Industrial and Commercial Bank of China Ltd

SSE:601398

Earnings Call Transcript 2023-Q1

[Wang Liancheng]

[Interpreted]Good evening. I'm the General Manager of Corporate Strategy and Investor Relations Department Wang Liancheng, welcome to our Half One Earnings Call. Today's call is held on-site conference as well as call. It's our pleasure to have the investors and analysts for today's call. Now I'd like to introduce the management present today. Mr. Liao Lin, the President of ICBC; Mr. Wang Jingwu will be Executive Vice President; Executive Vice President, Mr. Zhang Wenwu; Executive Vice President, Mr. Duan Hongtao, Board Secretary, Mr. Guan Xueqing. Our Directors, Mr. Lu Yongzhen, Feng Weidong, Cao Liqun, Chen Yifang, and Dong Yang also joined today's call and we are also joined by the heads of relevant departments and the subsidiaries.

In the first half of 2023, all the core indicators of our bank have maintained stability and key strategic layout has also achieved new progress. We have achieved results better than expectation. The net profit in the first half was CNY 174.7 billion. 1.1% Y-o-Y growth and 1.6 percentage points higher than the third quarter. The total revenue was CNY 428.9 billion and maintaining better momentum in the first quarter. The net fee-based income was CNY 73.5 billion, the size, the largest among our peers.

In the first half, our ARE was, respectively 0.84% and 10.51% ranking a better position than most of our peers. The capital adequacy ratio was 18.45% and also leading position among our peers. The provision cost ratio was 218.6%. The net NPL ratio was 1.36%, a drop two bps lower than that at the beginning of this year. The overdue ratio was 1.18%, four bps lower than that at the beginning of this year, the capital overdue loans and NPL loans was negative For the 13 consecutive quarters, NIM was 1.72%.

By the end of June, the loan increased growth by 9% while comparing to that figure at the beginning of this year, and the total investment increased by 7% and deposits increased by 11.7%. And this is the general introduction of the first half results. And our PBT of the presentation has also been posted on our website. You can refer to that.

And now we are going to the Q&A session.

[Operator]

[Interpreted] We advised every investor and analyst to raise one question every time, and please indicate the name and the organization before you raise the question. The first question, please.

[Yanmei Zhu]

[Interpreted] Thank you for the opportunity to raise the first question. I'm Yanmei Zhu from UBS Securities. Congratulations on ICBC on achieving the stable results on the back of compact situation. I would like to ask so which I have frequently asked in formal course about the net profit growth, maintaining growth of net profit is not easy. However, the situation remains quite complex. So can you elaborate on the total volume and growth rates and any highlights of the revenue. Looking forward, can the net profit remain -- achieve a positive growth for the full year? Thank you.

[Unidentified Company Participant]

[Interpreted] Thank you for your question. The question is about the revenue net profit. You have already have our PPT presentation of our profits. So I will answer all the questions together. So I would like to talk about the highlights of our half one results. We have a lot of price ports of our earnings for the first half. For example, the core indicators remain stable. All kinds of risks are controllable. And the strategic implementation had achieved some breakthroughs and the operation has also achieved progress in both quality and quantity. And I would like to elaborate our achievements from two aspects or two sheets, which I believe can be -- demonstrate our progress in a more clear way.

The first sheet is the balance sheet. Business sheet, the balance sheet of ICBC in the first half has become cleaner and healthier. Clean can be demonstrated in our improvement of our asset quality and the constitution of our capital. By the end of June, the NPL ratio was 1.36%, two bps lower than the beginning of this year, the gap between overdue loans and NPLs was negative 461 remaining active for consecutive 13 quarters.

In the first half, the RWA growth rate was 9.1%, 1.1 percentage points lower than the growth rate for total assets. So all this combined meaning the asset quality foundation of our bank has been consolidated. The balance sheet has become healthier, can be also demonstrated through our more balanced structure. The new incremental assets exceed RMB 4 trillion mainly coming from the incremental loans which is RMB 2 trillion and also new investments amounting CNY 700 billion.

We have accelerated our assessment on the equilibrium and the balance, so as to make sure our assets can be maybe more stable, it's to manufacture, green inclusive, agriculture-related stack which are the key aspects of the real economy side. So as better accommodated to serve the real economy. And from the liability side, the assets increased over CNY 3 trillion.

And we have also achieved more balanced growth of all types of deposits, including savings, corp, retail, corporate and financial institutions deposit and also the banking liability proportion has been managed at a relatively low level compared to our peers is the belief of our reliability has also maintained quite solid.

The second sheet is the income sheet, which has become more balanced, coordinated, and sustainable. By balanced, it means we have become better adapted to the risk and profits. We have always pay great attention to development and the security and the provision coverage ratio has increased by 9.5 percentage points with the balance of allowance reached CNY 751.2 billion the total volume of net profit increased by 1.1% and the totaled CNY 174.7 billion. That means we have improved both the risk mitigation capacity as well as our profitability.

By coordinated, it means on one hand, we have become more conservative in our expenses. The cost, income ratio was 23.2%, also a better position than our peers. By sustainable, we have become more solid in the foundation of our operation and development momentum. For example, we have implemented key strategies like GBC Plus to build a more solid ecosystem of our clients and also the ICBC, digitalization of our bank, the total retail customer increased to CNY 729 million, and corporate customers exceeded 11 million.

Another key indicator is the MAU for mobile banking clients exceeded 200 million and series -- a large area of digital results, digital products have also been put into place, which can show our momentum for innovation has also been strengthened continuously. So these two sheets can demonstrate the solid foundation for our future development as well as the resilience and secondly, about your question on revenue.

My personal opinion is when you look at revenue, should pay attention both to the growth rate as well as the total volume and structure. In terms of the volume, we have stabilized revenue and improved the structure in terms of the total volume, we remain the largest size. The first half, the total revenue hit CNY 428.9 billion, continuously ranking the top among international peers, which has created adequate room for us for future profit growth as well as risk prevention.

Structurally speaking, revenue has become more dependent on diversified resources. The noninterest income ratio mix made up 21.4% of the total revenue increased by 3.9 percentage points, among which basic revenue like payment and settlement and bank card increase continue to register a positive growth which has made quite solid foundation for us to increase more revenue in these areas because we know fee-based income are quite important to the total rapid growth.

In terms of the growth rate, we have seen marginal improvement. You can look at the figures. Despite of the conjunction of 3.4% of the total revenue, however, the contraction was 0.1 percentage points smaller than the first quarter's drop. And also the contraction of the net interest income and fee-based income, also smaller than the first quarter. And the other noninterest income has registered a positive growth about the outlook on the full year's net profit.

Looking into the future, we believe the good fundamentals of China's economy, which are quite resilient and has huge potential and vitality remains unchanged. And we have seen the introduction of a series of policies to stabilize the economic growth, will also promote the economic to become stronger and better and we believe that will also create quite favorable conditions for financial institutions like ICBC

So to sum up, with a huge size and strong base of customers straw into technological advantage. And equal environment ecosystem of clients, we have still a solid foundation for future development and strong momentum to have greater growth and we are confident that we can have foster more drivers for future revenue growth and profit growth, so as to create more returns for our shareholders and investors. Thank you for your question.

The next question?

[Unidentified Analyst]

[Interpreted] My question concerns net interest margin. We have seen that your NIM continued to go down. What are the main reasons? Is there any change in interest payment costs? We have seen that the loan yield still faces pressure with the cost interest rates slowing down and the outstanding mortgage interest rates adjusted down. But how would you stable NIM? And what is your outlook? Thank you.

[Unidentified Company Participant]

[Interpreted] Just as a former question concerning operating income. The question regarding NIM is asked every time. In our annual results announcement in this March, I have discussed this with all of you. At present, in China's banking industry, the operating model and the profitable -- profitability model are all the same. So the sectoral trajectory NIM is similar, but the extent of the change differs according to the mix of the balance sheet so the main trajectory is dependent on the sectoral one. But to the extent is dependent on the bank's efforts of their own.

For ICBC, we follow the sectoral trajectory in NIM in the first half of the year, at further shrink, but we have also noticed some positive signs. Many analysts mentioned the rebound. Well, from my side for the change, NIM compression shrinked compared with in the last half of the year, our NIM was 1.72% in the first half of the year remaining within the reasonable range down by five bp compared with Q1 and 20 bp compared with the beginning of this year.

In the future, it remains to be seen if we can further stabilize it, but this is a positive sign in terms of the reasons. The new time deposit interest rate is going down. The change of NIM is dependent on loan yield and the interest payment ratio of deposits, asset interest-bearing assets, average yield was down by three bp year-on-year. And the interest-bearing liabilities interest payment rates was higher by 30 bp. This is attributed to more time deposits. At present with the deposit interest rates, the realization adjustment mechanism in place, we've seen the nominal rates of deposits is going down.

Our new RMB time deposit interest rate was down by nine bp compared with last year and down by 15 bp year-on-year. The marginal cost was lower for the new deposits, which will stabilize our cost of liabilities. In terms of the business mix, it is improving. In the first half of the year, we actively adjusted the mix in terms of assets, liabilities, customers and so on. This is our internal momentum.

We improved the mix of assets and liabilities to stabilize our NIM, especially in loans. We emphasized all kinds of loans, of all kinds of scale, we improve the proportion of retailing and medium and long-term loans, which is priced higher by the end of June, the personal operating, the business loans and the medium and long-term corporate loans accounted the -- their proportion was higher by 0.7% and 1.5 percentage points, respectively.

This is also another positive sign. You also mentioned the reduction of outstanding mortgage interest rates. Now reasonably speaking, such adjustments will have impact our NIM. We have pressure indeed, but from the side of the customers, it is conducive to repeat their burden of repayment and reduce their willingness of prepayment and it's also good for the commercial banks to remain their volume of mortgage loans. The highly adaptability is the requirement of constructing a modern financial system. And it is also our advantage.

We will continue to improve our extension, direction and the mix and we will continue to manage well the interest payment and loan yield especially managed well, the balance of loans extension to remain within a reasonable range and increase our capabilities and sustainability of serving the real economy. We are confident to keep it within a reasonable range. Thank you.

Next question, please?

[Unidentified Analyst]

[Interpreted] I'm from Huatai Securities. I would like to ask about the asset quality. Just now President Liao mentioned half one NT ratio was lower. Can you sum up the asset quality performance in the first half of your bank?

[Wang Liancheng]

Investors have concerns over certain sectors. What do you think of your asset quality in some search sectors like retail sector and also some geographical and also for inclusive finance, large banks maintained high growth rates in the past several years and in potential risks in this regard. I'd like to invite Mr. Wang Jingwu to answer this question.

[Wang Jingwu, Executive Vice President]

[Interpreted] The asset quality is the last line for our bank. We have paid out attention to risk management, particularly to the risk management in key areas. In the first half, the core indicators of asset quality maintain quite stable and also improvement by the end of June, the balance of NPL was CNY 343.6 billion. NPL ratio was 1.36%. So it's lower than the beginning of this year of the loan ratio was 1.1%, 4 bps lower than the beginning of this year. The cap overdues NPS was negative CNY 46.1 billion, remaining negative for 13 consecutive quarters.

We can look at some details from the corporate side. The asset quality of all sectors, overall speaking, have been improved and the risk in some key sectors has been released. The average NPL ratio of corporate loans of domestic branches was 1.88%, 20 bps lower than the beginning of this year and 8 bps lower than the first quarter. NPL ratio was -- NPL ratio of half of the industries like manufacturer, retail and wholesale have been also lowered, respectively, by 71 bps and 149 bps at the beginning of this year.

For example, other sectors, which have been actively impacted by COVID, like tourism, entertainment, transportation have also seen improvement. At the same time, due to the adjustments of the real estate developers has some pressure on destocking and the NPL ratio was -- the ratio of property-related industry was 6.68%. This is the corporate loans, 54 bps higher than the beginning of this year.

By the ratio, the proportion of property-related loans to the total corporate loans has been quite low, just around 4.9%. Besides, we have also said adequate allowance to property-related loans. So the relevant risk is controllable and impact is also limited to our total assets. From the retail side, the asset quality has also maintained quite stable.

The domestic retail loan average NPL ratio was 0.66%, 5 bps lend higher than the beginning of this year and one bp higher than the first quarter. Among which the domestic mortgage NPL was 0.42% to its higher than the beginning of this year. And the green consumption of NPL was 2.36%, 17 bps higher than the beginning of this year and 3 bps higher than the first quarter.

The retail business loans NPL ratio was 0.77%, 14 bps lower than the beginning of this year, 8 bps lower than the first quarter. You asked me about the asset quality of the inclusive finance. We have maintained relative growth rates of inclusive finance since the beginning of this year, with a growth rate higher than our peers. This is also a key strategy and measures for us to support the real economy side and also an actual need for us to optimize our structure and increase our revenue as well as accelerating our transformation. Currently, the NPL ratio of our inclusive finance was 0.76%, 60 bps lower than the beginning of last year with relevant controllable and limited risk in order to realize higher quality development of include finance, we have adopted the following measures.

First is to make use of our advantage in our technology by integrating both internal and external data and information and construct customer selection model. So as to better accommodate our services to the requirements from the real economy side. Secondly, we have sticked to the loan extension by our experts. We have mixed for use of our advantage in terms of the offline outlets as well as our customer relation management managers to enlarge their information access through via off-line platforms and combining with the online digital platforms so as to effectively recognize relevant risk of our customers.

Firstly, we have also continued to enhance our disposal on NPL ratios -- NPL loans and by achieving synergy in the front and middle and back desks in recent years, facing complex macro environment, we have stepped up our disposal of NPL, nonperforming assets. Over the past three years, the disposal of nonperforming assets exceeded RMB 190 billion, which helped us to maintain stability through cycles of our asset quality by maintaining the NPA ratio at a relatively low level.

So as to present a clean and balanced balance sheet to our investors. Looking into the future, we will continue to enhance our risk governance path and prevent any potential risks in the property sector as well as LGFB so as to promote our risk control and prevention capability to reduce any potential losses of our credit risk assets so as to create more room for our profit growth. About any potential impact that investor analysts might have heavy interest for -- from the new regulation of the classification of financial assets, the impact mainly focused on the corporate credit business. And you have smaller impact on our retail bond investment, Interbanking investment and build assets. So relevant impact is generally controllable.

[Operator]

[Interpreted] The next question comes from line -- the next question comes from Katherine Lei of JPMorgan.

[Katherine Lei, JPMorgan]

[Interpreted] Thank you for giving me the chance to raise questions. My question concerns credit growth. In the first half of the year, what are the features of your credit growth in terms of volume, mix and pricing. We also noticed that the credit growth was sluggish in July for the whole sector. What is the latest situation in effective credit demand for your corporate and retail loans? Will you keep relatively similar growth in credit growth compared with last year?

[Wang Liancheng]

[Interpreted] You have noticed the great growth in the first half of the year. I'd like to invite our SEVP Mr. Zhang Wenwu to answer your question.

[Zhang Wenwu, Executive Vice President]

[Interpreted] Since the beginning of the year, we implemented the national economic and financial policies and monetary policies. We adhere to commercial sustainability principle and grasp the chances in the demand in the market, we strengthened the risk prevention. Our credit volume grew stably with improved mix and the volume and quality were also improved in supply. Our RMB loan balance domestically totaled CNY 23.5 trillion, up by CNY 1.99 trillion and grew by CNY 787.6 billion year-on-year.

We have four features: first, our support for major projects with serving the manufacturing. We support the transportation, water, conservancy and other major infrastructure in the 145-year plan projects. And we provided the last on supply for the real economy. In the first half of the year, our mid- and long-term corporate loans increased by CNY 1.3 trillion. The increment improved by 12 percentage points year-on-year. We support our domestic made airplane, the high-speed train and other pillars of the great power, our loans to the manufacturing balance exceeded CNY 3.6 trillion.

Our balance and increments in the manufacturing loans both ranked first among the peers. Second, we prioritize major areas. In inclusive finance, we improved volume and the coverage. Inclusive finance was taken as a pick through in our transformation, and we grasp the chance in digital, inclusive finance. We have a series of online financing products that is closer to the market customers and demand. The balance of the inclusive finance loans exceeded CNY 2 trillion with an increase of CNY 500 billion leading the peers.

We also serve the green finance. We improved our paradigm in this regard and support the effective use of clean energy, new energy, automobile and the PV power station and other green industries. The balance of green loans exceeded CNY 5 trillion the volume and increments, both the peers. We also serve tech innovation. We have specialized train mail campaign with construction of many Sitech centers.

Our strategic emerging industries loans exceeded CNY 2 trillion increments was over CNY 600 billion. The volume and increment both led peers. We also improved our agricultural finance services, we support the 3 agriculture major areas, cover more urban areas by the end of June. Our agriculture-related loans balance was near CNY 4 trillion, grew by 20%, leading the peers. Certainly, we keep the extension of retailing loans.

We continue the implementation of number one personal bank. We also marketed more series of major products in this regard. So we have achieved a year-on-year growth in the non-mortgage loans. In the first half of the year, the personal consumption and operating loans increments are more than CNY 280 billion. We also increased our availability of housing loans. We have extended more than CNY 510 billion in personal housing loans. We also grasp chance in the secondhand houses. The accumulated expansion was over CNY 150 billion up by CNY 70 billion year-on-year.

We also coordinated the paradigm and achieved coordinated development in Yangtze River Delta, the Greater Bay Area, middle region, Chengdu, Chongqing region. In these regions, our loans growth was higher than the average. In pricing, the yields and the growth have faced relatively lower down in the second half of the year. The slowing down of the loans was down. LPR downward pressure have some impact on our yield. But we're going to full play our advantages and manage well in the mix and duration of the loans.

So that to contain the extent of the reduction in the reasonable range in the loan demand in the first half of the year, our credit was relatively robust. We keep the robust reserve and also stabilize our pace. We achieved year-on-year growth for the Q1 and Q2 in corporate loans in the major products, major customers and long tail customers, we have formed a unique product and service system in manufacturing, green site tech, urban rejuvenation, education, tourism and inclusive finance., we have ample demand reserve corporate loans will also be the major force in our future loan growth.

We will continue to adapt to the new development of housing markets based on the adjusted mix of personal loans, we will extend our consumption scenarios. We will continue our marketing in personal consumption and operating loans, so as to strengthen our competitive edge. So all in all, we see that our effective reserve is ample and stable. We can achieve a growth that can cross the cycles based on the risk yield, we will continue to improve our market cities.

In the future, we will continue to grasp the market trajectory and continue to improve our credit business and strengthen and improve credit market competitiveness and value creation based on the economic development and customers' demand, we will continue to implement financial services with more strength so as to achieve high-quality development. Thank you.

[Wang Liancheng]

[Interpreted] Next question please. From Credit Suisse Asset Management. I would like to invite the Executive Vice President Ms. John Wei Wu to answer this question from Credit Suisse Asset Management.

[Unidentified Analyst]

[Interpreted] I would like to ask how was the development of ICBC Wealth Management business in the first half of the year? And in particular, in terms of Wealth Management products, at the end of last year, we saw some market fluctuations with quite an amount of redemptions. I wonder what is the latest dictation and the update has been stabilized and improved. And finally, as we understand, the management fee rate of equity funds has been reduced. Will there be any pressure on the management fee reduction for Wealth Management products in the future?

[Wang Liancheng]

[Interpreted] This question is about Wealth Management, Asset Management. I would like to invite the Executive Vice President Ms. Zhang Wenwu to answer this question.

[Zhang Wenwu, Executive Vice President]

[Interpreted] Thank you for your question. About the Wealth Management business in the first half of this year, now we are in the process of constructing a big wealth management system focusing on transformation and transition of our asset management and funds and insurance. In the first half, the total revenue from our Wealth Management business was CNY 12.1 billion, we have provided services to customers over 16 million and created over RMB 160 billion for our customers. The AUM of our retail customers exceeded RMB 20 trillion making ICBC the first rank and an increment of our AUM by CNY 1.38 trillion compared to the beginning of this year.

Now we are also in the stage of transitioning from paying attention to the balance sheet of the bank to the balance sheet of our customers and also a transition from the product sales volume to the AUM of our customers. And we are also trying to establish tiered service system for different types of clients by relying on the diversified service plans with the use of AI and big data. About your question on the Asset Management business, you mentioned about the fluctuations of the market which cost pressure to most of our banks due to the redemption and for our asset management subsidiary, we have maintained quite stable.

The average contraction of our pure debt fixed income products ranged only between 70 to 80 bps and non-product had been closed due to the redemption of our customers. In the first half of this year, ICBC Asset Management subsidiary maintained quite good momentum in our business development. Firstly, the investment profits and operation results have outrun their peers by comprehensively using investment strategies like duration, leverage and credit, they have ceased to be good opportunity brought by the good performance of the debt market. By the end of June, the average annual return rate of the existing Wealth Management products was 3.33%. This also ranked the top among our peers and at the longer run since the establishment of our SMN subsidiary or the return rate of all the products upon duration, was as high as 4.47% and also with the asset quality quite stable.

Secondly, our Asset Management sub-tier has also improved their capability to better serve the real economy by increasing their investment in the advanced manufacturing, technology innovation and green finance. And thirdly, they have also made great efforts to optimize the structure of the reinvestment. The middle and low risk products accounts over around 90%, among which the noncash products totaled CNY 1.2 trillion. And by the end of June, the WMP in compliance with the new Asset Management regulations peaked CNY 1.71 trillion in the daily average rate daily volume -- average volume since the second quarter was CNY 1.63 trillion, also ranking the top of our peers. Overly speaking, we have discovered high-quality growth rate for our Wealth Management business to better serve our customers in accordance with relevant regulatory requirements.

About the fee rate of Wealth Management products. For banks, we have always insist on the orientation of inclusive finance with overall fee charge rate far below the mutual funds rate because most of our WMPs are fixed income rates. So the fee rate have been vastly lower. For example, the average fee rates of our WMP in compliance with the new asset manager regulations was only 30 bps.

In the future, by better -- by paying attention to the market situation, client requirements and also our operation is we will try to achieve the balance between the volume and the price of the WMPs. The new asset management regulation is new to the industry, along with the capacity and maturity of the industry, the Wealth Management business industry can also become more scientific and more inclusive in the future. Thank you.

[Wang Jian, Guosun Securities]

[Interpreted] One last question. I'm Wang Jian from Guosun Securities. I have noticed an issue about mortgage loans. In the first half of the year, what about the recovery of the mortgage loss demand? What about the repayments, is there any new change in July? PBOC mentioned the adjustment of the outstanding mortgage loan contracts. What is the latest development? So based on such adjustments, how do you foresee the impacts on your NIM and profitability.

[Wang Liancheng]

[Interpreted] Your question concerns the mortgage demand and the repayment also the adjustments of the outstanding mortgage loans. I'd like to invite our SEVP, Mr. Duan Hongtao to answer your question.

[Duan Hongtao, Board Secretary]

[Interpreted] In the first six months, the housing market is under adjustments. But the personal mortgage loans remains to be one of the most important parts of our #1 personal bank strategy. It is an important financial product to meet the demand of the people. First, in the first half of the year, our expansion of mortgage remained stable with improvements. We actively adapted to the new changes in the housing market where the chance and actively aggressive chance in secondhand, how this so as to achieve positive growth, the accumulated loan growth was over CNY 510 billion, up by CNY 48.1 billion year-on-year. The personal secondhand housing mortgage loans totaled CNY 150 billion, up by CNY 70.6 billion year-on-year. The average interest rate of the new loans was 4.15% achieving balanced development of pricing and quantity.

Second, the growth was stable from volume. The balance of our personal mortgage loans was CNY 6.37 trillion. This is a very important product accounting for third quarter of our personal loans and one fourth of the total loans from the value contribution and the capital saving advantage, it is still an important support for our stable operation. From risk prevention, our -- the average LTV of mortgage loans was 46% in the first-tier cities, it's only 37% and is 48% for other cities showing a resilient capabilities against risks. The NPL ratio was 0.42% leading the peers. For prepayments, the interest rates of loans was lower customers tended to adjust their allocation of assets and liabilities. So the willingness of prepayments still remains to be high.

The prepayment proportion was higher in the first half of the year, leading to the reduction of the balance. However, the balance was down by CNY 57.6 billion compared with the beginning of the year, down by 0.9%. Since June, the pre-payments compared with the peak in April was reduced. We will continue to make efforts to effectively satisfy their need in their regard for us to achieve stable and sustainable growth in personal mortgage loans for the adjustment of outstanding mortgages and its impact on NIM and profits or the adjustments because there's a large number of customers and concerning policies, we need to consider the differentiated policies.

We are communicating with the authorities and analyzing and making the implementation plans. After the adjustment details, we can make forecasts reasonably speaking, the adjustments will have some impact on NIM and profits while it is conducive to boosting housing markets, relieving customers prepayment pressure and improving their consumption willingness. It is also good for our bank to improve retail and medium- and long-term loans proportion will continue to actively improve the mix of asset liabilities through adjusting mix. We will mitigate the pace of NIM contraction and keep it in reasonable range. Thank you.

[Unidentified Analyst]

[Interpreted] Before the earnings call, we have also consultant collect questions from retail investors. And now I would like to raise the questions from our small investors. Above the dividend payout, well ICBC consider dividend half year and now the valuation of ICBC is severely undervalued. What measures will ICBC adopt in the future to restore your valuation and what new plans for your issuance of capital instruments? This is a sensitive and also important question about dividend payout, valuation and capital, I would like to invite the Board Secretary to take this question.

[Unidentified Company Participant]

[Interpreted] Thank you for the question. I would like to answer your question -- answer your three questions from three aspects. Firstly, about the cash dividend maintain a reasonable dividend payout ratio and also high dividend yield for our customers, for our investors is the principle for us, we believe 30% division payout ratio for our bank is roughly reasonable level for us to both meet the dividend requirements from our customers, but also to maintain adequate position of capital for our future growth so as to better position us to create long-term sustainable investment returns for our shareholders. You asked about the -- whether we have considered paying dividend by half year. Now we don't have any information to disclose in this regard.

Since our IPO in 2006, now we have created more than RMB 1.3 trillion cash dividend to our shareholders. Ranking be #1 of listed company in Shanghai Stock Exchange since 2007. And the annual CAGR growth rates of the cash dividend for A shares and H shares was since the IPO was as high as 4.7% and 5.3% considering the share price increase, the return yield will be respectively 5.3% and 5.7%, respectively for our A&H shares. And dividend yield calculating with the stock price at the end of June. For 8 years will be 6.3%. And for our H sales will be 7.9%. All these figures can be demonstrating the strong and long-term yields. For our investors, if you can hold ICBC sales for long term. So we are quite ideal investing for long term and value investing.

From the performance in the long term and midterm development, a reasonable dividend payout ratio is not only a key approach for us to retain our investors and also quite important for our future growth. So currency, we still think 30% dividend payout ratio is reasonable. About the old valuation and price ratio of our bank for the hidden value of our stock, the net assets per share by the end of June is RMB 9.04, 5.6x of the book value per share upon our IPO in 2007. Currently, the price book ratio was roughly historic low level despite of a better position compared to our comparable peers. This is the outcome of different factors, including the investment and the market and also many other factors at play.

In the past, you have also seen we have maintained quite solid in our performance with our core indicators remaining stable and also for the asset quality and some key sectors, like property sector and LGFV has been controllable and manageable. And our other key indicators that provision comp ratio and PL ratio has been also quite strong as Mr. Wang just now mentioned, NPL ratio was two bps lower than the beginning of this year. So we think the value of ICBC should be better acknowledged by long-term global investors and value investors as well as ESG investors for -- in the future, we will continue to enhance our Investor Relations management.

Better inform our investors of our advantage in our key strategies of, for example, the retail strategy, our advantage in transactional banking, global markets includes finance, green finance as well as our digitalization and the exploration of our long-term customers, GBC plus customer ecosystem construction and also the fostering of key talents, which are all drivers for our future development of more than financed. So we believe against backdrop of better recovery of China's macro as well as the invigorating measures free departments and authorities of China for the capital markets. The market players -- market force, we are better promote the recovery and improvement of our price-to-book ratio and to enable more investors benefiting from our business government.

As to your question about the capital instrument issuance. By the end of June this year, our capital adequacy ratio and core common Tier 1 ratio or will outrun our outperformed peers. In the future, we'll continue to become less dependent on the capital-intensive business and to optimize our assets. Currently, we think the new regulations of the capital management has limited impact on us. In the future, we will also better combined the issuance of capital instruments and noncapital TLAC instruments since this year -- in the first half of this year, we have completed the issuance of 55 billion capital instruments. And this week, we have also issued the second Tier-2 capital instruments totaled RMB 55 billion, and we will continue to take advantage of the low interest rate window and to further optimize our capital structure.

[Li Chen, China Securities]

[Interpreted] I am Li Chen from China Securities. My question concerns customer development. You have mentioned the acceleration of customer ecosystems. In particular, the GBC plus project was the latest development for GBC customers, how will it transform into your financial indicators?

[Unidentified Company Participant]

Thank you for your concern for our GBC plus project. In the first place, we introduced GBC coordination from fund flow so as to improve the close-loop circulation of our fund. Through the circulation, we signed our customers. After 1 year since the first introduction, we improved it into GBC plus from fund to customers to ecosystem so as to construct a fundamental project called GBC+. We have several features. First, it's our leading customers. This is our advantage. Second advantage is our fintech, which is strong. 36,000 tech talents in ICBC with the investment of more than CNY 2 billion through service, customer, value chains, we formed a system with top customers leading the middle and tail customers.

So as to construct an ecosystem with all kinds of customers in terms of volume, we adhere to tap empowerment to the -- through the front chain, we improve our service train and to cultivate the customer ecosystem. Our highlights are finance plus government, finance plus sectors and finance plus livelihood of the people. For example, we built ICBC e-security platform with the provincial social security institutions. We provide all kinds of functions so that they can have their business by more than 30 provinces so that our customers can share the services more conveniently.

Second, we coordinate the group institutions through our service chain. We expand our customer chain so as to help customers route in ICBC, many of the customers may not be those of ICBC. How can we absorb these customers into ICBC? We base in payments, settlements, trade and supply chain financing, we extend our service to the upstream and downstream customers and diversified customer ecosystem. For example, for a hospital, we built Internet smart hospital and settlement digitalization platform. As our main supporting bank, our proportion of the business exceeding 90%. We actively extend to BC and we serve the Medicare workers in their financial assets totaling CNY 900 million from the best customers of ICBC, we extend to BC and customers from service chains to customer chains.

Thirdly, we vitalize the eco effect so as to transform customer chains to value chains so that the customer ecosystem can blossom. To now in the 31st World College Summer sports game, we are the only banking partners in supporting their finance needs. In multiple scenarios, we built our support and our supporting funds was over CNY 20 billion. You can see the transformation and the flow of three chains in this ecosystem. In the major scenario construction, we extended 3,340,000 corporate accounts.

Increased deposits of over CNY 467 billion, increasing by 19% and 64%, respectively, year-on-year. So you can see seven projects within GBC+ project, including outlet competitiveness improvement, the e-mobile banking and behind that, we have eight projects and we have seen achievements. So to be full play our advantages in top customers. As we form the ecosystem, our customer mix, we will undergo great changes with such a change and our huge volume of assets and AUM, we will have qualitative change.

We will continue to play our fintech advantage and also strengthen our risk management system, also improved the eco assessment not only based on the commercial indicators in terms of assessment, we will see the three chains and whether they form a holistic system. In the future, this will be an important advantage for ICBC with such a system in place. It will play vital role in value creation. And for ICBC high-quality developments strengthen our solid, it will empower and will give us proper methods. Thank you for your concern for our ecosystem construction.

[Operator]

[Interpreted] Next question from GolfAmerican Securities. I will ask the question about the property lending. In the first half, we have seen the Q-o-Q increase rate of property lending of 6% so asked about the breakup of the lending in the property sector. How much were the product developers and how much was the lending-related ensuring the delivery of housing?

Has the NP ratio of developer loans picked? And well, if not, when we see the tick and how will you balance the lending to the property sector and relevant risk management?

[Wang Liancheng]

[Interpreted] Exec Vice President, Mr. Zhang Wenwu will take your question.

[Zhang Wenwu, Executive Vice President]

[Interpreted] In the first half of this year, the policy environment of real estate continues to only be roughly easing environment since the end of 2022 to ensure the liquidity of all the developers so as to promote the recovery of the real estate sector. For our bank, we continued all with the stick with the same standards of our lending in this respect to continue to provide our support to the quality developers and reasonable requirements for lending. Firstly, the total volume of our lending and investment in this sector has remained stable. By the end of June, the domestic property lending totaled CNY 767.2 billion, accounting for 4.9% to the total group corporate loans and 3% to the total lending of our group.

From the increment perspective, the property-related property industry lending increased by CNY 42.4 billion compared to the beginning of this year, an additional increment of CNY 40 billion compared to the same period of last year. From the structure, we mainly prioritized Tier 1, Tier 2 cities. And for project selection, we mainly [ see ] the developer loans and also lending to the guarantee housing.

Secondly, the risk in the property sector has been released to a certain extent. But overall, the situation is controllable. NPL, the nonperforming lending to the real estate was CNY 51.2 billion by the end of June, an increase of CNY 6.7 billion compared to the beginning of this year. NPL ratio was 6.68%, 54 bps higher than the beginning of this year, mainly impacted by the adjustment both at the demand, signed and also supply inside of the real estate sector and also the liquidity pressure for certain individual private developers. For our bank, we have strengthened our risk management industry and also made resourcing measures to every individual clients.

In the first half, we have seen some substantial progress in the risk digestion in this regard and continue -- we will continue to promote the risk management in the second half of this year. And firstly, we will continue to balance the lending growth and also risk management. To better meet the requirements of prime developers, we have signed strategic cooperation agreements with 12 developers. And since November of last year to now we have total extended lending over RMB 180 billion and among which the new, we extended loans totaled RMB 150 billion in 2023.

And in terms of the lending to guarantee the delivery of houses, we have support several projects to resume their construction. And overall speaking, the relevant projects can also help us to maintain a solid asset quality for the mortgages. Looking into the future for the -- from the policy end with multiple policies continue to play out the risk for developers now may be bottomed. And for our bank, we will continue to support the requirements for the prime projects of developers with focus on support the Korman housing projects and guarantee and rental houses and to support the M&A lending for developers in a more cautious way so as to ensure a more balanced while extending the lendings and also on the risk management.

[Wang Liancheng]

[Interpreted] The next question comes from Xu Ran of Morgan Stanley.

[Xu Ran, Morgan Stanley]

[Interpreted] Thank you for the opportunity. My question concerns LGFE in its risks in the recent years, the local governments due to multiple factors, face tightened fiscal situations, but the volume of the debt is still large. For ICBC, what is your dollars pricing interest and asset quality in this regard? How do you look at the risks for LGFE?

[Wang Liancheng]

[Interpreted] Our SVP, Mr. [indiscernible] will answer this question.

[Unidentified Company Participant]

[Interpreted] At present, we don't have a standard for LGFV credit. We will follow the principle of market-based rules. We will keep the volume stable with reasonable mix and controllable risks. First, our volume will be maintained stable. Our LGFV loans, mainly focused on the new organization area. In the first half of the year, the growth rate is lower than the average of the corporate loans and the proportion continue to reduce. The mix is reasonable. The loans mainly went to Yangtze River Delta, the Greater Bay area and other cities and regions with higher level of urbanization. For example, in the Yangtze River Delta and Jingjingji region and Pearl Harbor region. We have seen a large proportion of the increment and outstanding and also, we focus on the projects with ample cash flow. Certainly, the risks are controllable. The asset quality of LGF fee loans is better than the level of the domestic corporate loans.

Secondly, we will actively identify the risks, mitigate the risks and orderly dissolve the outstanding loans risks. We will -- we also focus on the package plans for that dissolving introduced by the central government, we will follow the market base, through based and commercial-based principles and dissolve the -- develop the risks.

[Xu Ran, Morgan Stanley]

[Interpreted] Just now, the management has talked about the ICBC and the digital transformation. Can you talk more about the major achievements in this regard? And looking forward, in words can AI play a more important role in your business?

[Wang Liancheng]

[Interpreted] Just now sell investors and allies ask about the GBC plus now is asking about the DSPC. I would also invite our SVP, Mr. [indiscernible] would take your question.

[Unidentified Company Participant]

The ICBC is a core strategy for our bank. Actually, other senior management members just now talked about the ICBC and I would like to give you a brief answer. We have two directions. One is outbound, how to improve our services to customers. Second is inbound, how to better facilitate our employees? And about the -- some details of our ICBC for the outbound strategies how to enable our customers to better explore the market. We improved our services both to corporate customers and retail customers.

For retail customers, we improved our mobile banking and to better integrate the services to their business and the largely living needs our own reliant platforms and also open platforms so as to provide one-stop comprehensive service to reattract customers, and MAU of our mobile banking exceeded 200 million, the largest size among our peers and the uses of our mobile services has also increased to a large extent. From the corporate side, we have also improved our platforms and to introduce some new platforms to better serve the corporate customers, like GBC+ project mentioned by President [indiscernible], we have covered 30 key industries, including medical care and construction. We have collaborated with a lot of partners for our open banking platform.

We have also improved our cash management services through our digital transformation with global footprint, more than 470 overseas branches by increasing our domestic and foreign systems of tech systems, which includes the global payment, cash monitoring and following and also credit and asset management, exchange rate risk management for corporate customers, we have advantage in this regard. Our system is quite mature. Over 110,000 corporate customers have used dollar platforms.

Domestically, we have also enhanced our cooperation with state-owned enterprises by introducing them to use our tertiary system. We have developed or helped over 100 SOEs around 104 SOEs, we have engaged in their chartary system construction.

We have also enhanced our digital inclusive finance to promote inclusive financing products to individual business owners. About the risk management, we have also continued to enhance the comprehensive risk management accelerated the digital transformation of our risk management by better making -- better use of the risk penetration and enterprise-wide risk management covering both domestic and foreign branches, commercial banking and investment banking on balance sheet and off-balance sheet banking, head office and subsidiaries so as to realize the management of the entire enterprise-wide.

We have also developed the risk monitoring model in terms of the anti-fraud and to make immediate interruptions on Ford. Our experience has been awarded due to the contribution from our bank to guarantee the security of our customers' financial assets. We have also exported our risk management instruments to over 400 financial institutions and we will continue to focus on our transition to be better -- to be more motivated from digital technologies by better integrating remote and on-site integration of our services.

For example, the phone services and also the off-line services after the modification of some core tax systems, so to improve our marketing, both on remote and on-site both online and offline platforms. So as to improve the marketing customer relation management cost working platforms, so as to promote their marketing efficiencies and also to better satisfy the needs of our customers. And for the office system, we have also optimized our smart office platforms, named [ e-office ] for our employees, which can both improve the efficiency of work and also experiences of our employees.

That has have not saved a lot of manpower due to the introduction of some digital platforms which includes transaction and also risk management by introducing the rovers. Another key impact for our ICBC is the system construction by better allocating our resources, we further promote the structure and system to foster new drivers for more innovation and to improve our innovation with the principle of for kinase, for benefits of our customers and employees and we also tried to promote the synergy among different business lines and different desks for is to promote the keys, the sales of key products for the mutual funds and insurance and we are also encouraging the application of successful experience of digitalization.

And I would also like to talk about the underlying infrastructure of our digitalization. We have been quite active in accelerating our structure of the underlying infrastructure. So as to better manage the accounts for customers from the main intensive framework to more distribution framework. Now the transition has been completed. The digital factors have become richer with more data from the society outside for bank. For example, the Internet companies or from relevant government bodies, we can -- which we can purchase.

And another important resources from inside for banks with the use of both internal and external information, we have improved our [indiscernible] and also scenario constructions. The available rate and the sustainable rate of all kinds of digital platforms developed our bank has been improved extensively. We have also engaged in some key -- front-end key front pilot projects like GBS deployment.

Another key direction for our digitalization is the application of new tech like AI. We have seen the outstanding performance of Chat GPT and relevant linguistic model. We have also been actively engaged in development of similar big model technology in AI. We have collaborated with some key national lab and tech companies in this regard. And now we have put in -- is some of the pilot projects of application of AI model by focusing on some in sports of our key businesses so as to improve our efficiency. For example, now we have improved conventional AI model application efficiency which can help us to improve our main power model by over 50%.

Second is with the better use of AI technology, we have explored new business production model to better help our employees at the branches to solve some complex problems. And the global market research assistant, intellectual assistant can also help them to foster the reports from one hour to five minutes, which can help them to make better decision-making at a shorter time. So in the future, we will continue to focus on the big modeling of the AI big model technology so as to make more comprehensive use of this kind of technology to we invent the complete innovation of our business scenarios to foster more products with more innovation and impacts.

[Wang Liancheng]

For the interest of time, we will have the last question.

[Unidentified Analyst]

My question concerns personal loans. Apart from mortgage loans, what about the growth of personal non-mortgage loans under the current economic situations where the growth mix and the pricing. We have noticed the personal business loans grew rapidly, what about the asset quality and the potential risks.

[Wang Liancheng]

RSVP, Mr. Duan Hongtao will answer your question.

[Duan Hongtao, Board Secretary]

Thank you for your question. Mr. [indiscernible] while answering the formal questions touched upon this question about mortgage loans. For your question, in the first half of the year, we grasped the chance in economic and consumption recovery. Domestic branches, personal nonmortgage loans totaled RMB 2 trillion, up by nearly CNY 300 billion, up by 17%. First, in personal consumption loans by the end of June, the personal consumption loan balance was near CNY 200 billion by CNY 23.5 billion by 13.5%.

The main reason is that we increased our growth in e-lending customers. The balance of e-loan was over CNY 160 billion, up by 12.6%. Second, personal business loans by the end of June, personal business loans balance totaled CNY 1.16 trillion, up by CNY 250 billion by 29%. The main reason were the growth in housing base mix tons and personal e-loans in pricing, marketing, customer services. We strengthened our coordination and synergy so as to improve our competitiveness in personal business loans.

Thirdly, the credit card overdraft by the end of June, the domestic branches balance in credit loan -- credit card loan was over CNY 600 trillion, up by 1.5%. The fee-based income was CNY 990 million up by 16%. The NPL ratio both increased but compared with Q1, they both reduce -- for the risk and the resolution, we strengthened our identification and marketing in customers. We improve our risk system. From the start, we control our credit risk.

We improved the securitization of the credit card loans and e-loans NPL, we construct a smart management platform and improve our capability of management in this regard. The personal loans NPL ratio was 0.7% compared with the end of last year, it's down by 14 bp down by 13 bp compared with the same period last year. NPL ratio continue to reduce. In the future, we will continue to improve our support for automobile electric products and the amusement, tourism and other service consumption to improve our ability of personal financial services.

[Wang Liancheng]

I think all your professional questions and thank the management for their answers. That's all for today's exchanges. If you have any other questions, please contact our IR team. Thank you for your confidence and support for ICBC and your recognition for our stocks in its long-term investment value. We will continue to run ICBC well and bring you stable and sustainable returns. All the best for all of you. Thank you.