Industrial and Commercial Bank of China Ltd

SSE:601398

Earnings Call Analysis

ICBC Reports Slight Income Growth Amid Low Rate Environment

In the third quarter, ICBC's net income rose slightly to CNY 270 billion, an increase of 0.2%, while operating income was CNY 599.1 billion. Despite facing downward pressure on net interest margins due to interest rate cuts, the bank anticipates continued strong growth in noninterest income driven by performance in the capital markets. Loan volumes increased by 10.2%, bolstered by a rise in corporate loans. However, future operating income is expected to decline, emphasizing the bank's need for prudent risk management. For the upcoming quarter, ICBC aims to stabilize credit costs while navigating a complex economic environment【4:0†source】.

Earnings Overview and Key Financial Metrics

In the third quarter of 2024, ICBC reported a net income of over CNY 270 billion, reflecting a modest increase of 0.2% year-over-year. Operating income was CNY 599.1 billion, indicating a reduced decline than anticipated. The bank's non-performing loan (NPL) ratio improved slightly to 1.35%, down by 1 basis point (bp) from the start of the year. Assets grew to CNY 48.3 trillion, an increase of CNY 3.7 trillion, with total loans rising by CNY 2 trillion. This robust growth is indicative of effective asset management amid a challenging economic environment.

Loan Growth and Market Positioning

ICBC has aligned its strategy to prioritize key sectors, showing a 10.2% increase in RMB loans amounting to CNY 2.12 trillion. Notably, corporate loans surged by CNY 1.43 trillion, marking a staggering 68% increase. Loans directed towards new industries and consumer credit increased significantly, with personal consumption loans rising by over CNY 390 billion, a growth of 13.3% year-to-date. Moving into Q4, the bank expects loan growth to maintain momentum, supported by favorable government policies and a recovering economy.

Guidance for Revenue and NIM Trends

Looking ahead, ICBC anticipates net loan growth of approximately 10% for the upcoming year, slightly lower than the previous period but continuing above the average national growth rates. The bank’s net interest margin (NIM) faces downward pressure, exacerbated by changes in monetary policy; reductions in deposit rates are expected to stabilize financing costs. However, excessive downturns in NIM are projected to moderate in magnitude. Fluctuations in the bond market are also anticipated, with positive sentiments driving forward performance.

Non-Interest Income and Diversification Efforts

ICBC reported a strong performance in non-interest income streams, bolstered by robust activities in the equity and foreign exchange markets. The bank’s non-interest income showed significant growth in Q3, driven by improved capital market conditions and effective trading strategies. The management believes this momentum will carry over into Q4, contributing positively to overall profitability. The bank aims to continue diversifying its income sources, especially within wealth management and investment banking.

Asset Quality Focus and Risk Management

Asset quality remains a central focus for ICBC. The proactive management of NPLs has resulted in a stable credit quality profile, with ongoing efforts to address potential risks in the real estate sector and consumer loans. The overall NPL ratio indicates that credit quality is being effectively monitored and improved, supporting the bank's wider risk management strategies. The bank has implemented rigorous asset management processes to bolster financial stability, particularly as regulatory changes take effect.

Technological Investments and Future Outlook

ICBC is making strides in technology-driven improvements, with a fintech investment of CNY 27.2 billion bolstering its operational framework while enhancing customer engagement. Initiatives include the development of digital platforms aimed at improving service efficiency. The bank is confident these investments will yield positive returns, where efficiency gains could lower operational costs and support more competitive pricing models in the future. Looking forward, ICBC remains focused on harnessing technology to enhance risk management and customer service capabilities.

Earnings Call Transcript 2024-Q3

[Jianqing Jiang, executive]

The '24 Q3 investor call. I'm Jianqing Jiang from Corporate Strategy and IR department. Today, ICBC SEVP, Mr. Weiwu Zhang, the General Managers of relevant departments and subsidiaries to carry out this communication with you. The Q3 results were already released in January since this year, we faced with low interest rate environment. We accelerated encouraging U.S. control modern layout, digital drivers, diversified structure, ecological foundation, the so-called transformation. We cultivated new drivers and created a new balance between income and expenses.

Our operations maintains robust. First, the main indicators performed well in the first 3 quarters, net income was over CNY 270 billion up by 0.2%, the increase turned positive. Operating income was CNY 599.1 billion, where decrease shrinked NPL ratio, 1.35%, down by 1 bp. Capital adequacy ratio was 19.25%. Provision coverage ratio maintained 200% above. Second, balance sheet continued to expand. Total assets was CNY 48.3 trillion, up by CNY 3.7 trillion. The loans increased by CNY 2 trillion investments, CNY 1.4 trillion in mix continue to be optimized liabilities was CNY 44.4 trillion, up by CNY 3.5 trillion.

The deposit deviation record the lowest same quarter in the same term in most than 5 years. So the high core development drivers continuing to pick up to the supply strategy and ICBC to continue to optimize personal customers increased to 755 million corporate customers, 13.15 million NAV of banking was over 200 million, such as the briefing on the Q3 results of ICBC. Now, we will start the Q&A session.

[Jianqing Jiang, executive]

Please identify yourself with your institution and name. The first question, please.

[Operator]

The first question comes from Xu, Ran of Morgan Stanley.

[Richard Xu, analyst]

First of all, congratulation. For Q2, physically Q3 net income was better than expected. At the operating income in PPOP were negative and the credit cost was already very low. In future revenue increased provision in Q4. Will the noninterest income continued to maintain high growth to contribute to operating income and renew fee-based income sales pressure, what was the outlook for the full year and next year's profitability? Will net income maintain positive growth?

[Jianqing Jiang, executive]

For this question, I would like to invite Mr. Sheng Rujun, General Manager of Finance and Accounting Department, to answer your question.

[Sheng Rujun, executive]

First, for the provision, we'll follow accounting principles and regulatory requirements. The provisioning is decided by several relationships between several factors. First, according to the accounting principles, we consider how much provision you need to maintain. Second, how much provision you need to maintain at the end of the term? Third, how much we have spent for the provision for the time and fourth we consider you dispose how much provision we have made back to the book. So this is decided by the comparison of the multiple factors for ICBC.

First, we strictly follow accounting principles and the ECL and also the regulatory requirements for provisioning. In future, all these are the premise of our future provision strategies. Second, for today's strategy our operation income will continue to decrease. This is a trend for the whole sector. We hope to establish a good balance between income and expense in order to strengthen our loan growth. First, we save the write-off resources and second, where we stimulate the potential in some nonperforming loans by complement, we were considering the 2 factors, we decide how much provision we do for the term.

And when we compare the provision at the beginning and at the end of the term, we think that the provision will continue to decrease. The provision than that of the last terms, for Q4, we will continue such strategy, but whether the provision will increase or will be back to the book. I think it is decided by the comparison of the major factors. I think by effectively managing all the resources, we will try our best to sell the resources and to disposal so as to save the new provisioning and control the credit cost to support other performance.

Your second question about other noninterest income, especially after September, our noninterest income has shown a robust momentum for Q3. Our operating income, the decrease was lucky better than expected. You can see that the decrease -- we're not going to be that of half 1. So this comes from partially the contribution of noninterest income, there are several reasons. First, the better performance of the capital markets. So we have seen some increase in the equity products and investments. And also, we saw the better performance of the exchange rate market. So we have seen back -- we have seen some overperformance in the exchange, foreign exchange income and also in adapting to the new changes in financial market business have applied comprehensive tools to earn more in the trading business so that we have seen increase in noninterest income.

For Q4, for the components of the capital markets, we think the attitude is quite positive. So in equity markets, we believe Q4 will continue the robust growth and also for debt investments, we will continue to operate well for the foreign exchange market. Now, the RMB to U.S. dollar, I think the momentum is quite robust, but it's hard to say whether we can keep a robust growth in Q4, but we are fully confident to continue such trend and present net interest margin will face downward pressure. The fee-based income is affected by DC reduction policy and some in the investments appetite of the industries, it is facing downward pressure before the full year and next year.

We have several payments first, from a macro perspective especially after September, we have seen multiple new policies, whether be it fiscal or financial policies. Against this background, they will provide a positive development for the operation of the bank. The confidence for consumption is recovery and the industries are picking up. So we believe these will provide more business opportunities for banks and for the real estate market and LGFV, there are also policies, which is conducive to saving the credit costs for banks. We believe thus for banks, they will be conducive for the corporation of the bank.

Internally, we pay our attention to the pressures and challenges if we will continue our high-quality development and create a more balanced and stable balance of credit income and expense, both adapt to the low interest rate environment and to stabilize net interest income. We think that net interest margin will still face downward pressure, but the management will continue to strengthen the adjustments of the asset mix and stabilized income and optimize loan mix and mitigate the downward pressure of interest yield and stabilized net interest margin for fee-based income and noninterest rates, noninterest income.

We will continue to let the business lines to grasp those chances, especially graphical changes in net good performance of the market so as to cultivate more sources in wealth management and also the potential of subsidiaries and foreign institutions in its contribution to our income.

And third, in asset quality management, we hope to strengthen asset quality management and cultivate the potential advantage of ICBC in comprehensive risk management and also in risk cost control. We will continue such management system and promote an active prevention, smart control and comprehensive management to keep our asset quality to be stable and increase the nonperforming loans disposal. So as to promote the risk resilience capabilities and decrease the low credit costs by the comprehensive measures.

We hope to increase, we hope to maintain the balance between the income and expenses.

[Jianqing Jiang, executive]

For the bond investment in noninterest income, I will invite the general manager from financial market department to make some supplement.

[Unknown Executive]

Well, this year, the bond markets performed quite well. So the trading income recorded 2.5x compared with the last term. So in the last 3 days of the term, there may be some fluctuations. But for the full year, the noninterest income has contributed a lot for the operating income.

[Operator]

The next question is Lin, Yingqi from CICC.

[Yingqi Lin, analyst]

I'm Lin, Yingqi from CICC. First of all, congratulations to the management, ICBC's NIM stabilized in Q3. With the recent monetary policy package, how much impact will the interest rate cuts and deposits rate cut have ICBC in Q4 and 2025? Deposit interest rates have been declining in recent years. Is there any room for further decline. Considering the impact of those assets liabilities, what is the outlook for ICBC subsequent main trend?

[Jianqing Jiang, executive]

Thank you so much for your question. Regarding the topic, we will invite Mr. [indiscernible].

[Unknown Executive]

Thank you so much for your questions. I also want to thank you for your attention to NIM. I want to answer a question in 3 aspects. The first 1 regarding the impact of the package of monetary policy recently, the PBOC in conjunction with relevant departments issued a package of monitoring policies to support stable economic growth, including reduced reserve ratio and interest rate cuts, your estate financial policies, policies to support the stable development of the capital market to this confidence in the market. And it will definitely promote business operation of the real economy and played a very incumbent role in favor of the commercial banks to continue sound operation.

This is speaking, first, the reserve ratio cuts directly provides the bank with low-cost and long-term funds, which is conducive to reducing the cost of banks and enhance the capability of our financial sector to serve the real economy and increase the amount at and deposit interest rate decreases conducive to reducing the bank's cost of funds and firstly, the deposits and mortgage interest rate decline is conducive to reducing the prepayment of loans stabilizing the size of the bank's assets and improving the vitality of the consumption from divestments.

And however, we are also aware that with the downward adjustment of LPR deposits, mortgage rate cards and other policies, there is a greater downward pressure on the level of returns on the asset side. From the perspective of the pace of loan repricing, this round of the rate cut will have a very small impact on the interest income in Q4, and that it will have a fairly greater impact on interest income for the whole year of 2025. The liability side is affected by the slower pace of deposit repricing and record of security impact of the interest rate adjustment will be relatively lucky. That is my response to your first aspect of your question.

And secondly, regarding the trend of the deposit rate. Since this year, the deposit listing rate was cut tight in July and October, respectively, with accumulative 10 bp cut in the interest rate for current deposits and a cumulative reduction of around 35 bp to 45 bp for time deposits adjusted by maturity. Anyhow, after the reduction of the deposit lifting rate in October, if there are more special circumstances, it is less likely to be reduced again during the year. In the future, we will closely monetize the market situation, policy interest rate changes and other factors to comprehensive study and flexibly adjust the deposit leasing rate.

And thirdly, regarding the outlook on the subsequent NIM trend currently, the overhauling of the banking industry is at a low level, and we have expected that the trend of declining NIM and the narrowing will continue next year. But the magnitude of narrowing NIM will be narrowed. In the 3 quarters of 2024, our net fee amounted to 1.43% unchanged from the interim period. The 18 bp from the beginning of this year and the 7 bp narrower than the same period while actively playing a role of a large state-owned bank as the main force to serve the real economy, we have also taken initiatives to strengthen the adjustment of asset liability layout under the low interest rate environment.

On the other side, we have done a great job in arranging major asset classes, optimizing credit allocation and accurate pricing. On the liability side, we have strengthened cost control and for further factors for cost reduction have increased. So the foundation of sound operation has been further entrenched, and we will maintain at within level. That's all for my response.

[Jianqing Jiang, executive]

Now let's move to the third question.

[Operator]

The third question comes from [indiscernible] of China Securities.

[Unknown Analyst]

Thank you, management. I'm [indiscernible] from China Securities. The question is about loan growth heading into Q4 and products will the loan growth for full year decrease and what is -- how is the reserve for the quick start of loan growth for next year? And the asset introduction of the package of policies will be loan growth for next year improve.

[Jianqing Jiang, executive]

For the loan growth, I will invite Mr. [indiscernible] from Asset and Liability Management Department to answer the results. General Manager from Corporate Banking Department will answer.

[Unknown Executive]

Thank you very much for your question. For the 3 years loan growth, we expect that R&D loan growth will record around 10%. A little bit lower than the same period of last year, but higher than 2 percentage points than the average for the society and higher than 5 percentage points than the GDP growth. There are multiple factors. First, macro perspective, the end of September, the loan balance was over CNY 250 trillion. The double-digit high growth created a good environment for economic development, but as the economy transforms, the demand change of real estate markets and the risk control strengthened now [ GSV ].

We believe based on such high base, the loan growth will be lower. Our loan balance was over CNY 28 trillion, I think in the future, RMB loan growth will gradually decline. The trend will be similar to that of the whole society to maintain our support for the real economy, our loan growth will continue to be higher than the average of the whole society. Also, I hope that you can, above this issue, on 2 sides, we adapt to the change of the social financing, although the growth declined, but the investment -- but the land investments increased by CNY 2.7 trillion, up by almost 15%. So the growth in general maintained stable.

Also, I'd like to share that we have 3 characteristics in loan growth in the first 3 quarters. This is very important to the stable growth for the full year. First, the RMB loans increased by CNY 2.12 trillion, up by 10.2%. Second, we prioritize our main business. We prioritize support for major projects, the domestic RMB corporate loans increased by CNY 1.43 trillion, up by 68%. Loan growth in manufacturing, enlarging new industries, improving finance, and go finance was -- were all over 15%. And the loans for personal consumption consumer business and credit card overdraft increased by more than CNY 390 billion, up by 13.3% than the beginning of the year.

[Jianqing Jiang, executive]

For the result of next year, I'm Jianqing from Corporate Banking Department. I'd like to ask that for next year, we have a few points to make. I think from macroeconomics perspective, the economy will continue to recover the long-term better performance has not changed. So we believe the new drivers will continue to be cultivated that will pave the way for the demand of wealth. Second, from the national strategies, a lot of policies are being introduced, especially in recent months. We believe these can create new effective loan needs. From ICBC's perspective, we see that corporate loans reserve is quite stable.

In the future, we will follow the lenders of the new policies and increase our loan growth and especially the NDIC's multiple projects such as in nuclear power projects, we will continue to refine management and had at the end of next year or Q4, the growth of the loans.

[Operator]

The fourth question, let's invite [indiscernible] from Bank of America and Securities.

[Unknown Analyst]

I'm analyst from Bank of America Securities. And what is overall trend of your bank's asset quality? What is the change in asset quality of real estate-related loans? And has there been any optimization of credit policy for housing related loans with the recent interaction of more asset policies that led to the masking and on the estimation where actually the credit rating.

[Jianqing Jiang, executive]

Thank you so much for your question. And now we will invite Mr. [indiscernible] from the Credit Management Department.

[Unknown Executive]

Thank you so much analyst for your question. And for first 3 quarters, the bank's credit quality was stable and improving with NPL ratio of 1.35% at the end of September, down by 1 bp from the beginning of this year and unchanged from the middle of this year. The average NPL ratio of corporate loans in deducted branches was 1.42%. So project that we will continue a prudent operational principles. In particular, we need to be aware of the whole package of policies issued by the central government which will definitely facilitate our economic growth and the termination of the real estate market.

I believe that with better market environment for commercial banks, especially for ICBC and other big banks, we have a very favorable environment. As for the real estate market, actually, in recent years, this factor of commercial bank has been the center of the attention, and we have taken a very active appetite to deal with the new changes in the real estate sector. For the first 9 months, we have strengthened the disposal of the bad asset and also, we have a very adequate detail position.

That's why, by the end of September and the NPL ratio is about 5.26% and down by 11 bp besides, so we have followed closely the new policies regarding real estate market, and we have witnessed the recovery of the market for the first 3 weeks of November for [indiscernible] and we found that the transaction deals has reached historical high over the past 18 months, the competence and expectations of the consumers have enhanced and also the situation for the real estate developers have also relaxed. We believe that when the commercial banks take the initiative to manage and create a more favorable environment.

You may know we have maintained a prudent operation and principal. For instance, we will have the trinity principle of our cities and projects and also the houses and also maintain the reasonable ratio of the real estate notes of the total loans. So recently, so we'll continue to aggressively manage our real estate assets lay out and actively promote the disposal of the NPO all related to the real estate sector. Besides, you may have noticed that the regulator has issued some very favorable policies, for instance, before cancellation for decline and therefore additional approaches, and we will promote the sound development of the real estate market, the following relevant regulations.

[Operator]

Next question comes from Chen, Junliang of Guosen Securities.

[Junliang Chen, analyst]

The question is to the introduction of the new policies, how is your mortgage loan growth, is there a positive growth? And we'll be repricing the outstanding mortgage mitigate early repayments and whether the asset quality in the future trend, we see the increasing trends of consumption loans, operating loans and credit card NPL ratio worth millions. Will you put in place to control such risks?

[Jianqing Jiang, executive]

Thank you very much. I will invite Mr. [indiscernible], the General Manager of Personal Banking Department to answer your question.

[Unknown Executive]

Thank you very much for your concern for personal banking business. For the multiple new qualities, they are related to releasing purchase limits, down payments proportion decrease and also a decrease of interest rates. This can help the recovery of the real estate market from the short-term results, we have seen that the willingness of people buying houses has been recovered. And for new houses, secondhand houses, we have the more deals. For the first month after the introduction of the new policies, our total mortgage application and loan growth have seen increase compared with last quarter.

But the policy was only iterative for a short time, the results is here to be observed for a longer term in the future, as the policies continue to be implemented as the economy continued to recover and will the market continue to pick up, we are confident about the past growth of mortgage loans. In adjusting the outstanding mortgage interest rates, we have completed the adjustment of the interest rate of the outstanding mortgage that is LPR conduct 30 bps for most outstanding loans, they can lower down the burden of the interest rate payments of people and it can also reduce the willingness for early repayments. Recently, we have seen that the amount of early repayment has decreased.

We expect that as the interest rates of outstanding mortgage come close to that of the new loans and the economics continue to improve, we believe the early repayment will be back to a reasonable level in asset quality. Since this year, ICBC's personal mortgage NPL ratio has shown some slight increase. This is in line and this is the same for the sectoral trends. But the absolute number is still very low and the general asset quality is quite good. The transmission of credit risk will require a process.

In short term, the NPL ratio may increase slightly, but from mid and long-term, as economic developments continues to be stable and people's income continue to improve, the asset quality will be stable and will be good. And for other retail loans where asset quality shows the same trend and that of the whole sector, we have seen a growing trend in NPL ratio since this year, but it is still in reasonable range as a package of newer policies continue to be implemented and positive factors for economic growth continue to pick up, we believe that the asset quality for personal loans will continue to be manageable.

Second, in the future, from 3 aspects, we will coordinate the development of personal loans and the management of the risk. First, we will continue to strengthen and increase the loans of personal loans. We think at present, there are still potentials for personal loan growth when we implement the new policies, promote people's consumption. We believe this can be conducive to establishing a good environment for management of risks in personal loans. Second, we will accelerate digital drivers transformation.

This year, we have introduced 5 transformations. In personal loan stage, we'll try to increase digital drivers. Our focus is to increase digital risk management capabilities, improve standardized line of credit and risk management. We will center on ECL management, optimize onboarding model and line of credit model and post-loan management model. Third, we will improve an intensified intelligence and digitalize personal management through horizontal and vertical management we will increase the pre earning system for personal loan risks and to improve the risk management effectiveness.

[Jianqing Jiang, executive]

The sixth question, please.

[Operator]

Let's invite [indiscernible] Securities.

[Unknown Analyst]

I have a question, which is about inclusive finance. What was the investment structure and the pricing of inclusive notes in the first 3 quarters of this year. Recently, NFRA indicated that it will further optimize our policy of nonreturnable loan renewal including expanding renewal target and adjusting the risk classification standard. What is the implementation status of nonreturnable loan renewal and corresponding risk of ICBC? What is the outlook for the asset quality of inclusive loans in the future?

[Jianqing Jiang, executive]

Now let's invite [indiscernible] from the Intuitive Finance Department.

[Unknown Executive]

Thank you so much for your question. Focusing on the high-quality development and inclusive finance, ICBC has integrated requirements of the national strategy. And by the end of Q3, the balance of the bank's inclusive mills amounted to about CNY 2.81 trillion with an incremental of CNY 585.9 billion increase of 23% and assumed inclusive loans in the balance and incremental loans were further increased. The number of inclusive finance customers exceeded CNY 2 million, an increase of nearly 40% during the year.

So based on the faster growth, we mainly targeted at the Science and Technology Innovative business manufacturing industries and the micro and the small-sized enterprises and to help them with expanding domestic need and industrial upgrade, and for instance were upgraded the new generation operation expense loans to further enrich the supply of the credit-related products and expand the coverage of our customer base. And we have also explored the scenarios of the industrial chain and explore the financing solutions that is related to digital supply chains. And we also encourage innovative products tailored to the different areas by the end of Q3, and our individual loans from the small and medium-sized enterprises, the growth rate is much higher than other kinds of loans.

And so in this context of the overall interest rate and adjustment, we have maintained the online development intensive and intelligent development focusing on solving the problems of information asymmetry and promoting the enhancement of risk prevention and control as well as efficiency operation and management. We hope that by further lower cost and enhanced efficiency, we can increase the feasibility of inclusive finance. For the first 3 quarters and the average interest rate of interest loans is about 3.37%, which is very reasonable. In terms of renewable, we do leave that to meet the operational needs, especially their financial needs and stimulate their dynamism and support the real economy is very critical.

And also for the banking and other relevant financial institutions to provide high-quality services will enhance the customer cohesiveness and optimize the structure and effectively present risks and magic risks and also to create long-term benefits. So recently, based on the policies of our ICBC, we have continuously provide very high-quality development. And on September '24, the financial regulator, the NFAR issued the circular, which is based on the previous policy and made some improvement, and we implemented the policy.

And we will stick to risk orientation and to provide the credit and the services to the businesses that have good reputation and have no bad record. Besides, we will also, based on implementing the policies and combining the procedures of loan renewable, and continuously monitor risks and management of loans and strengthen the review and the supervision of the whereabouts of the loans and analyze as the risks and also enhance our early warning capabilities and to enhance high-quality development. In terms of asset quality, ICBC has sticked to online and offline integrated development and digital governance and expertise and enhance the full process.

Risk control mechanism for inclusive finance, and we also strengthened the joint prevention and control from the middle and back office. And also by the end of September, our NPL ratio has maintained at a reasonable level and maybe in the business access, we have integrated multidimensional data from both inside and outside of bank iterate and optimize the functions, the business access monetized and had used our early warning models as well as identify risks in a forward-looking manner in the no duration stage, we continue to do a good job of our risk mapping and enhance the efficiency of risk prevention and also in the deposition and the treatment, we have expanded the channel so as to enhance the efficiency and build in the channel of disposal.

Recently, the whole package of our financial policy has conveyed very big -- great signal to the market. And we believe that it's a very great foundation for stabilized asset quality. And based on that, we will continue to promote high-quality development of inclusive finance and continuously enhance the intelligent management level of risk prevention and control and consolidate a sustainable foundation of inclusive finance so that it will be more practical and more long term and of a high quality. Thank you again for your question.

[Jianqing Jiang, executive]

The seventh question, please.

[Operator]

The next question comes from Xiao, Feifei Citic Securities.

[Feifei Xiao, analyst]

My question is attracting attention recently. Recently, share buyback and holding increase loan facilities have been gradually implemented. We've already seen several companies disclose long credit lines granted by ICBC. Provide an update on a number of companies who have reached in cooperation agreement so far in the estimated long amounts, what types and attributes of clients are the primary focus? Are there specific qualifications for scale requirements for companies seeking repurchase and holding increase from facilities?

[Jianqing Jiang, executive]

I will invite [indiscernible] from Investment Banking Department to answer your question.

[Unknown Executive]

The listed companies have been a focus of our financial service. Our comprehensive service has been quite fully covered PBOC, national regulatory administration have set the related notice. We have followed the requirements. We have followed a principle prioritizing internal controls and establishing systems. ICBC launching new specialized credit product becoming the first to establish and comprehensive framework of products, systems and processes for repurchase and increase loan facilities.

We've asked about client selection in 2023, we followed national financial regulatory administration requirements. ICBC treated these companies across different ownership structures equally. We have approved several business. They can apply for their loans according to their need. We have income release and we have already granted loans for the first batch of clients and several customers have signed agreements with ICBC and the list of companies are promoting the information disclosure according to requirements. For the business types, the loans was related to share buybacks or holding increase.

We cover mainboards, try fix and we support the transformation and upgrade in traditional industries and also support the development of emerging industries. In the future, we will continue to implement the loans. We will leverage our advantage in financial services, when we strengthen the confidence of the market sentiment and also, we will strengthen our financial services for the shareholders and continue to play the role for serving the real economy.

[Jianqing Jiang, executive]

The eighth question, please.

[Operator]

May Meizhi from UBS Securities.

[Meizhi Yan, analyst]

I also have a question, which is currently related to everyone's attention. Recently, the state announced a capital injection to large state-owned banks. What is the outlook for the scale, pace and the pricing of capital replenishment? Will there be a further increase in credit expansion after the completion of capital replenishment? Where the capital injection has much now impact on subsequent capital replenishment, including TLAC insurance where the dilution of EPS and dividend after the capital increase be observed by earnings growth in the medium and to the long term?

[Jianqing Jiang, executive]

And this is related to our credit management. So we will invite [indiscernible] to address your question.

[Unknown Executive]

First of all, thank you so much for your question. Let me first briefly introduce the overall situation of ICBC's capital management. In the first 3 quarters, we actively promoted the capital management measures for commercial banks in accordance with general ideas of exogenous and the balanced development. Optimized capital management enhanced efficiency capital use at the end of Q3, ICBC's capital adequacy ratio stood at 19.25% with core Tier 1 and the Tier 1 capital adequacy ratio at 13.95% and 15.23%, respectively, which continue to meet a relatively good level compared with our color parts. That is the overall picture.

Regarding the stale pace and pricing of capital management, recently regulator indicated that it will increase and the core Tier 1 capital of 6 large commercial banks and implement it in an orderly manner in accordance with the idea of advancing in an integrated manner, facing by batches and individualized plan for each bank. And now the specifics are not clear yet. And we are still working on the relevant proposals and also had talked with the regulators. I believe that when there are more identified and finalized content, we will timely communicate with the investors.

And then secondly, regarding the growth expansion after the completion of capital replenishment, we believe that capital injection is definitely conducive to strengthening the bank's capital strength and enhancing our credit investment capability and the ability to serve the real economy. So for the next step, we will take full consideration of the policy orientation economic growth rate, market supply and demand and business strategies to coordinate the credit expansion efforts prioritized to meet the financing needs of major strategies, key areas and with links and further enhance the financial service capabilities.

And regarding the impact of the capital injection subsequent and capital replenishment, including the marginal impact of TLAC insurance, we believe that definitely, it will have some marginal impact on TLAC. However, the amount and timing of the capital injection have not yet been determined. It's very hard to tell the extent of the impact. However, we will -- after the plan is determined, we will reasonably arrange the pace of the insurance of capital instruments and to lack bond in accordance with the actual capital injection and the operation situation of the capital indicators in the future.

The bank will successfully achieve the first phase of TLAC target by the end of this year, and we will steadily push forward the second phase of initiatives and subsequently TLAC bond insurance under the guidance of regulators and shareholders to ensure that regulator requirements are met on schedule regarding EPS and dividend admission after the capital injection, we believe that it will have the phased dilution of EPS in the short term. However, for the medium and the long term, it will be conducive to the sound development of large banks, including ICBC and the creation of sustainable value for shareholders. We hope that with our efforts in all aspects with a short-term period of time, we can absorb such impact with our better performance.

[Jianqing Jiang, executive]

The ninth question, please.

[Operator]

The next question comes from Shen, Juan with Huatai Securities.

[Juan Shen, analyst]

My question concerns Fintech. My question is what are the progress and key achievements in the ICBC development during the first 3 quarters of this year? Will the technology investments start impacting profitability? And will this be reflected in cost, interest margin or lower credit costs? How the life is with cybersecurity management and development?

[Jianqing Jiang, executive]

For fintech, I'll invite the General Manager of Fintech Department, Mr. [indiscernible] to answer your question.

[Unknown Executive]

Thank you very much for your concern for Fintech. For the ICBC establishment, there have been several years since the introduction of the ICBC. We have been improving steadily. First, the clients reaching the availability, competitiveness and the stickiness of clients, we try to improve all these assets and for externally, we show it in our 3 platforms. For example, mobile banking, ICBC, eLife and the open banking platform, we are trying to improving and polishing our systems for example mobile banking. We are doing version 10. In the future, we will introduce the new version.

And also, you may observe the development of Harmony OS version. We will also introduce such a version in the future. And also, we are improving the ecological right protection for the industry Internet and the specific industries need, we are improving our plans. Internally, we center around the needs of our employees. We have 2 groups. One is client managers and second is the outlet working employees on the counters, we improve our effectiveness and service of the financial products. And second, we are improving the office environment, for example, in outlet services we synergize online and off-line services.

Our clients -- our employees exceeded the number of tens of millions so the results have been quite fruitful. And the second result is that the improvement of products and services, which can adapt to all kinds of demand in clients. For example, in corporate banking, we focus on the corporate e-banking, especially this year, we have made improvements in several aspects. Also the inclusive finance department also mentioned the intensification and the intelligence of inclusive finance, the ICBC development also helps the improvement of inclusive finance.

Also, we have the traditional advantage, for example, the custody settlement. We enlarge our investments and expand in ICBC worldwide payment system and the clearing cost and the cross-border clearing system. And thirdly, for the risk management, we pay -- given to full play the advantage in risk management of ICBC, we have corporate level and group level smart risk management system. This year, we will see milestone. So gradually, we will fully implement our risk management system and also, we adapt to the technology change.

We transformed from a traditional model to the new model of more openings for us to improve the flexibility of the system in new technology system, especially that with AI, we have seen fruitful routes in improvements, the industrial level and 100 billion level scenarios we have supported a lot and improve our products and services. These are several aspects I can give you. As examples, we also put people at the center of our work. We explore the integration of people and technology. For example, we have ICBC plan in which how technology employees can better incorporated into business need, so as to integrate and given to focus the effectiveness of data, this is cooperation between our department and the HR department for us to make the digital chain be incorporated in all kinds of branches.

We center around clients, reaching an ecosystem support and the operation for the clients, we are improving such supporting system. This is my brief introduction for the ICBC for technology. For fintech investments, this has allowed great attention from the market. Last year, ICBC's Fintech Investment totaled CNY 27.2 billion, including all kinds of fees, HR, the cost of salaries, but for the direction, we think the level is quite reasonable. I think the proportion of the fintech investments accounts for 3% of the total operating income in the large banks, this is quite an amount. This is -- the investment is used in the upgrading of equipment; second, the development of financial services.

The 5 major tasks requires the upgrading of models and products. So this year, based on last year's investments, our daily average transaction almost reached CNY 1 billion increasing by 10% compared with last year. These all require the operating of equipment. And third some new technologies and strategic layout in particular, AI developments. You know that the cost of labor is still high but all levels of the employees' believe that AI will be conducive to the approving of the banking system and the driver for the development in the future. So we have made some proactive arrangements in this regard.

Compared with the international banks, we can still improve ourselves. You also mentioned the results we can see. I think the results can always be seen, ICBC's assets, for example, in recent years, increased by several trillion, but the number of employees actually decreased. From my understanding, the development of Fintech is a core driver. This can show the value of the ICBC for some direct contribution, for example, last year, the digital employees, robots, the automatic process, we can calculate. The workload was over 30,000 employees.

We are doing some conservative transaction, which cannot be done by humans that can be done by the technologies with the value contribution of the development of the ICBC. In the arrangement and system of the investments in Fintech, we have a full process from the investments and the post evaluation, we have mechanism to assess to guarantee the effectiveness and results. For cybersecurity, in general, the challenge is a little bit high for cybersecurity we see the attack may be industrialized. There are also factors like geopolitical contradictions, but from the perspective of technologies, we think, IT development is quite important.

First, the business operation security. We need to keep the 1 billion transactions that can be operated stably. We can serve over hundreds of millions of customers personally and tens of millions of corporate customers for several -- for the past years in general in the continuity of business operation and the support of the security, we have made some achievements. And second, for cybersecurity, we are facing several million of potential attacks. For the full year, the number may be 400 million. The increase was over 20x of the past. So the pressure is quite high of which the most pressure comes from the global operation of ICBC. We are 100% confident about domestic operation in China, but there's also -- such protection should also be expanded to other institutions in other countries.

We are doing this job to put the system of early warning system and the securities system should be expanded globally. And third, we build out security. How can we implement the national level data and security, laws and regulations to increase our data security and its effectiveness? We are actively promoting such work. The classification, we have completed the required work. We will continue to strengthen our job from prudent situation, we are confident about ICBC's security system to improve it to a higher level.

[Jianqing Jiang, executive]

Okay. So we will proceed to the 10th question.

[Operator]

Yuying Zou from CLSA.

[Zoe Zou, analyst]

I'm Mr. Zou from CLSA. How about the bond investment situation and the revenue contribution in the first 3 quarters of this year? At the end of September, the equity market will strongly and the CECL between stocks and the bond has increased. How do you look forward to the performance of the bank business in the fourth quarter and next year?

[Jianqing Jiang, executive]

Thank you so much for your patience and for your attention. Now we will invite [indiscernible] to address your question.

[Unknown Executive]

Indeed, just as you mentioned that overall, the bond market from beginning of this year to September and the momentum is quite good. Therefore, the Q3, there are some changes because for the last week, there is some rebounds and because there some major events, for instance, in early August, the in Bank of Japan interest rate that due to market fluctuation and also in the mid-September and the Fed decreased the interest rate by 50 bp, and also in September, the package of the financial policies was rolled out by -- in China. So we have timely adjust our policies and for the first 3 quarters, and we have increased the income from the bond market by about CNY 10 billion and also as a total incremental value of the investment is over CNY 20 billion.

So looking forward, Q4 and next year, in the bank business as now the NIM is narrowed, while the monitoring and the fiscal policy, stabilized and gradually implemented as well as the impact of the reduction of the U.S. to the overbooked market. We think that the fluctuation in the bond market will increase. However, we believe that the liquidity is pretty well. And also the short-term interest rate is decreasing. The shortage of good asset is fundamental of the bond market. So we think that overall risk of the bond business is still under control, even if the fluctuation will be strengthened.

For the next step, we will continue to implement the policies of the central government and strengthen our forward-looking measures and judgment and to adjust our policies according to the changes in the market and maintain the control and the pace of our measures and also to optimize our investment strategies and to balance the income from the NIM and also from the prices and to make our bond business more sustainable and sound. And also with the current package of our financial policies, we will play our role as a leader in this area and to assess the real economy and strengthen our investment in green development, innovative development and also the investment in the key sectors and the weak sectors.

And in terms of transaction, we will fulfill our role as the market maker and to enhance the flow and also the transaction and to facilitate high-quality development of interbank businesses and also to increase the contribution of bond businesses to our overall revenues.

[Jianqing Jiang, executive]

In the interest of time, the Q3 performance briefing has come to an end. Thank you so much for your question. And I also want to thank our Governor [ Lam ]. If you have any questions, feel free to contact our IR team, and that will be the end of our meeting, and I wish you all happy and healthy and all the best. Thank you so much.

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