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Industrial and Commercial Bank of China Ltd
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[Foreign Language] Dear investors and analysts and dear friends, good afternoon. Welcome to joining ICBC Q3 2018 Earnings Call Conference. I'm Mr. [ Wanchun Zheng ], Deputy General Manager of Strategic Management and IR Department at ICBC.
As required, the third quarter results had been announced and you can access it on the website of stock exchange. And today's conference call will last for 1 hour.
Today with us, we have members of the senior management of ICBC, Ms. Guan, Board Secretary, and also the Head of Personal Financing Department, Financial and Accounting Department, Urban Financial Institute Research Center and Asset Management Department, Credit and Investment Management Department, Assets and Liabilities Management Department also our business department.
[Foreign Language] Now the Q&A session starts. Mr. Board Secretary and the heads of relevant departments are very glad to take your questions. Due to the large number of investors and analysts joining in today's conference, so please, one question per one person every time. [Operator Instructions] Thank you.
[Operator Instructions] The first question?
[Foreign Language] The question comes from [ Chin Lan Sun ] of Southern Asset Management.
[Foreign Language] My question is about the inclusive finance and the small and micro business financing. And now the current situation is to ease monetary policy but it doesn't mean the easing of credit, so there is some problem for the micro and the small business financing. And my question is about, for ICBC, who has the position of advantage for large enterprise financing. So how do you incorporate inclusive financing and small/micro enterprises financing in terms of rate control and pricing?
[Foreign Language] Mr. [indiscernible], Deputy General Manager of the Inclusive Financing Department, will take your question.
[Foreign Language] Thank you for your question. In terms of inclusive financing and the small and micro business financing, ICBC mainly promotes inclusive financing through FinTech approaches by the end of September this year. The loan extended to small and micro business. 70% of the loan is extended through FinTech approaches. On one hand, it helps us to lower the cost of operation and management. On the other hand, it helps us to increase our capacity to recognize and control the risks. And in terms of interest rates for the inclusive financing, our principle is sustainable development of -- in this regard. That means the returns can cover the risks. So far, through FinTech, the credit extension in inclusive financing has been achieved some substantial results, and the lending quality now is about to be good.
[Foreign Language] I wanted to add something on to it. Just now you mentioned that the regulation should be between easing money and easing credit. I quite agree with you. Actually, here, we have to pay attention to the delivery of the management policy. And ICBC has been very active to go in quite effective in terms of delivering the monetary policy. So we -- on one hand, we can develop [indiscernible] administering policy. And on the other hand, we can develop our inclusive financing by providing best practices to the real economy.
[Foreign Language] So far, ICBC's principle in developing inclusive financing is that there is no future for large banks like ICBC if we don't develop inclusive financing. And we have to take a lot of measures to develop inclusive financing. And our goal is that double the inclusive financing target within 3 years. [Foreign Language] Just now you asked about the risk appetite and the pricing for inclusive financing and our principle remained unchanged. That is we have to adhere to the sustainable development in this regard. We have -- our pricing should cover the risk. But we -- on the other hand, we also will take a comprehensive approach while we provide service to inclusive financing, which can cover the risks. On the other hand, we will also take into consideration the comprehensive effects for inclusive financing. For example, the deposit increase or debt weighing services for these small and micro businesses. [Foreign Language] And lastly, but not the least, I suggest you do not tack on ICBC, which only serves the big enterprises. We also serve individuals and also foreign micro business. [Foreign Language] As introduced by Mr. [ Zheng ] just now, the inclusive financing has been implemented through FinTech. New patterns like big data, Internet of Things or AI, which can help us increase our competitive risk control and mitigation and also have the increased financing achievements on our big platform. [Foreign Language] Thank you for your question.
[Foreign Language] The question comes from [ Zheng Jing ] of [ Anmedo ] Asset.
[Foreign Language] My question is about the pledged stock and the forced selling and end market. Is -- we are a Q.C. from U.S. since 2013. When we entered Chinese market, we have bought shares from ICBC. And my question is for the pledged stock. It is said that there is window guidance on the stock protection. And my question is about ICBC's exposure on those pledged stock. And if the pledged stock falls to selling level, is ICBC going to sell it to conduct forced selling? And if not, how will you deal with the pledged stock prices? And will those lending go into the NPL?
[Foreign Language] Ms. [ Huang ] from the Credit and Investment Management Department will take your question.
[Foreign Language] To answer your question, by the end of September 2018, the total balance of the pledged stock for ICBC is CNY 21.3 billion, up by 20.55%. And the -- so far, the loans are categorized as normal credit and it involves 137 customers and 131 stores. By the end of September, 12 customers reached forced selling level, with number involved is RMB 3 billion.
[Foreign Language] I would like to add onto it and the total proportion of the pledged stock lending to the total loan of ICBC is quite low, only accounting for 0.23%. [Foreign Language] And for all those pledged stock of customers of ICBC, they have relatively high raising and good balance and performance. And the revenue increased by 12% so far. So comprehensively speaking, they have maintained a very good performance so far. [Foreign Language] And just now, we mentioned around 10% of our customers reached the forced selling, but we are not going to -- force them to sell the pledged stock because we can resort to other payment refunding resources. So as to control the lending, we'll not go to the NPL category. [Foreign Language] And thusly we can see just now, the pledged stock forced selling prices is only liquidity prices rather than the mal-operation problem of the pledged companies. And all those customers of ICBC are quality customers. [Foreign Language] And the pledged stock lending of ICBC only accounts for 0.5 to 0.6 to the total pledged stock. [Foreign Language] And that's what we've done to show comparison in the risk recognition and risk control. [Foreign Language] Thank you.
[Foreign Language] The question comes from [ Wu Peng ] of Bosera Fund.
[Foreign Language] Thank you for the opportunity to raise a question. My question is about wealth management. Since the end of last year to April this year and July, we see -- we have seen the exposure adjust and the abridged version of the wealth management new regulation. And -- but after this season's branch banks, we have learned that there is no guidance or opinion on how to implement the new regulations. So my question is that, what is your thinking as the past quarter in the department of wealth management? When -- or what conclusions where you can give more details on implementation as to the new regulation?
And a follow-up question. Judging from the interim results, the stability has been maintained in wealth management. But as we know that the loan standards will become mature recently and so what's your outlook in the wealth management business within next 1 to 2 years?
[Foreign Language] As is the announcement of the new regulation, actually, they had already started a lot on the details of new regulation, and now we have already worked out the details on the work plan to implement the new regulation. And this document has already been released to branch banks and the entire banks of ICBC now are implementing the work plan. So ICBC, I don't think the phenomenon you just mentioned, the branch bank has no guiding opinion from the head office.
As for the new business in wealth management, we -- our principle is to conform to the requirements of the new regulation. We carry out the requirements in terms of classification, marketing, investment and also information disclosure. As for the existing volume of wealth management, we are also trying to define in the existing wealth management business and try to transform it to conform to the requirement of the new regulation. And regarding the wealth management stable scale, as you mentioned, it's posted in our results. I would like to continue to answer your questions.
[Foreign Language] As to your question about the stable price of the wealth management of ICBC in the third quarter, according to the requirements of the new regulation, on one hand, we will try to decrease the existing value in wealth management and ask to be adjusted to the structure while we're issuing the new products so as to prevent the risk of liquidity, if we decline the existing mortgage too much, so as to realize the smooth transition.
[Foreign Language] And the question comes [ Tsu Che ] of [ PAG Kong ] Asset.
[Foreign Language] My question is about the asset quality of ICBC. Can you give us some colors on the indications what the third quarter in terms of asset quality, like the 3 indicators, the indicator on special mention loans, the indicator on the overdue loans and the indicator for overdue more than 90 days? And can you also share with us if there is any change in the risk effect of the asset quality, do you think? We've witnessed the China-U.S. trade conflict and also after the restructuring of some state-owned enterprises and the slowdown of the leverage.
[Foreign Language]
[Foreign Language] I will answer your, firstly, your question as to the asset quality of ICBC. By the end of third quarter of 2018, the asset quality of ICBC remains quite strong. The indicators of NPL declined as well as the ratio of special mention loans, overdue loans and [indiscernible] NPL loan for the newly extended loans. [Foreign Language] Of the special mention loans at the end of third quarter, the total number of special mention loans is CNY 469.4 billion, down CNY 900 -- CNY 93.6 billion. That is the decline for consecutive 9 quarters. And the ratio of overdue loans, the total amount of overdue loans, is CNY [ 370.8 billion ], down CNY 15.3 billion or 1.77% compared to the end of last year and down by 24 basis points. The prices are -- the total number is CNY 36.8 billion for the end of third quarter, down by CNY 28.34 billion compared to the end of last year or 43%. That is also a decline for consecutive 9 quarters.
[Foreign Language] I would like to add on, too. In the recent February month, the asset quality of ICBC has become better than the first half of 2018. [Foreign Language] Just now, we introduced the balance of prices have continued to decline and the special mention loans continue to decline. So the provision for coverage ratio increased and the NPL ratio continued to climb down 1 basis point. [Foreign Language] The -- as you mentioned, the trade conflict between China and the U.S., the direct and indirect impact on ICBC's asset quality has become not so prominent within short term or long term. [Foreign Language] As for the macro situation for next year, we are also forming policies. As for the supply side reform and the M&A of SOEs, due to several years ago, actually, they have started to restructure and optimize our credit structure. So, so far, we haven't encountered a big issue in terms of cash. [Foreign Language] As we are all clearly aware of the progress of the deleveraging and the measures, all of them are undergoing optimization process. I think the structure deleveraging progress creates a favorable environment for us to maintain the stability of asset quality. [Foreign Language] So under the governances of the trade tension between China and the U.S. tightened regulation and deleveraging, we see, obviously, the challenges on one hand. But on the other hand, we are also facing opportunities for us to transform and upgrade our structure to raise our credit -- to optimize our credit structure to achieve better asset quality. [Foreign Language]
[Foreign Language] The question comes from Xu Ran of Morgan Stanley.
[Foreign Language] My question is about the deposit and NIM for the third quarter. And we have seen that deposit is over 10% in ICBC, which is leading to such a leading advantage compared to other banks in China. So my question is what is the driving force for the increase of the deposits? And how were ICBC to maintain cash in terms of pricing?
[Foreign Language] Thank you for your question. As you said, within the first 3 quarters, ICBC's reported increase has been leading the other banks in China. The total increase of deposits for ICBC within the first 3 quarters is amounted to CNY 1.74 trillion, up 8.9%. And that's a record high since 2010 in terms of the incremental volume. So ICBC leads the other banks in terms of the daily average amount incremental volume of the deposits.
[Foreign Language] In terms of pathway of savings, the deposits, balance of the deposits is around RMB 9 trillion. The savings, the total number of savings is CNY 744 billion. Corporate deposits is amounted to CNY 865 billion. And we have also some borrowings from interbanking. And the total number is CNY 126.8 billion. [Foreign Language] The driving force for the increase of deposits are improved volume. Firstly, at the beginning of the year, the management of ICBC has set their thinking of a deposit increase.
[Foreign Language] Last year, ICBC implemented the 5 major strategies, among which we have a fourth scale customer strategy. So within 2018, we have increased a lot of corporate and personal customers. The number of corporate customers is totally amounted to 60,000 and the personal customer increased by -- [Foreign Language] The total number of personal account is 3 trillion. [Foreign Language] Thus, we seized the opportunity brought by the new regulation of wealth management. We promote all our deposits in terms of structured and principal guaranteed wealth management products.
[Foreign Language] And in terms of corporate customer, on one hand, we increased a lot of government and institutional customers as a result of the institutional reform. And in terms of company corporate customer, we also increased a lot of business in the salary payment and also give some scenarios to promote operation with these customers.
[Foreign Language] In terms of policy under circumstances of the interest rate liberalization, ICBC's strategy to refine rate management has helped us to maintain the stability of NIM. Within the first 3 quarters, the interest payment paid is 1.43%.
[Foreign Language] And also to come back to the classified pricing last season in terms of the product maturity, so the total number of deposits is 44.7%, down 0.2%. [Foreign Language] So with a firm customer base of ICBC and also the optimization of our pricing mechanism, so we are quite confident in the future deposit increase.
[Foreign Language] The question comes from Tian Lu of Goldman Sachs.
[Foreign Language] My question is about interest-bearing assets. Actually, according to the IFRS, at the beginning of the year, the classification of interest-bearing assets was completed but some banks have just completed the classification by the end of the third quarter. So my question is when did the ICBC complete the classification for interest-bearing assets according to the IFRS guide?
[Foreign Language] Since the 1st of January 2018, the classification has been reduced to 3 big -- on the basis originally 4 categories. But so far, we haven't received any specific or detailed guidance on the implementation of this classification method on our disclosed results. Actually, at the beginning of this year, ICBC has started and worked out on a preliminary plan. So as you can see from our interim results disclosed, by the end of the first half year, we actually combined the new rules and the original regulation with the disclosed results. And actually, that also applies to our -- to other banks and the financial institutions in China. And by the end of this year, the Ministry of Finance will give us new details on the implementation of this new classification we will follow closely. If that comes out, we will implement that new regulation.
[Foreign Language] It's our hope that our disclosure of our results, can on one hand, can conform to the requirements of the financial accounting standards. On the other hand, we can give considerations of the acceptance of our results users and to also conforming with the regulations.
[Foreign Language] The question comes from [indiscernible] of [ WFY Investment ].
[Foreign Language] My question is about the personal lending. And we can see from the interim results that the personal loan increased more than the corporate loans. And in the third quarter, what are the housing mortgage and also personal credit loan? And also what about the NPL ratio of the mortgage and personal credit?
[Foreign Language] To answer your question on the housing loan, the proportion of housing loan to the total personal loan is quite large, accounting for 92% to the total personal loan. And within the first 3 quarters, the increase -- the housing loans had a rapid increase. And after the circumstances of the macro regulation of the housing market, the asset quality of the housing loan also steadily improved. And within the first 3 quarters -- within the third quarter, the NPL ratio of the housing mortgage and volume has both declined.
[Foreign Language] To answer your question of the credit loans, within the first 3 quarters, the credit loans also steadily improved. By the end of September this year, the balance of the credit loan is amounted to CNY 664.2 billion, increased by CNY 73.7 billion compared to the end of last year. And among the credit loan, the biggest comes from the installment payment, which also actually ranked the first among our peers.
[Foreign Language] The asset quality of our credit loan has also been very sound. The NPL ratio for the credit lending is 2.25%, down by 0.1 percentage point compared to the end of last year. And the NPL ratio of the newly increased credit loan also -- of ICBC also leads the other banks in China. And it's also on a consecutive decline for 3 years and 3 quarters.
[Foreign Language] I would like to make some add-ins to your question. As for the housing mortgage, we have several following features. First, since last year, we have witnessed a rapid growth in terms of the personal housing lending. And ICBC has been very competitive in this effect. Secondly, the 90% of the housing mortgages goes to the first house lending -- first house mortgage. Thirdly, we have maintained a proper way of pricing, which carries all the differentiated pricing in different cities, in different tiers of cities. And fourthly, the NPL ratio for the newly extended housing mortgages had been quite long. Since 2016, the NPL ratio of the newly extended housing loan is only 0.09%.
[Foreign Language] There are now only 3 categories of credit card lending: overdue, installment and personal credit lending. Although the NPL ratio for the credit card lending is relatively high, 2.21%, but the returns of the credit card lending is also quite high. [Foreign Language] And the NPL ratio for the overdue and installment and pure credit lending is relatively low.
[Foreign Language] Just now you asked us about the change of the personal lending as a result of the macroeconomic situation changes. So far, ICBC has not absorbed any big change or big impact in terms of the NPL ratio of the personal loan.
[Foreign Language] The question comes from [indiscernible] of [indiscernible] Financial Holding.
[Foreign Language] My question is for the fee. ICBC's fee income increased a lot in the third quarter. And besides this, now you introduced the increase of the credit card lending. Is there any other driving force for the increase of the fee income? And what is the absolute for the fourth quarter and next year in the fee income?
And a follow-up question, as I have read from the results of your H share stock, I see that there is a loss of financial asset, which has amounted to CNY 3.3 billion. What's the reason behind this? And is ICBC going to change that?
[Foreign Language]
[Foreign Language] I will take your first question as to the fee income business. Within the first 3 quarters, ICBC has realized a rapid growth in the fee income business in terms of the total volume and the incremental volume of the fee income business. ICBC ranked the first among the peers in China. The driving forces for the increase of the fee income business mainly attributed to the following 4 reasons: first, the increase of the credit card business -- credit card lending; and secondly, the increase of the guaranteed commitment, which is increased by 33% compared to end of last year; thirdly, the development of the e-commerce, the third-party payment increased by 71% compared to end of last year, which also fully demonstrated ICBC's efforts in transitioning transformation through fintech and developing fintech and Internet financing; fourthly is because of the international settlement. The international settlement increased by 20% compared to the end of last year in terms of trading and guarantees lending. So generally speaking, we are quite optimistic of the stable and improved -- of the fee-based business within the near future.
[Foreign Language] Secondly, yes, you have observed quite carefully on our results of the third quarter on the H stock. It is true that there is a big changes happening in our financial investment so far. That's because the expenses of the structural deposits goes to the financial investment category. So compared to the -- so that make us -- incurred us a loss of CNY 1.7 billion unilaterally speaking as the operational [indiscernible] also goes to the interest-earning assets. So comprehensively speaking, we also generate profits. [Foreign Language] Maybe later, you can access our result announcement of the Asia, which is embodied on the 2 items. So actually, it's the same principle, just a different standard.
[Foreign Language] The question comes from [indiscernible] of [indiscernible].
[Foreign Language]
[Foreign Language] The next question comes from [indiscernible] of [indiscernible]. [Foreign Language] The next question comes from Fan Hans of Deutsche Bank.
[Foreign Language] My question is about NIM. First, you introduced the asset deposit side. So my question is the pricing in the lending asset side. And taking into consideration both the deposit side and the asset side, what is your outlook on the NIM in the future?
[Foreign Language]
[Foreign Language] The NIM for the third quarter is 2.3%, which is quite stable compared to the first half of 2018. Actually, it's also under gradual improvement since the last quarter and also quite stable since the last quarter of 2017. [Foreign Language] And in terms of structure, the return on the interest-earning asset has been improved. [Foreign Language] The average returns of the interest-earning asset is 3.8%. And for the third quarter, it's 3.8%, up 20 basis points compared to the same period of last year. The interest-bearing rate is 1.64%, up by 6 bps compared to the same period of last year, up by 7 bps compared to the end of last year.
[Foreign Language] In terms of the asset side, the interest rates for the long-end bond are quite stable. And the average interest rate for the long-end bond is 5.07%, increased by at least actually 35 basis points and 3 basis points compared to the same period at the end of last year. [Foreign Language] The yield rate of bonds increased by 3.7 -- yield rate is increased by 3.73%, up 14 basis points compared to the same period of last year.
[Foreign Language] Just now I mentioned, we should take into consideration of both the asset and liability side to judge the future change of NIM within the fourth quarter. From the liability side, we see it will become more and more competitive in terms of the asset quality. [Foreign Language] In terms of lending, despite of the downwards of the market interest rate, we have enhanced our rates and pricing mechanisms to ensure the stability in terms of helping the customer loan. [Foreign Language] Lastly, I want to add that the progress of the interest rate liberalization, and now ICBC has maintained a NIM relatively better than our peers in China. But judging from the experiences of international banking, which have already undergone the interest rate liberalization, in the beginning phase, they were downwards of NIM, but as long as it becomes stable, different banks will have, obviously, a different NIM. [Foreign Language]
[Foreign Language] The question comes from [ Shin Jui ] of [ Fuko Bank ].
[Foreign Language] My question is about asset quality of the nonstandard assets as we announced -- as the announcement of a new regulations in terms of wealth management. And I would like to -- can ICBC management give us some colors on the rate of the nonstandard assets? And can you elaborate on the industries of the nonstandard assets?
[Foreign Language]
[Foreign Language] The total number of nonstandard assets of ICBC is CNY 885.8 billion, among which the NPL is CNY 13.36 billion. That is the total of the principal and interest. [Foreign Language] The NPA ratio of the total -- to the nonstandard products is relatively low, stood -- standing at 1.5%. [Foreign Language] And the NPA of the nonstandard assets has decreased by RMB 1.1 billion or 7.72% compared to the end of June. [Foreign Language] The defaults of nonstandard assets so far is mainly distributed in the conventional over comparative industries, like the high energy function industries. [Foreign Language] As to the other parts of the NPA caused by the liquidities of some enterprises, after the recovery of the credit lending, we will consult with our branch bank to properly resolve this issue.
[Foreign Language] I would like to make some add-in, please. Firstly, the nonstandard assets of the bond investment of ICBC is not shared in banking. [Foreign Language] In the first beginning when we used our nonstandard assets, we conduct the unified risk appetite, unified management and risk control. [Foreign Language] The industries we extend our nonstandard assets -- nonstandard bonds mainly includes the infrastructure and key government projects and also some green environment-friendly projects. [Foreign Language] Thirdly is the risk of the nonstandard asset is relatively low because of the financing party is -- have relatively high credit rating, and we can also resort to diversified approaches to recover the loans. [Foreign Language] And for those entered NPA, we will synergize the whole bank's assets to implement the principle of making investments on behalf of our customers to mitigate the risks in this effect. [Foreign Language] So basically, we will continue our risk appetite in terms of making investment and wealth management on behalf of our customers, continue to optimize the extension of our nonstandard investments. [Foreign Language] So I can assure you that there is no need for you to worry too much on the reported number for CNY 13 billion nonstandard asset of ICBC. [Foreign Language] Thank you for your question.
[Foreign Language] The question comes from Zhang Shuaishuai of CICC.
[Foreign Language]
[Foreign Language]
[Foreign Language] I also have 3 questions. The first question is about the dividend yield of ICBC since 2015, as the profitability of ICBC has improved, the dividend ratio has been more than -- higher than 30%. So is there any possibility for ICBC to increase the dividend yield within -- in the future?
My second question is about ICBC's exposure at the provincial level and municipal and city level in terms of the local government financing platform.
And thirdly is about the asset quality in terms of the hidden debt.
[Foreign Language] It is true that the profitability of ICBC has been improved since 2015, and the dividend ratio has been maintained at around 30%. And the actual dividend -- yield ratio of ICBC, the dividend per share, has been under stable improved. [Foreign Language] Just now you mentioned the relationship between the dividends and the retention of the profits -- the supply of profits, actually, we have to strike a balance between that. If we give the dividend too high, that will impact the ICBC for the long-term shareholding party like value investors. [Foreign Language] The -- last year, the dividend is amounted to CNY 85.8 billion, and the total dividend since ICBC got publicly listed is amounted to CNY 700 billion to CNY 800 billion. That makes ICBC the largest dividend issuer for the publicly listed companies, so that can ensure returns for our value investments -- investors. [Foreign Language]
For your second question concerning the local government financing platform, actually, ICBC has took a initiative to control the risks and to conduct the class by management of the local government financing platforms. And the -- a large proportion of the local government financing is from a high -- relatively high level, like the municipalities and provincial governments. [Foreign Language] Firstly, the asset quality has -- for the local government financing has been maintained quite strong. The NPL ratio is relatively low and the structure of the local government financing has undergone continuous optimization. [Foreign Language]
Fourthly, we actually implement and deliver the regulations and the policy of the regulators and the Ministry of Finance. [Foreign Language] We quite welcome and also support the effective control and regulations of the regulators on the hidden asset -- on the local government financing so as to ensure the safety and sound of the asset quality. [Foreign Language] Thank you for your question.
[Foreign Language] The question comes Wang Yiwen of Shenwan Hongyuan Securities.
[Foreign Language] My question is about wealth management. Since the new regulation on the wealth management on -- also the -- what's the location -- what's the distribution of the industries for the newly granted wealth management business? And secondly, since the exposure draft for the commercial banks to establishing subsidiary companies to conduct wealth management, so for ICBC, is there any plan to set up a subsidiary company in the wealth management? And how can you strike a balance between the subsidiary and other funds in the insurance subsidiary?
[Foreign Language]
[Foreign Language] I will take your first question concerning the wealth management. On one hand, we're making great assets to decline the existing volume. On the other hand, we are trying to innovate our new products. By the end of September, the total number of the net value product is CNY 443.8 billion, accounting 13% to the total wealth management, calculating according to the standards of G06 of CBRC. [Foreign Language] In terms of the structure of the new products, the majority part is cash management, and we also are developing business in fixed income and also nonstandard investments. [Foreign Language] To me, the requirements of the regulators to make wealth management investment in terms of net value product and standardized product, so we mainly invest in the bonds and inter-banking deposits and the other equity standard -- standardized products. [Foreign Language] According to the newly published notice of PBOC in July 20 on further enhancing the management of the assets for commercial banks, we are also working on establishing new nonstandard products to match it. [Foreign Language] So overall speaking, ICBC has a higher -- a larger proportion of the asset management to the total wealth management in terms of conforming to the requirements of the new regulation as well as in extension of the asset management. Thank you for question.
[Foreign Language]. I will take your second question as to the wealth management subsidiaries offering the announcement of the exposure draft of our relevant authorities. [Foreign Language] As to the structure and frame working of -- and design of the wealth management subsidiary company, we have established a special working team to work on it. [Foreign Language] As to where and how to establish the wealth management subsidiary companies, as long as we fulfill our formality -- internal formalities, we will disclose it. [Foreign Language] You also mentioned the synergy and -- the strategic synergy and relationship between this wealth management subsidiary company with other ICBC funds and insurance companies, and thank you for mentioning that. Actually, it's also been of great importance from the management of ICBC, we have taken it into consideration while we are doing the top level design. [Foreign Language] We'll explore a new wealth management pattern which will suit ICBC. [Foreign Language] Thank you for your questions.
[Foreign Language] The question comes from Li Shanshan of BOCI International.
[Foreign Language] My question is about the liquidity coverage ratio. I don't know what's the number of the LTR for ICBC in the third quarter? And I've noticed that since 2017 and also the first half of 2018, the LTR ratio of ICBC has been decreasing. And so I would also like to ask what you're thinking on the outlook on the future tendency of the LTR of ICBC? And what -- can you also share with us what's the driving force for the decline of LTR?
[Foreign Language] Thank you for your question, and thank you for your attention to the LTR. Actually, ICBC has always leads the other banks in China in terms of its LTR. [Foreign Language] The reason for the changes of the second quarter's LTR is because we increased our average on the utilization of the medium-term capital. [Foreign Language] By the end of September, the LTR is 133% despite the increase of deposit and bond renewal. [Foreign Language] And the LTR ratio is also related to the transition and total volume and the maturity of capital. [Foreign Language] So our goal for the future is to control LTR ratio according to the requirement standards, and we are trying to make efforts to increase our deposits to optimize our investments in terms of bonds and to ensure a proper -- appropriate provision coverage ratio. [Foreign Language] Thank you for your question.
[Foreign Language] Okay. Due to the limited time, if -- we have only the last question.
[Foreign Language] The question comes from [ Li Mia ] of [ Fulsome ].
[Foreign Language] My question is about international strategy of ICBC. We have read from the press that in the third quarter, the sub-direct of ICBC has established in Austria. And today, we also learned from the news that a representative office of ICBC has established in Vietnam. And the favorable environment of the Fed interest rates hike, is -- does that represent a good opportunity for ICBC going global?
[Foreign Language] I will take your question. Actually, in terms of the internationalization strategy, ICBC has made a lot of achievements in the previous decade in terms of M&A and strategic investments. Now we have presence in 46 countries, and we established more than 400 institutions in those countries. And through shareholding of South African bank, we also have presence in over 20 African countries. So that makes ICBC the only Chinese bank with presence in 66 countries. [Foreign Language] And secondly, as to other regions and countries around the Belt and Road Initiative, we are continue -- we are going to continue to establish at least our branch banks or subsidiaries, besides borrowing from Australian subsidiaries and Vietnam representative of this, we are continuing to establish some organizations in some countries or regions. [Foreign Language] Over the past decade, when we are implementing the international strategy of ICBC, we focused on providing global service for the global operation of our global customers. [Foreign Language] And fourthly, as for our overseas organizations, the momentum for growth has been maintained quite good, and the corporate governance level is also relatively high. [Foreign Language] As for the new layout for the international organization, we were trying to make more efforts to increase the quality of our overseas organization. We will speed up the localization rate to control and anti-money laundering and also compliance. [Foreign Language] In the future, I strongly believe that the sector of the internationalization will provide better support for us to implement the integration strategy and the mega retail strategy and other key strategies. And also the re-enhancing our strategic integration with South African bank, we will provide better service to our strategic clients and so as to improve our efficiency. [Foreign Language] Thank you for your question.
[Foreign Language] As well as the broad-based questions concerning the performance in the third quarter of ICBC and also very detailed questions. So thank you for your attention, and thank you for joining us in the third quarter earnings call. And our IR team will be glad to take your questions if you have any other questions. So that will conclude our earnings today.