China Merchants Bank Co., Ltd. (3968.HK) Q4 2024 Earnings Call Transcript

Ladies and gentlemen, media, friends from the media, good morning. Welcome to the 2024 Annual Results Presentation of China Merchants Bank. I am Xia Yangfang, General Manager of the Office of the Board Directors. CMB has announced our 2024 annual results on Tuesday evening. Today's event is being conducted both off-line and via live webcast. I would like to introduce the participants of today's event. They are Mr. Miao Jianmin, Chairman of the Board, Mr. Wang Liang, President and CEO, Mr. Peng Jiawen, Executive Vice President and CFO and Secretary of the Board of Directors, Mr. Jiang Chaoyang, Chief Information Officer. ,: Today's event, I will first invite Mr. Miao Jianmin and President, Wang Liang, to first review our results highlights and then we will enter into the Q&A session. Simultaneous interpretation in both Chinese and English will be provided. I would like to give the floor to Chairman, Miao and President, Wang.

Dear investors, analysts, and friends from the media. Good morning. Welcome to CMB 2024 Result Announcement. Today's results presentation will be divided into three parts. First, I will give an introduction over the company's 2024 results highlights. And then President, Wang will give a brief introduction to operational information. And finally, I will briefly address our outlook and strategies for 2025. In 2024, facing the complicated external environment, the Group took the strategic target of building a value creation bank, take active measures and comprehensive policies and realize steady operation with good momentum and even more distinctive features. And more significant advantages and realize dynamically balanced development of quality, profitability and scale, which was reflected in the following six aspects. Firstly, we effectively respond to multiple challenges with operating results study improved. We withdraw challenges such as is efficient effective credit demand, declining interest and fee rates, intensified competition in the industry and capital market fluctuation. Our full year net profit recorded positive growth and ROA remained at a high level. Our net operating income, RMB 337.12 billion, Y-o-Y decrease of 0.58%. Net profit attributable to the shareholder of the bank was RMB 1.39 billion Y-o-Y increase of 1.22%. ROAA, 1.28%, ROAE 14.49%, Y-o-Y decrease of 0.11 and 1.73 percentage points. NII, RMB 211.27 billion, Y-o-Y decrease of 1.58%. NIM was recorded 1.98% Y-o-Y decrease of 17 bps, still maintain a leading position in the industry. Net non-interest income, RMB 125.84 billion, positive growth, Y-o-Y increase of 1.15%. Cost-to-income ratio, 31.92% Y-o-Y decrease of 1.05 percentage points, showcasing effective cost reduction and efficiency management. Maintain stable growth in asset scale would be the second point, and we continue to strengthen liability advantages. We actively respond to market competition and persist in increasing effective asset origination, optimize our structure with liability costs significantly reducing. Total assets exceeded RMB 12 trillion, an increase of 10.19%. Total loan and advances to customers was RMB 6.89 trillion, up by 5.83%. Total liability exceeded RMB 10 trillion, up by 9.81%. Total customer deposits exceeded RMB 9 trillion, up by 11.54%. Interest-bearing liabilities average cost ratio 1.64% year-on-year decrease of 9 bps, maintaining an outstanding level in the industry. Thirdly, we maintain good asset quality with strong risk compensation capability. Our NPL balance was RMB 65.61 billion, up by RMB 4.03 billion. NPL ratio, 0.95%, remaining flat with the year-end. Our allowance coverage ratio was 411.98%, a decrease of 25.72 percentage points. Allowance to loan ratio, 3.92%, down by 0.22 percentage points remain robust risk compensation capability. Credit cost ratio, 0.65%, a year-on-year decrease of 0.09 percentage point. Fourthly, we continue to optimize income structure. and maintain endogenous capital growth. Our net non-interest income proportion continued to increase, reaching 37.33%, up by 0.64 percentage points year-on-year. Retail finance contributed to more than half by value with net operating income and profit before tax from retail finance accounting for 58.37% and 50.74%, respectively. We have an industry-leading level of cash payout ratio. Our plan for 2024 was cash dividend payout ratio 35% above. Dividend for average share was RMB 2. We will conduct intermediate cash dividend payout this year. Our CAR at all level continued to increase. Core Tier 1 CAR, Tier 1 CAR and CAR were 14.86%, 17.48% and 19.05%, up by 1.13%, 1.47 and 1.17 percentage points compared with the year-end. Under the weight measurement approach, our core Tier 1 CAR, Tier 1 CAR and CAR were 12.43%, 14.63% and 15.73%, up by 0.57, 0.81 and 0.77 percentage point compared with the same period of last year. Fifthly, we further increase input in technology and accelerate to build a digital and intelligent CMB. We adhere to IT empowerment philosophy and maintain our IT input. In 2024, our input amount to RMB 13.35 billion, 4.38% of the bank's net operating income, we have over 10,000 R&D personnel, accounting for 9.3% of our total employees. Recent years, we have seized the opportunities arising from the rapid development of AI and build our core competitiveness around AI+finance, which is mainly reflected in the following aspects. Firstly, we start early in AI, as early 2017, we have established our AI lab to follow the future development trend of AI technology, increase our resource input and tackle key challenges make breakthroughs. And secondly, we have strong in-house R&D capabilities with leading model. We have independently developed a new generation of intelligent computing infrastructure and put into operation large model arithmetic clusters composed of thousands of computing models and released the first open source financial AI model with tens of billions of parameters in domestic banking industries, Egil. Thirdly, we have comprehensive large model architecture. We have built a full tier architecture covering infrastructure models, AI middle office and large model applications, which features full stack large model capabilities and build Intelligent Bank Foundation and reduce the cost and thresholds of AI application and development. Large model technology have been widely used across the bank with over 120 application scenarios. Sixthly, we proactively implemented ESG concepts and provided financial services to real economy. We improve our corporate governance mechanism and fully integrate ESG philosophy into our management, enhanced sustainability development capability and our MSCI ESG was upgraded to AAA level. We actively participate in climate governance, improved green investment philosophy and policies. Our green long and green leasing balance increased by 9% and 19%. We have released the first climate change mitigation theme Green bond among all Chinese banks. And the funds raised from the bonds mainly support industries, such as energy conservation, environmental protection, clean production and other sectors enhance our own carbon management capabilities. We actively fulfill social responsibility and provide further support to real economy to support people's livelihood. Loan to key sectors continue to increase, and we continue to enhance our financial accessibilities. The information security and privity protection and consumer rights protection. The above is my brief review of the performance in 2024. Now I will give the floor to President Wang on the company's operational preformation.

Thank you, Chairman, MIAO. I would like to introduce the company's 2024 operational information. In 2024, the management has acted in accordance with the BOD and stick to the strategy of building a value creation bank and establish a high-quality development model driven by strict management fundamental principles and breaking new grounds and overcame the impact of multiple unfavorable factors through our multi-prolonged and multi-measured approach and achieved good results. This is mainly reflected in the following six aspects. First, we optimize asset liability management and achieve continuous growth of business scale. In face of insufficient effective credit demand, our PR cut, adjustment of interest rates of existing mortgages, deposit trend towards -- trend towards more deposits, we strive to optimize our AL structure, strengthen deposit cost control and realized a stable growth of both deposit and loan and our deposit costs decreased significantly. Total loans and advances accounted for 56% of total assets, retail loans accounted for 52.91% of total loans and advances, an increase of 0.09 percentage points. Investment assets balance increased by 15.47%, accounting for 30.5% of the total. Ratio of total deposit to total liability was 83.31%, balance of demand deposits accounted for 52%, average daily balance of core deposits accounted for 86.24% maintained at the high level. Customer deposit cost ratio was 1.54% down by eight bps. Second, we vigorously developed fee-based business with higher proportion of non-interest income. We strive to overcome challenges, study more on the market to grasp opportunities to receive gradual change on our non-interest income. Net non-interest income increased by 1.15%, accounting for 37.33% of the revenue, up by 0.64 percentage points. Among them, net fee and commission income decreased by 14%. Other net non-interest income increased by 33.37%, influenced by the fluctuated capital market fee cut, profit concession, our wealth management income was down by 16%, but the decline was gradually changed quarter-by-quarter and account for 46% of the total fee and commission income. Payment and settlement income decreased by 7%, mainly due to sluggish consumption and representing 39% of fee and commission income, an increase 2.09 percentage points. Third, we continue to consolidate strength in retail finance and achieved coordinated development of the four business segments. We resolutely secured a strategic dominant position of retail finance and place equal emphasis on the quantity and quality of retail. The number of retail customers exceeded $200 million, an increase of 6.6%, among which Golden Sunflower and above customer $5.23 million, up by 12%. AUM from retail customer grew to a new level. AUM from retail customer was approaching RMB 15 trillion, with an annual increment increase of RMB 1.61 trillion hitting a three-year new high. Among them, AUM from customers in the level of Golden Sunflower and above increased by 12.9%. Retail loans grew steadily -- the balance amount to RMB 3.64 trillion, up by 6% and incremental market share continued to increase. We adhere to the stable and low volatility strategy, by steadily developing our credit card business. We have 69 million active credit card users. And the credit card transaction value of the company amount to RMB 4.42 trillion. Second, customer acquisition of Corporate Finance continued to increase, and we continue to deepen our characteristic development. The coverage expansion of corporate business received remarkable results with exceeding 3 million number of customer from the retail finance, the corporate balance of the financing products aggregate to corporate customers exceeded $6 trillion. Among them, traditional financing increased by 12% and nontraditional financing increased by 11%. We continue to innovate characteristic specialized products. Supply chain finance business grew by 23%, and the core enterprises and upstream downstream entities we served increased significantly. Users using the Treasury Management Cloud increased by 28% and the international BOP for corporate clients increased by 19%. We upgrade customer service model and give full play to our special service mechanism, such as all -- one entire bank for one customer, IB, PB integration and et cetera. And third, the investment banking and financial market continued to strengthen our competitive position. For debt financing instruments with the company as the lead underwriter, we rank third among the peers. We also ranked first by the underwriting size of ultra-long perpetual bonds and Cytec innovation notes underwritten and our M&A financing business volume increased by 6%. In terms of financial market business, the transaction value of RMB bond investments increased by 7% year-on-year. In terms of bill business, the direct bill discounting business increased by 35% ranking second in the market. In terms of FI business, we have partnered with 107 securities companies and third-party depository service and the customer we serve increased by 11.2%. Wealth Management and Asset business continued to increase. We follow our customers' risk preference and provide a diversified asset allocation service. For products holding -- for customer's holding wealth products reached 58.22 million increased by 13%. Customers using TREE asset allocation service reaching RMB 10.38 million increased by 13.84%. The balance of retail WMP increased by 12.38%. Agency sales of non-money market mutual funds and insurance policies increased by 101.48% and 21.07%. The average daily balance of corporate WMP grew by 30%. The total asset management business amount to RMB 4.48 trillion remains stable. Balance of assets under custody was ¥28.6 trillion, up by 8.24%, ranking among the top of the industry. Fourth, we accelerated development in key areas and enhanced our level of comprehensiveness and international development. We respond actively to the challenge of low interest rate environment, expand development room, and forge competitive advantages and promote the diversification of income to enhance our sustainable development capabilities. We accelerate our development in key regions and key areas. The growth rates of customer base, AUM, core deposits, and loans of branches in key regions were higher than the average level of domestic branches, continuously making higher contribution to the bank. The growth rate of loans in key areas such as, Sci-Tech Finance, Green Finance, Inclusive Finance and Manufacturing Industry were significantly higher than the average growth rate of the loans extended by the company. We build distinctive advantages in retirement finance with the pension funds under custody increased by 26%. Scale and market share steadily increased, a total of RMB111.3 million individual pension fund accounts have been opened. We accelerate the improvement of our level of international development and promote our overseas institutions to consolidate our capabilities. We focus on key scenarios such as, Chinese enterprises going global, financial -- foreign enterprises bringing in, another key, scenarios to provide comprehensive service such as global accounts, cash management and et cetera. Total assets of overseas branches, was RMB236.5 billion, an increase of 10%; profit before tax, RMB2.6 billion, up by 8%. The total assets of CMB Wing Lung Bank, was RMB453.05 billion, an increase of 6.19%. We leverage on the advantages of our full license operation through our subsidiary, enhance our comprehensive operation capabilities. CMB International completed 38 Hong Kong IPO projects, and ranked first in the market in respect of the share of IPO underwriting in Hong Kong. Scale of WMP under management CMB Wealth Management amount to RMB2.47 trillion, ranking the first. For CMB leasing, we continue to increase its efforts in asset placement. And for the scale of Asset Management business of CMB China Merchants Fund amount to RMB1.57 trillion, an increase of 1.29%. Fifth, we continue to strengthen risk management and maintain stable asset quality, affected by several factors, such as the continuous adjustment of the real estate market. Some of the risk indicators increased slightly, but the overall asset quality remains stable. The NPL ratio of corporate loan was 1.06%, down by 0.13 percentage points. The NPL of retail loan was 0.96%, up by 0.07 percentage points. Special mention loan ratio, 1.29%, up by 0.19 percentage points, overdue loan ratio, 1.33%, up by 0.07 percentage points. We strictly classify assets and NPL formation remains stable. And we closely follow their changes in external environment and enhance our risk prevention in key areas. The ratio of NPL to loans overdue for more than 60 days was 1.17. NPL formation ratio was 1.05%, up by 0.02 percentage points. Balance of corporate loans granted to the real estate industry was RMB18.55 billion, 4.062 of the group's total loans with the NPL ratio being 4.94%, down by 0.3% to PBT. In terms of corporate loans granted to the manufacturing industry, we strengthened industry research and take other measures to maintain good NPL formation and NPL ratio of the manufacturing industries. In terms of retail loan, we focus on high-quality customers, optimize regional structure and improve the accuracy of risk identification. Residential mortgage loans and retail microfinance and for credit card loan and for consumer loan, their NPL ratio were 0.48%, 0.79% and 1.75% and 1.04%, remaining low in the industry. Six, we explore AI+finance model and accelerate the digital and intelligent transformation. We accelerate the application of AI in customer service, risk control, operation, office and other areas to comprehensively promote the intelligent transformation of operation and management. In terms of customer service, we use large model to upgrade our smart wealth management assistant and enhance the self-service capability in high frequent complicated scenarios, and we generate a digital PM for wholesale finance. In terms of operational management, we launched the intelligent assistant for RM and apply large model in capital management, risk warning, HR management and et cetera, to enhance our operational efficiency. In terms of internal operation, we use intelligent technology to enhance our business handling efficiency and over 730 operational processes expanded its application by using the large model. And the efficiency of key business process increased by 58%. We realized a replacement of more than 26 million man hour by intelligent application and 8 million man hour by Conch RPA. The above is the main operating information in 2024. Now I would like to invite Chairman MIAO to introduce the outlook and operational strategy for 2025.

Now I will briefly introduce the outlook and the business strategy of the company for 2025. Looking forward to 2025, the banking industry faces both opportunities and challenges. In respect of challenges, firstly, the external environment is more complex. The secondly, the China economy still faces many difficulties and challenges. The foundation for economic recovery is not yet solid with insufficient effective credit demands, luggage consumption and some enterprises are still facing difficulties in production. The banks are facing pressure in its operations. We facing with narrow NIM, lower fee rates and insufficient effect of credit demand and other challenges, which further promote the evolution of the banking industry. In terms of opportunities, China's economy adheres to the principle of making progress amid stability and promote stability through progress. We see many policies coordinate with each other to spur vitality, bring new opportunities for the banks, which was reflected in the following aspects. Firstly, macro policies became more proactive and effective. The fiscal policy will continue to ramp up efforts and become more supportive. Monetary policy will be further easing, and there are continuous launching a bunch of policies. And at the same time, we see these policies revitalize the market confidence, stabilized economy and improve the operating environment of the banks. And secondly, industrial transformation and upgrading are accelerating and high standard opening up continue to expand. Technology innovation drives the development of new quality of productive forces, accelerating the construction of a modernized industrial system. There are many, many and enterprises going into global operations, they explore into diversified the market. And third, artificial intelligence drives a new wave of technology revolution and industrial transformation. At present, we are in a critical period of transformation from digital to intelligence. Bank in the future may be divided into intelligent banks and non-intelligent bank. The AI technologies rapid development, lower the cost and threshold of using large model technology, providing strong impetus for the transformation of commercial banks. Looking into 2025, we will stick to the strategic vision of building the best value creation bank with innovation-driven development, lead model and distinguished features. We will conform challenges, continuously improve our three core capabilities of wealth management, fintech and risk management and accelerate to create more and greater value for customers, employees, shareholders, partners and the society. Firstly, uphold fundamental principles and break new ground and promote continuous improvement in high-quality development; secondly, maintain strategic focus and further consolidate and expand core competitive advantages; and thirdly, adhere to technology leadership and create a new moat for intelligent banks; and fourth is to adhere to distinctive development and accelerate the level of international development. And fifth, adhere to a risk-oriented approach. Thank you. A - Xia Yangfang: Thank you, President, Wang and Chairman, Miao. We will now enter into the Q&A session. We will first invite questions from investors and analysts and then we will have time for the media. Before we raise the question, please state the name -- your name and the agency you represent before you raise the question. This lady, please.

Thank you for giving me this opportunity. I'm May Yan from UBS and thank you very much for Chairman and also, Mr. Wang’s introduction. And first, congratulations to the results of 2024. My question is for Mr. Miao, that you mentioned a lot about the macro situation, including less ineffective demand and also interest rates coming down. So I would like to know how -- what's your judgment for the macro situation. And in this challenging environment, how CMB can maintain your own strength and advantage? Now, CMB actually now have the highest PB among the Chinese banks over one-time PB. So how can you maintain your highest level of ROE in the long run? We hope that, that could be over 15%, and your valuation and also -- your valuation are all better than peers. Thank you very much. How can you maintain that in the long run?

Thank you for this question. It's a very big comfort. Yes, you think that you are quite positive on our results. In this macro situation, actually, we are facing challenges, but definitely, there are opportunities. And I think it's mainly, I would like to say is uncertainties, especially like in the US, the new government saying they want to show up the tariffs on Chinese imports. And also, there are a lot of uncertainties in the US market, and they are saying in last year, on 26 September, after serious policies have launched. And I think the economy is restoring. And I think the uncertainties in China can responding to the uncertainties in the world. And very recently, I think the recent central government also sent out the signal that once there are shocks or bigger shocks coming from the outside external environment, then there will be more stimulus policies rolling out. So, I think this provided certainties in the external environment for banks in China. But the main challenges for Chinese banks is less effective demand, especially from the demographic level, which the aging population will lead to a decline of the interest rate. That is why I say it's a cyclical problem for the bank to face the interest rate coming down. And is also a trend that the interest rate will coming down. And at the same time, the lower fee rate is also a challenge for Chinese banks as well. And I think that our advantages of CMB among the peers are still very obvious. If you look at the NIM side, that we are having one of the highest NIM among the banks. Definitely, our NIM is narrowing down, but the level of magnitude of narrowing is smaller than the other banks. So, this is the main advantage of CMB. And from the fee-based business and in terms of wealth management, I think we still have a strong advantage on that. Definitely, in financial markets, we also have advantages and strength, but if you -- I think we're even stronger in wealth management. So, if our NIM can maintain to be one of the highest and also, our strength of the wealth management can be can be one of the best among the peers, then I think definitely CMB can be the -- one of the best bank in China. Definitely, my hope is also to -- we really hope that your hope is our hope namely to maintain a high level of ROE, but it's a very good wish. What I can -- this cannot be fully guaranteed, namely over 15% for long run because this has been also determined by external environment. But what I can assure you is that we -- as long as our advantages in NIM and wealth management can be maintained, which means that our ROE can be better than the peers. So, you see our equity is -- the size of equity is stable and as long as our return is better than others than -- namely ROE will be better than the peers than our benchmarking peers, much better than their ROE. So, I'm very confident on that. Are satisfied with my answer? Next question, please.

I'm Zhang Shuaishuai from CICC. I read from your -- the words in letter from the CEO, namely you were talking about internationalization and building up more comprehensive capacities and read your annual report. So, would you please give us more elaboration on that?

Yes. Indeed, in the letter, I said about how we can build up our internationalization and going to a more intelligent -- building up a more intelligent bank and also to build up our strength in our comprehensive capacities. I think this is mainly to responding to the external environment, like Mr. Miao said, like the low interest rate, low fee rate, and in this external environment, how bank can expand the revenue source and maintain a stable revenue is very important. And we -- and also at this time, we see opportunities that a lot of Chinese companies are going global and operated in global market. So banks also need to provide this international service to accompany the companies when they are expanding their business overseas. And also, we are seeing opportunities in terms of AI, namely -- these also provided opportunities to banks. And CMB started as a bank which emphasize highly on technology. We were the first to launch the mobile banking to launch the internet banking and also in terms of AI, how we can continue to be advanced than our peers in terms of AI technology application and to improve our service capability. This is also very important and how we can respond to the external environment. And fourthly, the environment, as we see is that banks are having the same services, namely, we are seeing evolution among the banks. And in this kind of environment, how we can be differentiated from our banks is also very important and to even foster and consolidate our unique strength. That is why I say the four aspects, namely internationalization and comprehensive operation as well as diversification and to be more intelligent are the various key for important strategies And as for overseas operation, we have overseas branches and also we have overseas subsidiaries. In terms of our comprehensive capacities, we have different licenses. They are performing quite well in their own unique market, like wealth management, asset management, investment banking, financial markets, credit card and also financial leasing. These are unique businesses that they can have their own advantage in their own niche market. And all this will be combined, we will become a very good strength of CMB to provide a whole comprehensive solution to the customer and become the new growing points or growing area for CMB. And at the same time, for unique areas, we also want to build up our new strength like in terms of technology to be advancing in technology and to be advanced in AI, we have set up the technology fund. Investment is around RMB 3.5 billion every year, and we will continue to invest more into technology and to be more advanced. So I think by doing so, this will help us to realize diversification of income resources and help us to go through the interest rate -- interest rate cycles and to build up our own competitiveness and to have stable return to our shareholders. Thank you. Thank you. Next question, please. Q – Unidentified Analyst: Good morning. Congratulations for the results that you have said. I really said that during my career, yesterday, I sent out my report, namely strong and compelling. Because I think your results is very persuasive -- yesterday, actually, we have seen your stock price has come down a little bit. And some investors ask me whether your results -- is not so solid, or whether there are some problems that we haven't seen. But my point is that shares sometimes cannot fully respect the fundamentals of corporate. So I'm still very confident in CMB. My question is about NIM. And I think that this year, China has actually slowed down the pace of interest rate cut down. And I think, what is your expectation for your NIM trend this year? In your report saying that, this year's plan for loan growth is around 7.8%. Whether it's quite optimistic plan and whether it will be difficult for you to realize that?

Thank you. Your first question is about NIM. Last year, our NIM is 1.98%, down by 17 bps. And we said that, the level of the narrowing down is contraction is better than our peers. I would like to share with you some of the trend of last year's four quarters. The first quarter is down by 27 bps year-on-year first quarter and second quarter, down by 17 bps year-on-year. In the third quarter, 14 bps year-on-year and the fourth quarter, 10 bps year-on-year decline. So if you look at the trend, the magnitude of the decline is also narrowing down from quarter-by-quarter. And yeah, why I share this trend with you, because I think that, this kind of trend might continue. The reasons I think just now Mr. Wang and Mr. MIAO has already give you some hints on that. The main aspect is that there are 3 LPI cut down and also for adjustment of existing mortgage rate. So this impact will continue into 2025. And last year's -- in the -- when we released the interim results, I said that, NIM might continue to follow -- will slow down to a decline, but a precondition is that there will be no major external policy changes, but just a while after what I said is that new policy has been rolled out, namely banks need to adjust the existing. And this year, within the PBOC statement is that we choose the right time or proper time to cut down our and also to cut down rates. So our expectation for this year, there will be continue to be interest rate cut this year, which will post definitely pressure on the NIM trend this year. And at the same time, I think another challenge is more petition for the assets since there are less effective demand and competition for loans and assets is also very fierce, which will continue to lead a decline in asset yield. And especially at the same time for the assets, which have enjoyed quite a high yield as in the past, like retail, like credit card, retail loan, now we are also seeing a decline on the yields as well. These are all challenges. But these are the challenges. But I think there are also opportunities like the decline in deposit cost. Last year, our deposit cost actually was, as you know, is always one of the lowest among the Chinese banks, but last year continued decline by 8 bps. And at the beginning of the year, we are also seeing the trend of decline of our deposit cost. I think this is quite beneficial, contributes some positive things to the NIM. And for the interbanking funding cost, it's 1.09 for CMB. And this year, I think that the cost of the demand deposit from financial institution will continue to decline. And also at the same time one thing we are seeing positive marginal positive trends for the trend of the term deposit. Last year, I think our demand deposit ratio has being back to over 50% at the end last year. I can now firmly say that it has already been affirmed trend that people are trying to choose demand deposits instead of term deposit. But I think we still need to observe that. But good side [ph] last year, we are having a good balance of our demand deposit. And this year, we are seeing higher growth on demand deposit as well. So these are the positive trends that we are seeing for NIM side. So in 2025, I think that the trend of the contraction of NIM will continue. But our goal or our hope is that the level of contraction will compared to last year can be improved, and we can be ahead of our peers in terms of NIM absolute level. And secondly, responding to your second question about the loan growth. In our annual report, our budget for loan growth rate in 2025 is around 7% to 8%. And this is our budget, but whether it can be completed will also be decided on external environment and also our own arrangements. But for a long time, we think that we hope that the loan growth rate for every year, there are two determinants on that. One is to be in line with external environment, including like GDP, like the PBOC's budget for social total financing. And second consideration is that we want to be more stable on loan growth rate through cycles. We think excess volatilities is also a risk. That is why the loan growth rate for CMB is quite stable even to go through the cycles, even though we are facing volatilities in external environment. So last year, loan growth rates around 5.8%. But if you exclude discounting, then the pure loan growth is around 8% last year. So compared to years before, I think this growth rate in 2024 is also stable. So in 2024, I think, that we'll continue to originate effective assets and hopefully that we can maintain a stable loan growth rate. But whether we can realize this goal, definitely, we'll work hard on that, but whether we can realize this go, it still depends on the external environment. It's highly related to that. Thank you. And one thing I want to supplement. And in the domestic market, as interest rate liberalization continued to evolve and I think it's very important that the asset decides the liabilities, namely the competitiveness on assets or whether you can originate good assets, decides the competitive off the back. So around 7% to 8% growth rate, this is also one consideration behind this growth rate determination. As long as we can have a loan growth rate, then this will help us to maintain a sound NIM level as long as we can maintain a stable loan growth rate. This will help to us to originate more customer and to originate more low-cost deposit and also to bring us more valuable business. So that is why I think asset origination is very important. This will be determined on by capital, by external environment. And yes, this also will be constrained by capital. So this kind of a balance among business development and also the capital constraint. Thank you.

We'll have the next question from the row four.

Thank you for this opportunity. I am Claire from GS. As you have also mentioned about the application of AI in the bank, I would like to ask how would you assess AI application in the bank operation? And how will it influence your efficiency enhancing and cost reduction? And what measures have you taken? And what results have you achieved?

I will invite our CIO to answer this question.

Ever since our establishment, we continue to adhere to the strategy to empower the bank by technology. In the Internet banking and mobile banking era, we seize every opportunity arising from technology revolution and launch many innovative products and services. including our technology system, it is also continuously iterating and upgrading. For instance, our mobile banking that we serve our retail customer, as you all know, it is widely recognized as the best mobile banking application. Our migration to cloud is a major trend. And by the end of 2022, we have completed our fully migration to cloud, which is also the first batch of banks among the Chinese banking industry. Just now, President Wang also mentioned the full transformation node development, among which the intelligent and digital transformation is one of the most important strategies. And of course, there are many key points within the transformation. And among the important focuses you have mentioned about our application of AI and what influence will AI bring into our operation. It is hard to give you a very accurate answer, but I would like to answer first on the application of large model. Of course, the disruptive changes brought by large model could be viewed from two aspects. The first one is technology. LLM in understanding knowledge in the inference capability, the breakthrough is very disruptive in the history. It is undoubtedly very historical. Will it change our operational model? It is still remain to be debated and see. I'm not sure whether you have noticed that the CEO of Microsoft mentioned in an interview in February that he has an idea. He has a hint. If it is a technology that is equal to the level of industrial revolution, we will see a 5% to 10% of GDP growth of all countries. But the sign is not that obvious. This is the idea given by the CEO of Microsoft, maybe it's is over-headily discussed topic within the market. So we need to remain to be cautious and reasonable towards how AI technology will pose influence on our life, on the world we are in and on the bank's operation. In some small areas, we have already seen some great changes brought by applying UI. But for a bank itself, it is a highly digital scenario, a business model. Large model will undoubtedly give full play to bank's operation. Well, actually for CMB, we start very early. In 2017, we have established a first AI lab among our peers. We have got well prepared for entering into the smart era, the intelligent era. We have also reserved many talents, many technologies. As in 2022, when OpenAI released ChatGPT, we attach great importance to the senior to -- by our senior management and in 2023 and also, our Chairman Miao, have also proposed a statement of intelligent and non-intelligent bank, and they have totally different fate and future development. So we have significantly increased our input in developing AI in developing large model. And secondly, in order to do a good job in large model, we need to construct a full stack architecture. Our large model architecture was consisting of four-tier. At the very bottom of it was, the intelligent computing infrastructure, and then middle office of AI, and then, the scenario application. We have already developed over 120 scenarios within the bank. This is our full architecture that consists of four tiers. We have quite deep understanding over the application of AI and large model, and how it will promote our faster pace of development and bring us more competitiveness in the market. I can also show you some examples of how AI is applied in our business. For instance, in the Retail Finance business, we have developed an assistant called AI Soldier, and many of our employees, regardless of being a relationship manager or a product manager, they have also been benefiting from this assistant. In Corporate Finance business and also the inclusive finance business, the business model is very distinctive. The business tend to be quite short in his period of time in his tenure and the frequency tend to be high, and we use the AI assistant to help the relationship manager to increase the efficiency to improve business cases in inclusive finance. We have also developed asset and liability assistant within the bank to help increase the 50% of our efficiency in quotation, pricing and also we use the assistant and also risk management, capital management and other areas within the bank. So in various scenarios, we have already applied deeply AI and large model technology. In a year 2024, by using large model, we actually generate quite good productivity equaling to over 5,000 manpower, full-time employee. In this regard, we will resolutely remain our input to IT and try to build us into a flagship of AI-driven bank. As you all know, there are some AI dilution, we also attach great importance to it. We will always adhere to a cautious attitude to take multiple measures to exclude the uncertainties brought by technologies to be compliant to follow the requirements given by our regulator and bring every aspect of the positive momentum given by AI technology, large model. This is my answer to your question. Thank you. I will have another question from the lady on site.

Thank you, senior management. I am Fuja Yi [ph] from Huatai Security. I have a question regarding asset quality. To see from your annual report, your corporate asset quality remained good, but retail asset quality fluctuates a bit. So combining your experience from the past economic cycle, what is your outlook towards the asset quality of retail loan? And when is the tipping point of the retail loan asset quality.

Thank you for your question. Just as you said, for the whole bank, our asset quality remained good. NPL ratio 0.95% and allowance coverage ratio remained high, but we still attach great importance to the overall condition of the asset quality. And we noticed that retail loan asset quality are showing some signal of increasing pressure. Well, our NPL formation ratio was -- NPL formation balance was RMB 39.3 billion, mainly from credit card business, and credit card business, we can say that the NPL formation remained high but stable. Consumer finance NPL ratio was 1.04%, but the special-mentioned loan ratio and overdue loan ratio have also shown an increasing tendency. For mortgage, the NPL ratio was 0.48%, but special-mentioned and overdue loan ratio also increase, so generally the overall retail loan asset remain leading in the industry, but the trend combining with the backdrop of macro economy actually increased. We have attached great importance to the asset quality of retail loan business. We have optimized the risk management model, and we have optimized our customer selection. Customers from Credit Card, Consumer Finance and Microfinance business, we will optimize our customer selection. We will also optimize our region selection, which areas tend to be lower risk. We will focus more on these regions and customer base from these regions. In mitigation tools, for mortgage, for microfinance loans, we have also shipped our model to have more pledged and collaterals, for these types of loans with the pledge and mortgage rates being 37%. And for mortgages, the pledge rate was as high. For microfinance loans, the mortgage rate was as high as over 80%. So for a different positioning, for a different customer base, we have different risk principle. We will act according to different business model and have targeted risk management and control policies. So at present, when will we see the tipping point of retail risks, I think that it is still depending on the macro environment, the external environment. As the residents' income continued to decrease, the unemployment rate is still increasing. These influence will bring pressure to the external environment, along with our macro environment, tend to be steady with a positive trend. The unemployment situation will be improved, so that as the general backdrop improves, so will -- so is our asset quality condition. Even though we are facing a very challenging external environment, CMB will still take retail finance as our mainstay. We will act according to the risk condition and give accurate and appropriate risk pricing for different retail finance business. We have a large proportion of retail finance business larger than the corporate finance business. And we believe the retail finance business can also bring us higher yield. So we will maintain appropriate and reasonable growth of retail finance business. Thank you.

Thank you, President Wang. I will have the next question.

Thank you, senior management. I am Lei from JPMorgan. I have a question regarding the core Tier 1, CAR ratio actually it is very high, much higher than your domestic and even international peers. And on the other hand, you have quite large pressure in the decreasing ROE. How is your idea or new plan for increasing the return to shareholders?

Thank you for your question. Well, regarding the high CAR, how do we view the high level of it? Of course, from the statistic level and the advanced measurement approach and weighted approach our CAR, core Tier 1 CAR and to see the reason behind, why would this indicators all be high. Well, on the first place, we have conduct many works and enhance our level of capital endogenous capability, which bring us more strong CAR level. But on the other hand, it is also influenced -- contributed by our new capital regulation. So, these two altogether contribute to the high level of CAR. But I don't think the high level will continue for quite a period of time. It is not something we can naturally sustain. We hope that we can act under the regulatory requirement and maintain a 2.5% cushion as buffer. Well, on the one hand, as a systematically important bank, there would be capital requirement for us. So, according to our internal calculation, 2.5% of buffer is quite sufficient for us. Our core Tier 1 CAR should maintain at the bottom-line requirement of above 10%. Under the advanced measurement approach, we have already satisfied. But under the weighted approach, we should remain cautious and keep a close eye on whether we have already meet the requirement. We will also save some capital to tackle with the future challenges that we may encounter. So, this is the first reason that I want to explain and how do we look on our CAR level. So, I think another reason behind your question is that how do we remain an appropriate level of ROE and how to maintain a good equity to deliver a good ROE indicator. So, my answer is that to deliver a balance between the two. From the bottom, we hope that we can deliver good return to our shareholder. But according to my analysis to CAR, we cannot say that we are fully comfortable with our CAR to reduce our capital level. And for ROE, our idea is to -- whether we have a target, even though we may not maintain above 15%, but we still aim to outperform our peers. That is our target.

Thank you, President Peng. And now we are having the next question.

Thank you. I am Richard Xu from MS. Your retail customer base is quite strong. Your deposit and retail AUM continue to be robust. I would like to know what is the future growth point of retail business? Now, you have a very competitive environment -- market environment. Where is your competitive edge, your competitive point to support your strength? And now the shrinking loan yield is quite significant. Will it influence your service delivered to your client?

We attach great importance to the customer base growth. For the past two years, our retail customer base continued to optimize in its total number and structure for corporate customers we -- we think that for CMB to continue to develop, we need to maintain three basic things. One is customer base is very important and need to be stronger and be better in terms of customer base. The size of a customer decides the size of CMB, how well CMB can develop. The quality of customer decides how well CMB can develop, So, this is also in line with our core philosophy in customer centers and create value for customers and to serve better our customer. This is very important. One of the base that we need to consolidate. And in terms of the quality of our customer growth, we emphasize one the newly graduates, namely young people. How we can originate customers from young people. Once there are -- every year there are over 10 million graduates from universities. If we can originate those customers, namely new grades from universities, this can be a very main source, a very good source for CMB's customer growth in the long run and also can be sustainable growth. And secondly, we emphasize on the -- namely the parenthood -- parents and children customers because parents are now investing a lot in education of their child, and they also saw -- that is why I think we need to nurture to their kids from their parents to have accounts with us when they grow up, they can also become our customer. And this is our long-term scheme. And thirdly is customers’ who have cross-border financial demands like students are starting overseas and also some residents have demand for global asset allocation. So how we can meet up this kind of globalization of asset allocation demand is very important. Fourthly, I think for retirement, service is also very important because the aging -- population is aging in a more accelerated way. For people who was born in the '60s and '70s, they have already accumulated a lot of wealth. So how can we help them to manage their assets? Yes. And this is very important inherited to their – through their children, so very important. So last year, I think we have all were 10 million accounts – patience accounts opened by our customer. This all provided us opportunities and potential for our customer growth. These are all inline with the new trends in the markets. So we need to flow the trend and so as to maintain or sustain the customer growth. And also, we have like family trust business, family wealth inheritance. These are also potential areas for growth. So customer base is the one of the very important thing that we need to consolidate and to satisfy the customers' needs in different aspects. So with these customer base continue enlarge, I think the strength of retail can be sustained. And in terms of the corporate side, I think there are over 60 million corporate clients registered in the market, but our market share is still quite small, is around 2 million, 3 million. And we are seeing new registration of new corporates are growing. And -- so that is why the customers that we newly originated are customers who are newly registered in the market. So these newly opened companies and newly registered companies means new opportunities. And this is also a new opportunities for sustainable growth of the bank. And when we accompany the company to grow, which is also help us to develop as well. In the past, we already provided services to many companies in new industries. And now they are already kind of the major players in the market. So -- now we are servicing different kinds of customers. And in corporate size and to enlarge the customer size, especially for customers who are in the special and new industries. So these are therefore -- I think these are will help us to assist to maintain a sustainable growth. We will continue to consolidate our customer base. Thank you. Next question, please.

Thank you. I'm Gary from HSBC. I think the fee-based income is a very good highlight for CMB. But last two years, we are facing difficulties on that? And looking ahead, whether it will -- from the fee-based income, whether it will become a drag to become a highlight again? And second question is about deposit growth, whether you are seeing the trend of term deposits, where the deposits are going to wealth-related products.

Thank you for your question. The first question about fee-based income. From the trend of the fee-based income, I think banks are all under pressure, especially from last year as we are seeing a lot of policies for fee cut for banks. Banks are all facing difficulties in fee-based income. And for – especially like the insurance-related products is also was also under pressure over the last two years. But we are also analyzing the trend from a quarter-on-quarter basis from last year. I think that we can elaborate on fee-based income and also other non-interest income. They might face in different situations. So if you look at the fee-based income, last year, we had negative growth. But quarter-on-quarter basis, the magnitude of net new growth was narrowing down. The first quarter was down by 19%. And yes, at the end of the year is much smaller than that number. This mainly -- I think the drag on last year's fee-based income was the fee-based income coming from extensive wealth management business. And the other thing I would like to say is the net non-interest income. Last year, we benefit from the rate cut – from the market rate cut. Especially, we have many gains on the bond investments like for the whole year, the growth of non-interest income is over 33%, which is contributing to the positive growth of the total non-interest income. But this year, I think things might turn around compared to last year. The first one is the changes on fee-based income. This year, I'm confident on the stabilization of fee-based income this year, and I'm more optimistic on that because from last year September, a lot of policies have not been launched. And the capital market -- confidence in the capital market has been restored and activities in the capital market has been more -- the capital has become more active from last year. So as we see in the last quarter, we see a growth of AUM in fourth quarter last year. Quarter-on quarter basis is -- we have seen -- it has even been doubled growth quarter-on-quarter basis, so which is quite a good base for this year's performance. So if the capital market trend -- continue the trend of positive and active, so I'm more confident on the fee-based income to be stabilized this year. This is my judgment. And secondly, for the other net non-interest income is highly related to our -- to the trend on the interest rates. Last year, we have seen the 10-year bond decline by -- the yield declined by 88 bps. But this year, we have seen adjustment in the bond market. This definitely have posed negative impact on the valuation of the bond investments. But our judgment is that in these quite competitive moderate policy environment and long-term interest rate decline cycle, I think that the trend of the bond rate coming down or in a more volatile manner is kind of a long-term trend. So -- in the long run, we think that after the first quarter, then the volatilities might come down. And I think last year, 10-year bond was a 10-year treasury bond, 1.78 bps and compared to last year's 1.68, it's only 10 bps up. So pressure on other non-interest income in the first quarter might be bigger, but in the -- if we look – in the longer term, it might continue to stabilize. And secondly, about your deposit, just now, I also mentioned about the trend of term deposits. Actually, for these past years, we are seeing that higher trend of term deposit, higher proportion of term deposit. It has continued for the past years. And after 2024 September, we have seen some changes on the proportion of demand deposit. As Li Jian [ph] said at the end of September, the demand deposit proportion is 48%. And by the end of the year, it's 52%. So this is quite an obvious rebound. But into 2025, we are seeing less growth on the demand deposit. On a daily average basis, our demand deposit is better than on a year-on-year basis. But on an in term basis, on a term basis, we are seeing more term deposits. So we cannot draw a conclusion from that, whether there is already a turning point for a term deposit trend. But marginally, there are some positive changes. So if the capital market continue to be active, the trend is positive and there are more consumption confidence, then we are more confident on the trend to have more demand deposits, but now it's too early to draw the conclusion that the trend is over -- of term deposits over.

Thank you for giving me this question, I'm Ms. Ma Xiangyun from Changjiang Securities. I have two questions. One is for is for Mr. Miao. Namely, my question is about for market valuation management. Just now you said that CMB has the highest PB ratio in the market. And recently, you have also released your market valuation procedures. So we would like to share your views on what is your kind of concrete procedures for this kind of market valuation management? And secondly, is about for provision level. And what is your target for the provisioning level while there are a decline in provisioning indicators?

Thank you very much. Okay. I will answer the question for market valuation. Just now you said that, CMB have one of the highest PB among the banks, namely we are the more expensive bank, but I think it's worthwhile. The price is worthwhile because our value is one of the highest among banks. How can we do a better market valuation? I think this is a question facing all public companies and all the senior management is one of the key things that we need to consider. So I think the key is to be operate well and then have good return. This is a basis for market valuation as long as you have a good return that you can do a good market valuation management. But if you do not have a good return, it's impossible to have market valuation management. And under this external environment, firstly, I think the top priority is to increase the return -- increase the return our capability for risk management and second capability for risk management; and thirdly, capability to -- for innovation. These are 3 major important capabilities and also to create value for our shareholders to society, to the counterparties. So value -- market valuation means to create value for our customers as long as we can improve capability to generate revenue and for better control of risk and to be more innovative, which means we can generate more value for our customer and to have a better moat for long-term growth, which means that we can create value for our customers. This will be the solid foundation for good performance -- for market valuation management. And based on that, I think important is to maintain a stable dividend payout ratio. And just now Mr. Peng said about dividend payout ratio. And some investors expect that we will have an even higher dividend payout ratio and some investors saying that the dividend payout ratio is in line with their expectation. In 2013 that we have written down in our articles of memorandum that our dividend payout ratio will not be less than 30% is the first bank in China to do so. And this year, our dividend payout ratio is already over 35% for dividend for every share is ¥2. So this is -- I know that some investors are expecting more and expecting higher. But I think that you keep the dividend payout ratio at a high and also at the same time, stable level is more important for investors. If we increase the dividend payout ratio this year, but then decrease that next year, I think this is not good for value creation. And this is also not good for the valuation stable. So we want to be ahead of peers in time, but also at the same time, stable dividend payout ratio among our peers. I think this is one thing, a very important aspect for market valuation. And thirdly, I think in the long run is sustainable growth and to have a good communication with the market, to have a good communication with the shareholders. As long as we can create value, we also need to spread out that to the market and also to let the investors understand that. So to understand what we are doing now, like just now your question about fee-based income, like the net interest income, how we are doing last year and how we will do next year. I think this is also share more information for you and also to help you to understand more about CMB's future. So you will be more confident in CMB, and this will also help us to do a better job in terms of market valuation. So this time, you need to it's not only story telling about market valuation. Market valuation, the essence is to do your own business well and to improve your capability for -- to generate more profit and improve your capability for risk management, improve our capability for intelligent. And by doing so, I think that we definitely will have a good market value management, even though we are more expensive, but I think it's still worthwhile. Thank you.

And I will answer your second question for the asset quality management. For asset quality, we are prudent and stable on that. For asset classification, we are very strict. Just now as I introduced that our NPL compared to loans overdue is already over -- around 1.3x of the loans that is overdue 60 days. So for loans that we also have made prudent and also ample provision on that to ensure that we don't have any drag on our development. This is the principles that we always adhere to for the years. And for like property market and like the retail loans that we are seeing higher risks, we are also adjusting our provisioning model and to improve the provisioning for these kind of loans. Last year, we have increased the provision in total last year is around RMB 40 billion. And less than RMB 1.3 billion compared to the year before because overall provisioning level is around RMB 270 billion because last year, we have disposed a lot of bad NPLs, and that is why I have exhausted some of the provisioning balance. But as you can see, our coverage ratio was down by 25 bps. This is mainly because we are seeing a higher amount of NPL amount, which is up by RMB 4 billion, around RMB 65 billion NPL. This is mainly because the denominator is bigger, namely NPL balance is bigger. So that is why we're seeing a lower coverage ratio. So -- which means that in good times we are having a very good profitability and during that period we improve our capability for more – have more buffer provisioning level. So in the current circumstances, we can also -- that made us – help us to have enough buffer to digest the risk in the current circumstances. So at the same time to ensure stability of your revenue and at the same time also to have a buffer on the risk. And as for the forecast or the trend of that, we think that we need to ensure that there will be risk -- enough risk buffer in place to cover risk. We don't want to leave any drag for the future or hit a risk for the future. And secondly, we want to provide for bad loans and also for the loans that need to provide more to ensure that there will be enough cover on that. So I think that the coverage ratio will be more stable level and also more higher level compared to the peers. Thank you.

Thank you, Chairman, Miao and President Wang. In order to ensure the rights of our individual investors, we have collected some questions through our e-mail. As many of the questions that our individual investors are interested in overlap with what have been already raised, so we have select one that has not been asked and we will invite our staff to read out the question. The question is, recently, the NAFR announced AIC pilot program to expand and CMB is largely likely to be included in this program. I would like to learn from CMB that whether CMB will experience any changes in your profit-making model and what changes will it bring to your business model? And is there enough capital for CMB to support the establishment of AIC?

I will take this question. In this two sessions, the NAFR leadership has announced the decision to expand the pilot program of the AIC. This is the first time to announce the expansion of the pilot program ever since the year 2017, when the five SOE bank was allowed to establish AIC, it is very important for the banks to support more financing in the capital market. It is very important and significant and meaningful for the commercial banks to enhance their level of comprehensive services. In the regard of direct -- providing direct financing and also investment and loan business integration capability. We are now under the process of discussion, whether we're able to realize our goal, to see our capital strengths, and we have the foundation, the service capability foundation to establish such AIC. Just now you mentioned that the CMBI has already accumulated a very rich experience in this regard. So for us, in our services, despite loan that we are able to grant to our customers, we are also looking to discover more areas such as providing equity financing services to our clients. It is very important and meaningful for us to find these new solutions to serve our clients. And we are now under the review of the Board, and if there are necessary announcement that we're required to make, we will act accordingly. Thank you.

We're now having questions from the online participants. Please follow the instructions given by the operator.

[Operator Instructions] Now we have the question from CITIC Securities, Xiao Feifei.

Thank you for giving me this opportunity. I have a question. Regarding that senior management, what is your outlook towards the mutual fund market, the capital market, and what is your management strategy and your decision towards the investment accounts?

Thank you for your question. About the capital market, what is our outlook towards its trend? I have just now mentioned my view as I answered the question regarding net noninterest income. So for me, I think that after the year -- the end of 2024, there are some rebounds in the capital market. But generally speaking, I think it will be a volatile market for the year 2024 with a declining trend. Why is the case? Because the monetary policy is still quite loosened tune as the backdrop. The PBLC Leadership, have also emphasized once again previously to lower the market interest rate. I think that can represent the major trend of the interest rate environment. So in the following, what will be the momentum of the economic growth will actually determine the pace of our policy introduced, and it will also continuously influencing the results on the bank's operating pace. So for CMB, I think there are still opportunities for us to allocate resources to our investment accounts, and you see in the past year, we have enlarged the proportion of resources in the investment accounts. We have enjoyed the benefit brought by the BOMBO market. So we will act according to our asset allocation arrangement, including what we have mentioned about the lower growth pace. And of course, for the three types of accounts, we will also give full play of our professionalism in the financial market. We will appropriately arrange to increase the volume of our trading account. We believe that as the market tend to be more volatile, there will be more opportunity arising from these market volatility. And from the last year's performance, this has already proved that we have strong professionalism. So therefore, we have quite a successful layout and appropriate time season -- timing season so that I think we think that it will still be a good arrangement and a good bonus we can see this year. So it is a very good chance for us to prove that we have the capability to select the right timing, to select the right market, to conduct relevant allocation of our assets and to maintain stable in our overall condition.

And I will have the last question from our investors and analysts, and we will enter into the Q&A session for our friends from the media. We're now having the question from Marc Wang Pong [ph] from China Securities.

Thank you for giving me this opportunity. I am Marc Wang Pong from China Securities. I have a question regarding CAR. Just now Mr. Peng has also made a clear exploration on the denominator. And I would like to ask more about the denominator. As we see that your core Tier 1 capital CAR ratio continued to increase. And under the risk-weighted approach that your RWA growth rate tend to slow down, if you consider the extreme condition, even though the ROE declined to less than 10%, your RWA maintained at a 5% level, your core Tier 1 CAR will not decrease sharply. So from this consideration has there been any chances for CMB? Is there any chances that you remain RWA growth at a relatively low level? And what is your strategy and measure for the RWA growth under the advanced measurement approach? This is my question. Thank you.

Thank you. Well, I will answer the question about the denominator. Well, for me, whether we can maintain a endogenous growth of capital, I believe the key is to generate higher return from our RWA. That is RORWA maintained at a high level so that we can have higher level of capital endogenous growth. So besides doing a good job in the nominator, we need to do also a good job in a denominator. We see quite sharp decrease in the growth of RWA. It is mainly because of several reasons, one of the reasons behind is about the new capital rule. The changes brought by the new capital rule reflected in our bank book, so that our RWA growth tend to be slower than the previous period of time. But in the real case, the general development of RWA tend to be quite stable so that to see from the year 2024 in the future, we think that RWA growth, 5% is not quite an appropriate and comfortable growth rate. We need to maintain a stable growth. This is also a requirement posed by our Board. It is not the case that required by the Board to be lower, the better. I've always mentioned that the volatility in the risk is also risk itself, we need to have ability to sell through the cycle and take into consideration of several factors. The first is influence over CAR. The second influence is our risk control. We need to maintain our risk preference. And the third aspect is our influence brought by the profitability. Low RWA growth, I don't think it can bring us good growth of profitability. So we need to strike a balance among these three factors to maintain good and appropriate growth of RWA. This is my general consideration in the future operation. We will continue to take good consideration and maintain stable growth of RWA.

Media. From now, we take questions from media. Q – Unidentified Analyst: I'm from 21st Century. My question is for Mr. Miao that in -- what is your thinking about financial technology? And what is your emphasis on AI plus finance? And how are you deploying that in your -- in China impacts and now -- last year, we noticed that your mentioning was that digital CMB now this year has become digital intelligent CMB. And also my question is for Mr. Zhu, what is your positioning of the -- see your subsidiary, technology subsidiary and also your technology department. There are rumors that your subsidiary is going to -- thank you.

Actually, we have three layers of technology, there are three committees. One is the digital committee. One is the Information Security Committee and also -- we have a digital committee and amount is that digital finance is the highest decision organization to approve the major strategies, major projects and resources allocation. And the information security committee and also technology committee are mainly focusing on internet security and also data security. And there are two main departments for technology. One is technology department. One is the digital finance development office. This is mainly for strategies. And to design the overall plan for how we need -- how we promote the development of the digital finance in CMB and also manage the fintech fund as well. And for technology department, it's a pure technology department, is mainly for the IT system construction and operation, and this is kind of a main architecture about the technology CMB. And secondly, as for the two subsidiaries, you mentioned about technology. These are all under the management direct management of CMB of our technology department. And our subsidiary is more -- one is more servicing only CMB, one is helping our corporate customers. So this is the governance structure of our system -- technology system. And just now you mentioned about DeepSeek, yes, definitely, it's very hard in the market that the model of -- which launched by DeepSeek is kind of a very big breadth of in the market for Chinese models as actually has helped the Chinese models to narrow down the gap between Chinese models to U.S. models from nine months to three months. And also the training, we have innovation on the training of model and also innovation on application. These are very important contribution from DeepSeek. One thing special to mention is that this definitely -- DeepSeek have provide more value. It doesn't only help China, but also help countries around the world, including U.S. From this aspect, I think that DeepSeek's the model launched by that is very unique and special and have special valuation. CMB hardly emphasis on that. After two new models launched by DeepSeek, we have already deployed these models and construct the post-training capabilities surrounding these two models, servicing the financial scenarios of CMB and we have already fine-tuned the DeepSeek's model to adjust to CMB's scenario. And it’s not long of DeepSeek launched this chosen launched these models is very strong. Definitely everyone knows that, but you might already notice that illusion about -- from DeepSeek-R1 model. So, in terms of the application since financial industry is highly regulated and servicing a larger amount of customers. So we are very prudent in terms of the application of DeepSeek.

One thing I want to supplement for CMB, highly emphasis on technology, namely technology make CMB stronger from the very beginning, we started from Shekou, first building that we have is the technology building. Even though before we have the official office building, we already have a technology building. In the period -- in the time for Internet booming, we are the first to offer the first Internet banking namely from turning us from the bank board to Internet banking. In the mobile term, we have the Internet banking, we have the online servicing and also we have the mobile banking, we have the app. We are all advanced of our peers. So in terms of the AI, how we can create -- build up our new capabilities, namely to servicing our customer by using our Xiao Zhao assistant and by servicing our internal clients, namely our staff, we have CMB assistant for our internal staff. And just now your question regarding the two subsidiaries, belong to CMB for technology. As we have -- as Mr. Zhu said, we have the highest decision organization, namely the committee is from a very high-level basis. This shows our emphasis on technology and also shows our application of technology. And by this kind of new structure, we help the technology to be embedded into businesses. And actually, we also have six research centers for technology, all these six research centers are helping targeting a different business segments and also internal operation so that embed the technology to a business level alignment between technology and business. So, the impact and effect is also very good and sound. Thank you.

Thank you. Mr. [indiscernible] from Security Times. My question is about internationalization. As you said, we will have six subsidiaries -- six overseas branches and three subsidiaries. So, what is your plan for overseas presence? And how can you utilize or leverage on the resources that you have to have a more Internet better development in terms of internationalization and to go through the cycles?

Thank you for your question. Just now I mentioned that next one of the important steps that we'd like to take is internationalization. Just now you said we have six overseas branches and three subsidiaries. And for overseas presence, we follow the areas that -- we follow our companies, which are going abroad and for focusing on the key areas where our Chinese companies go abroad. And also, at the same time, we need to have support from our regulators as well as support from regulators in the targeting market, overseas market as well because financial industry is a highly regulated industry. And they need to have a very good communication with the regulator from both China and also overseas market. So, under these highly regulated environment, how we can better exert or better use our overseas global presence to become more internationalized. In the foreign aspects, the first one, I think Hong Kong is very important. Market for us is very pivotal because this is the first step when Chinese companies or citizens going abroad. Here, we have Winlo [ph], we have CMB International. And I think it's the main markets that we're focused on. No matter is from the board or from the senior management are highly emphasizing on our business in the Hong Kong market to improve our competitiveness here and also to contribute our share to build Hong Kong's core area as a global financial center, and also contribute to CMBs as well. And secondly, we have branch in Singapore, which is targeting in the whole Southeast Asia -- and we hope that our Singapore branch can improve its own capability and better serve the corporates' and also customer -- retail customers' demand. And for overseas -- other overseas branches, I think it's more need to follow the regulation in their own market and comply with the local regulators, compliance first, and have their unique competitiveness to ensure that there will be no risk happened and have better development. So this positioning for these kind of overseas branches. And one thing I want to mention that we also have offshore license, namely servicing, even though we are in China, but we can provide services in the overseas market by using this offshore banking license. And thirdly, I think important we can have a better and closer relationship with international financial institutions to work with them to provide services to the corporates as well. So by doing so, we want to -- this also help us to build up our global service network and capability and by better developing our global presence. This also helps us to improve our management level, namely to be more international one, to be more linked up to the global bank. Thank you.

I am Peggy Ye from Nikkei. I have a question regarding CMB for your Hong Kong IPO share that you have quite a large proportion, including you act as the lead underwriter and other aspects. And previously, we see some of the other the other peers are performing better than you, but now you're having a good performance than your peers. I would like to understand reason behind what kind of effort have you made? And what efforts will you emphasis, such as being the lead underwriter or more projects? My second question is that your global presence, whether it will be influenced by geopolitical issues? And you have also mentioned some of the scenarios about Chinese enterprises going global. Will that also be influenced by your decisions to conduct international development? Thank you.

Thank you for your question. I suggest second question be taken by President Wang. About the CMBI's IPO for recent years, we are actually having a larger share, increasing share of the IPO business in the Hong Kong market and having a high market rank -- you also mentioned that we have done a good job this year. And the main reason behind from the two perspectives. One is that we are having stronger and stronger capacity. CMBI are now strengthening its investment banking team. We are accumulating our experience and quantity will ultimately be proved by the changes in our quality. And secondly is the coordinated development within the CMB Group -- the CMB itself. We always emphasis on promoting the coordinated and synergetic development among different entities within our system. And for clients that is going to be listed in the Hong Kong market under this backdrop. CMBI closely cooperate with our domestic branches, I believe it is the second factor that contributes to our good performance. We are also improving our mechanism, our process that further enhance the efforts of coordination, but also, it is also owing to more and more opportunities arising from companies that is going global. And for the second question, Chairman Miao, will take it. For the second question itself, it actually reflects our core competitiveness for CMB. The integration of investment banking and commercial banking business, we are doing a good job in commercial banking, but we are also good at investment banking business, both Domestic and Overseas markets. CMBI, in IB business, we are doing a good job in IB. IPO, ranking the first in the market. For the first quarter, we still maintain this good momentum. For the past quarter, the Hong Kong the Hong Kong stock market is delivering satisfying performance. And there are larger deals and projects -- more projects of IPO capital market is quite active. The Hong Kong International Financial markets still ranked the third in the Global Financial markets. Unlike some people said, that the position is not stable enough. It's fallen behind, but we are still quite confident that the Hong Kong market is still the hub, the importance -- important financial market around the globe. But for the position itself, we are quite confident. The IPO the issuance is also leading among the globe in Hong Kong market. We have a strong participation in it. We are very proud of it. Well, we could say that, we cannot avoid the influence brought by the geopolitical issue. It is not reflecting. It is not influencing financial industry itself. I'm not just Chairman of the CMB, but also CMG. In CMG, we have strong products. We have marine time transportation. And these sectors are also under strong influence of a geopolitical issue. And for this industry itself, the first thing we need to take into consideration is exactly geopolitical situation. So for us, the strategy itself, our -- we are actually aiming to strengthening our existing overseas branches. And we will have active communication with our regulators and take full consideration of risk issues and to cautiously promote the increment business in our overseas business development. Just like what we have been seeing in the Japan banking industry for 1990s is quite a different case from then, from the Japanese banking industry by then. We will take very cautious consideration of global -- presence of global business operation and maintain our own momentum of development.

Due to our time restriction, we will have the last question. Please have a quite brief and limited question.

Thank you for giving me this opportunity. The last question, I am Dalian Press Journalist [ph]. I have a question for Mr. Wang Liang. I read from your statement in the annual report that we should improve our own capability to make it certain and to cope with the uncertainties arising from the external environment. And how will you cultivate and nurture your own capability? Thank you.

Well, indeed, we see many uncertainties in the external environment. We need to stay firm and walk long. We need to cultivate our own certainty to cope with the uncertainties arising from the external environment. This is a demand coming from our group, a demand coming from our Chairman. So firstly, we need to stick to our own strategy and maintain our strategic determination. We need to adhere to our strategic determination of building a value creation bank. This is our strategic objective. We need to develop to create value for shareholders. In developing our business, we need to hold a long-tourism philosophy. We need to give full play of our strengths of our retail finance systematic strength and dig deeper into the opportunities and potential of retail finance business in the market and to achieve a dynamic and balanced development of the four business segments. China is a market with large potential. We believe these four business segments are connected and dynamically interacting with each other, and they will promote each other as we conduct development of the four of them, this is -- strategically, we need to remain our determination. The second certainty is to enhance our three capabilities is to enhance our wealth management capability that determines how high we can reach. The second is risk management capability as we face a large number of uncertainties, we need to enhance this capability that determines how far we can walk. And the third is to enhance our fintech capability that determines how fast we can go. We continue to increase our capability to meet these three targets to build our certainties from the perspective. And the third perspective is that to build our own certainty is to nurture an excellent team of our talents to let our team be graceful to our client and let our clients be recognizing China Merchants Bank and to cultivate a strong sense of recognition and belonging within our group and let our staff recognize CMB, recognize CMB culture. This is -- this will be our greatest moat of our certainties to face uncertainties in the external environment. No matter how the external environment changes as we maintain good performance in our capability to guarantee we stick to our strategy, we can sell through the cycle and maintain good performance of all businesses and deliver long-term value to our shareholders.

Due to time limit, CMB 2024 result announcement will conclude. For more questions, please contact our IR team or refer to our annual report that is already released in our website. Thank you again. Goodbye.