability to serve these kind of clients and to serve this trend. The fourth aspect is that the 1 entire bank for 1 customer strategy. For a traditional commercial bank in China, while sometimes as we provide services to group-based clients, there are some barriers, there are some silos between different branches, across provinces, across cities. So in reality, there are some quite obvious trend in the industry transfer and some top-tier clients, they tend to focus on operation in certain regions.

There are some proof that when we serve our top-tier clients, they tend to bring the whole group moving from one region to another. So this is a trend that we observe. We have built our unique 1 entire bank for 1 customer platform and focus on the industrial chain customers along the top-tier clients within certain industry and provide and unified standardized services to our clients, such as settlements and clearings and et cetera, and help those small and medium-sized enterprises solve their difficulties in getting financing.

Fifthly, to cultivate our capabilities of digitization. One is the online operation of our products; and secondly, our business model. We continue to follow the PeoplePlus digitalization business model, especially as we focus on deliver such kind of services to basic level customer. And the third aspect is about the tools and systems. We have got a CRM 4.0 system that is the customer relationship management system. It is a very good proof for we having a strong capability in terms of digital infrastructure.

And sixthly, the integration of our market line and risk line. They have formed such a kind of consensus that is very important to how large we can provide services to our clients in terms of the range in terms of the business types, in terms of the risk that we choose to bear in choosing clients, in choosing industry and choosing products. We have continuously adopt this kind of method to better choose our clients based on our understanding of the industry based on our credit policies to establish our own name list of choosing strategic clients that we aim to allocate more resources on to guarantee that we can have a healthy and quality development of our corporate finance business.

And finally, we believe that the above-mentioned factors can form a very systematic mechanism and which could be added by our corporate culture. We always believe that the corporate finance business doesn't have a shortcut. We would always control the risk to provide better service of our clients to refine our product, to refine our system so as to achieve a stable and healthy growth of the corporate finance business.

[Operator]

The next question is from Ocean Security, [indiscernible].

[Unknown Analyst]

From Ocean Securities, my question is about NIM. Just now you mentioned about the NIM side. You said the LPR repricing could be -- have some impact on that. And may I know with the impact effect from the deposit side also taking effect. So do you have any forecast that will be at the bottom and turn around next year?

And secondly, for Wealth Management for the first 3 quarters affected by fee cut, the industry's wealth management-related fee income has quite been quite weak. It's also the same in CMB. And after 24th September, as we have seen fourth quarter last year has a high base -- third quarter have a high base, but fourth quarter has been low. And now you don't have the base effect whether you are seeing better trend for fee-based income.

[Unknown Executive]

Thank you for your question. I think that Ms. Li will answer the NIM side and also Ms. [indiscernible] will answer the fee-based income.

[Unknown Executive]

Thank you. Just now for NIM, I just said that in order to support the economy, the policy side has guided down the LPR and also adjustment of the stock -- of mortgage, which definitely will have some impact on the bank's NIM, especially after [ 24th ] September, we are seeing there are further continuous decline of LPR as well as the pricing for stock mortgage. But definitely, there are policies on deposit side.

When we were taking all that together, the effect on deposit side definitely will have some offset of the decline on asset yield. So this year's impact will be quite neutral. And next year, LPR continue to decline and thus, price and the repricing on the stock mortgage definitely will have some pressure on the asset side. And definitely, we'll have pressure on our NIM.

So for next year, I think from a steel point of -- from the current point of time, I think that we are continuing to facing pressure, downward pressure on NIM, but the magnitude of this will be smaller compared to this year. And if there's no other policies, we think that next year's scheme will be stable, we're becoming more stabilized, but it's depending on external policies. And for us, I think we will take more active asset management policies such as to allocate more resources to quality assets and to control the cost and to improve the proportion of demand deposit ratio, so as to maintain our advantage or a decline of the funding cost. Thank you.

[Unknown Executive]

For your second question as the trend for fee is income. For CMB fee-based income, for the third quarter, I think that there is -- for all the for wealth management, we are seeing that decline magnitude is narrowing down for the first 3 quarters is down by 27% compared to the first half, it's down by 4 percentage points. But for the third quarter alone year-on-year basis is down by [ 15.9% ] is decline. The level of decline is also narrowing down.

I think the major impact is coming from fee cut on insurance side. Because last year, we have a higher base on insurance. So on a year-on-year basis, we are seeing the base effect. In fourth quarter, as you are quite concerned about the trend, definitely. This base effect is diminishing. We are quite confident that for wealth management fee-based income, the decline level will continue to narrowed down, but definitely, there are challenges.

In September, for the insurance, that there's an adjustment on the yield. So demand has been quite big in September, which means we have front loaded some of the business growth in September in third quarter but also at the same time, we have done -- we continue to expand our customer base and also asset allocation for our customers.

So we have seen -- in terms of sales volume and market share, we have seen progress made in terms of the insurance side. But policies have been launched after 24th of September, which definitely have some positive impact on our wealth management provided our opportunities, which means that we need to seize the opportunities like the recovery of investors' confidence in the market, especially for equity-related products.

Recently, we have seen this kind of trend. We have seen higher growth for equity-related trend. For equity-related funds, this year, our market share has been up by 40 bps and have reached a new high in third quarter. So facing the new policies, we will continue to maintain our strategy in terms of wealth management, to do more asset allocation and to grow more high net worth customer as well as AUM growth.

We are confident to face this opportunity next year and to maintain the trend which is -- I think that to well getting better for fee-based income.

With all that side, I think is more vague what we have said before. So because we cannot share with us specific deal with you. But my view is that, firstly, for NIM, as I said, before that the decline magnitude will narrowing down. This is a trend. This is quite certain.

And as I said now, with the uncertainty is the external policies. So if there are no further policies launched out, then it's possible that next year, NIM will reach the bottom. We are seeing new policies recently like the LPR adjustment, like the repricing of the stock mortgage. So next year, I think that NIM still will continue to face pressure but the decline magnitude will be better than this year.

Secondly, for fee base income because for the 3 quarters is mainly affected by insurance and the other is by the mutual fund. And these are more affected by policies and policies have been launched after September last year.

So fourth quarter, I think this impact is becoming smaller, much smaller. But this definitely, we tried a lot to have a higher volume in terms of business to offset the decline on fee-based income. So I think the trend will continue to see that the decline level will narrow down. But whether it will turn positive, still depends on the capital market trend, whether it will be a certain trend that the capital market will turn around and whether there will be further new policies coming out. So it's hard for us to give you a certain [indiscernible]. But what is certain is that the decline magnitude level will narrow down. Thank you.

[Operator]

Next question is coming from Gary Lang.

[Unknown Analyst]

My question is about the RWA growth rate. So what will be the RWA growth rate for the third quarter has declined compared to the half end? And your core CAR ratio, what will be your forecast for future RWA growth rate? Just now said that in 2025, you might speed up the loan growth rates. So what will be your focus for the RWA growth rate for 2025?

[Unknown Executive]

Thank you. I think everyone is in interested in the RWA changes. By the end of third quarter, for the waiting approach, for the rating approach, our RWA balance is around CNY 6.6 trillion, up by around CNY 50 billion compared to the beginning of the year, growth reached 0.7% and is 10 percentage points lower than the same period of last year, and it's also down compared to half year-end.

These changes, there are some reasons behind the reasons. In terms of year-on-year basis, we have a very low growth rate. This is mainly affected by the new capital rules, especially in the transition period, over the bottom line part that should not be added back to the RWA. This is why on a year-on-year basis, we have seen quite a very slow growth in terms of RWA, mainly affected by the new capital rules.

Secondly, is affected by the business structure changes. Just now we all mentioned that under this year's circumstances, we're seeing lower, slower growth in terms of loans. So that is why RWA growth is also lower. And another very important reason is for the contingent assets, we are seeing a decline on that part.

So we should also a reason why the RWA loan growth has declined for the contingent asset. This is mainly because we have done adjustments into our asset structure. We reduced our bill discounting business because this part yield is very low. That is why we control the total scale on that part. That is why no matter is for the RWA is coming from the build discounting business has come down.

And thirdly, it's mainly we strengthened our precise management owned capital according to the new capital rules -- for the retail credit line that we offer to customers, we also take up the RWA, but we have more precise management on that. And we improve efficiency on that. So this is also the reason why we are seeing more conservation on capital on that side.

And another reason is that -- for fundamental traders, we have better management and to save more costs on capital side, which also helped to save the RWA growth rate. This is why we have seen changes on RWA side. And since RWA growth rate is slowing down, that is why you are seeing no matter how is the core CAR ratio or CAR ratio, we have seen improvement on that.

With these trends set, what is our consideration for the future growth rate. No matter is for -- I know you are very interested on the dividend payout ratio. We are starting on that. Our -- currently, our dividend out ratio is already the highest among listed banks. And for us, we want to have continuous and stable dividend payout ratio is even more important than the absolute amount. So I think we'll take into consideration from the investors' demand and also our capital level and continue to start on that and to flexibly adjust on that.

[Operator]

Next question is from JPMorgan, Ms. L. Lei.

[Katherine Lei, analyst]

I would like to know more about the dividend payout. You have just mentioned that your view on dividend payout as the national -- as the central government actually increased the dividend payout of listed companies. And as you have quite adequate level of capital adequacy ratio and quite high capital adequacy ratio compared with your international peers even. Do you have any plans to consider the stock repurchase and et cetera?

[Unknown Executive]

We indeed repurchase stock repurchase is a very important measure to promote the development of the capital market. Recently, we have also been asked quite frequently. Indeed, we are doing some research in these issues, in these topics, we believe it is a direction that we can go forward. But we have to admit there are many influencing factors within our consideration.

I believe the major difference is that the listed company and listed banks are different. Well, for banks, they are under regulations, they have many limited limitations and restrictions, such as the capital level and et cetera. I have also seen some other listed banks within the Chinese market, and they have not taken any measures relevant to stock repurchase. We have the capability to do so to do higher dividend payout ratio to conduct the stock repurchase. We are able to do so.

However, there are some other factors that we have to take into consideration. So therefore, we will continue to study on these projects, to these issues. It is not what we want to do, then we can do it.

[Xia Yangfang, executive]

Thank you for your question. So in order to ensure the participation rights of individual investors, we have collected some questions from them by e-mail. And as most of the collected questions overlap with what we have just discussed. So we will pick one representative question to answer. So please have the staff read the question we collected beforehand.

The investors question is that as CMBs both management business and the demand deposit proportion is closely relevant to the capital markets. And I would like to understand that the changes in the stock market before and after the National Day Holiday, what will what changes will -- what improvements will it cast on the income of CMB's wealth management fee income and your demand deposits proportion?

So before that, I have answered somewhat about the content of these questions, in my previous answer. But however, for the detailed influence about the wealth management fee income and the proportion of deposit is too detailed to answer.

[Unknown Executive]

Well, I believe that the 500 ETF, the sales volume could somewhat prove our point. Our market share accounts for over 50%, so that our professional capabilities in selling some products has further improved and it will indeed contribute to the relevant income in the extensive wealth management business. So I wish that maybe we can save this response about the detailed income, the detailed proportion within our annual report.

And at the same time, about the capital markets influence on the proportion of our demand deposits, till now, our saving deposits increased has experienced quite good growth. It is a good momentum we see. But if you want me to clarify what is -- what growth is brought by the capital market, what growth is brought by other factors, it's hard to tell. So I think it would be better that we can respond to the question in a complete manner in our annual report. -- due to time limit, we will now have the final question. Please have the last question.

[Operator]

The last question is from China Security, Mr. [indiscernible]

[Unknown Analyst]

Senior management. I am [indiscernible] from China Security. I have a general question for you. For the first 3 quarters, the banking industry is under quite difficult operating environment, but we see that under the challenging backdrop, you have still doing a good job in constructing your customer base and you have achieved good results, AUM growth, customer growth. You have all secured that. And in terms of our financial indicators you have made your efforts. And we believe that this hard time will pass. And we also see some good signals -- just now you have also mentioned that as well.

And so my question is I have a quite inclusive question. What kind of internal capability that we are cultivating in terms of facing these challenges and what preparations have we been making to prepare for the bottoming out of the industry.

[Unknown Executive]

Thank you for your question. It's a very comprehensive one. also a good 1 for us to complete this conference. You have mentioned that hard times will pass. I highly admit that. I highly agree with that. Whether or not the hard times will pass, it will pass so at current stage, we need to cultivate our internal capability. It means that we need to strengthen our capabilities at all levels and wait for the good time.

So for the past years, especially this year, we have taken deep consideration, and we have been developing in focused aspects and areas. I will speak in a general manner and then focusing on several points. So generally, we have stronger capability of strategic implementation. It is guaranteed how can we further implement to achieve our strategic goal.

This is what we need to construct Well, to be more specific, it means that we need to maintain our strategic positioning. We need to maintain our long-term-ism. We need to focus on the 3 fundamentals of asset quality, customer base. and market orientation and the second aspect is to enhance our innovation capability. This is what we need to focus on in the current period of time. When the time is difficult, it is even more important for us to focus on innovation-driven development.

Later on, I can ask one of my other colleagues to further answer that part. The third part is customer service capability. We need to focus on their needs and their the changes of their need to enhance our service capability to all customers or products and all channels to realize in-depth operation and value creation of customers.

And for the full spec, we need to enhance our management capability, for instance, asset liability management, capital management, cost management and et cetera. And third part is our team management capability. This is to answer in a quite general manner. Due to time limit, I have to answer in that way. But I also have special points to focus on to help you better understand and some ideas that is quite representative.

The first one is the operational capability. How could we leverage on our operational capability to build a better operation platform to support the high efficient development of our business. For instance, in this year, we have constructed a 5 dimension or we should say 5 angle operational model to help realize high efficiency management and to generalize -- to generate more value for our clients.

And the second one is about digital-based management. And the fourth one is about operations in a safe manner. And the fifth one is about operation in a manner with higher level of staff satisfaction. So the 5 mentioned operational model can better support our business development.

So we have also developed another platform called profitability plus based on our traditional operations, we need to further take consideration on generating profits. For instance, for cross-border finance, we have been developing very good in this year and the profitability plus platform has played a very important role within -- for some other perspective, they are also benefiting from this platform such as our outlets, such as our payroll business and et cetera.

To cultivate our operation capability quite important. It is also a capability that is going to be further tested in the future development of the banking industry. The second aspect is about the cost management, refined management of our cost.

Just now I have mentioned some of my opinions and ideas. In terms of management, I mentioned that cost-to-income ratio need to bring down, but it is not the case that the lower, the better. The cost-to-income ratio is not about to lower the cost. The key is to enhance the efficiency. I mentioned 7 key aspects that we need to focus on. It is not something that we can finish in the short run. It's a mid- to long-term task. It is something that we are taking as the bank's culture to further promote it to all staff in the bank.

And the third aspect is about the coordination capability within the bank within the group. Across different business lines across domestic branches and overseas branches are core across the bank and other subsidiaries, we need to coordinate among these different entities. We need to further optimize the mechanism, the management mechanism, the procedure and et cetera. And we have initially achieved satisfactory results.

So for instance, the stock repurchase facility, we have already provided supported to 6 clients, and among them are some entities from the China Merchants Group, such as China Merchant Sports and et cetera, and they are receiving the financing support from China Merchants Bank. And we have also coordinated with our other subsidiaries such as China Merchant Securities and China Merchants Funds, et cetera.

And for the next point I want to mention is about the technology capability. So for that part, I would like to invite the Head of our Digital Finance Development office to provide more detail.

[Unknown Executive]

I would say that China Merchants Bank have always follow a principle that is the bank's development is based on the technology development and the digital development to further guide the development of the business. we have continued to maintain a high input in terms of IT. Our IT infrastructure construction has always followed the 5 principles that is online digitalized platform-based ecological and database principle of development.

Our online operation development has been proved quite successful as we have already mainly choose to provide services to our clients through the online channel, which is delivering services to [ over 95% ] our wealth management products are realized online. And recently, the A500 ETF fund, we have achieved quite good sales. The online channel has been very significant and important to promote the sales of the A500 ETF founder.

And the bank wise, over 60% of our sales are leveraging -- the bank's instruments and tools to conduct big data analysis. We have also developed a special talent team that includes 300 people to further develop such kind of business.

CMB is also the first batch of bank to realize the full-scale cloud migration and the reliability. It has achieved a high level of over 99.999%. For this year, utility business-related scenario that CMB has provided support to over 40 million customers. And for the cloud treasury management business, we have also delivered such kind of flagship products to our clients.

The AI is also a key area that we will focus on. And we have proposed a general mindset for our future fintech development, we need to embrace the new round of AI revolution and to further our input in developing AI and our business to develop into the smart CMB to digital CMB. We have developed these scenario-based solutions to our clients. And we have developed clusters based on the cloud and the carry on multibillion based model training.

We have bring online many applications as many as over 630 and more that covering risk management, retail finance business, corporate finance business, et cetera, and we strive to build our capabilities in these areas. Our smart AI assistant covering the payroll finance business have already delivered to many of our staff and many of our clients.

And over 6,000 programmers are using relevant tools to deliver RM model and helped over 100 RM-related enterprises to communicate with us and further develop our capability in this area to further build smart CMB to further realize our goal to build a value creation bank.

[Xia Yangfang, executive]

Due to time constraints, we will now conclude today's meeting. For more details, you may refer to our third quarter report that we have already posted online. And for more questions, you're welcome to communicate with the CMB IR team. Thank you once again. Goodbye.