China Construction Bank (OTC:CICHF) (CCB) has reported a modest increase in net profit and total assets in its third-quarter earnings call for 2024. The bank saw its net profit rise by 0.7% year-on-year to ¥257.1 billion, with total assets reaching ¥40.9 trillion, marking a 6.87% increase from the previous year.
The bank's net interest margin (NIM) is currently at 1.52%, reflecting the economic conditions and interest rate pressures. CCB's Vice President Li Jianjiang highlighted the bank's commitment to high-quality development and support of the real economy, with a focus on green finance and financial inclusion.
Key Takeaways
- CCB's total assets increased to ¥40.9 trillion, up by 6.87%.
- Net profit for the first three quarters reached ¥257.1 billion, a 0.7% year-on-year increase.
- The bank's non-performing loan (NPL) ratio remained stable at 1.35%.
- Green finance loans increased by 17.95% to ¥4.5 trillion.
- Financial inclusion loans stood at ¥3.9 trillion, with a significant portion for agricultural clients.
- Digital finance initiatives saw a 15.98% increase in loans, totaling over ¥750 billion.
- CCB plans to maintain stable profit levels and support the real economy amid an improving economic environment.
Company Outlook
- CCB aims to enhance its credit structure and support emerging sectors.
- Management is optimistic about the bank's long-term sustainable development and profitability.
- The bank is preparing for increased core tier 1 capital requirements by 2028.
Bearish Highlights
- The net interest margin is facing continued pressure due to economic conditions.
- Mortgage rate adjustments following PBOC announcements could impact ¥120 billion in loans.
Bullish Highlights
- The cost-income ratio remains strong at 25.25%, outperforming peers.
- China's positive economic outlook is supported by government measures, including interest rate cuts and fiscal support.
- Total deposits reached ¥28.7 trillion, with personal deposits growing by 8.5%.
Misses
- Despite a stable NPL ratio, CCB faces challenges in the real estate sector.
- There is a shift towards non-bank deposits, although CCB managed to maintain overall deposit growth.
Q&A Highlights
- Executives discussed strategies to support the real economy through inclusive and green finance.
- CCB is focusing on high-quality development and efficient capital management.
- The bank reported a 226% increase in non-interest income, driven by forex operations and equity investments.
China Construction Bank (ticker: CCB), one of the leading banks in the country, has demonstrated a commitment to both growth and sustainability in its latest earnings call.
The bank's stable asset growth and prudent risk management have positioned it well in the face of economic uncertainties. With a strategic focus on green and inclusive finance, CCB is aligning itself with broader economic and environmental goals, while also preparing to meet future regulatory capital requirements.
The bank's efforts to support the housing market and its coordinated approach to financing underscore its role in the broader economic landscape. As CCB continues to navigate the shifting financial terrain, its emphasis on high-quality development and robust financial operations remains central to its outlook.
InvestingPro Insights
China Construction Bank's (CICHY) recent performance aligns with several key metrics and insights from InvestingPro. The bank's modest profit increase and asset growth are reflected in its current market valuation and financial ratios.
According to InvestingPro Data, CICHY has a market capitalization of $201.31 billion USD, positioning it as a major player in the global banking sector. The bank's P/E ratio of 4.25 indicates that it's trading at a relatively low earnings multiple, which could be attractive to value investors considering the bank's stable performance and growth in total assets.
One of the most notable InvestingPro Tips is that CICHY "pays a significant dividend to shareholders." This is supported by the impressive dividend yield of 5.95%, which is particularly attractive in the current economic environment. Furthermore, the bank "has maintained dividend payments for 19 consecutive years," demonstrating a strong commitment to shareholder returns that aligns with its reported stable financial position.
The bank's focus on green finance and financial inclusion, as mentioned in the earnings call, is reflected in its revenue figures. InvestingPro Data shows that CICHY's revenue for the last twelve months as of Q3 2024 was $88.19 billion USD. While there was a slight revenue decline of 1.25% over this period, the quarterly revenue growth of 1.4% in Q3 2024 suggests a potential turnaround, possibly driven by these strategic initiatives.
CICHY's operating income margin of 65.05% indicates strong operational efficiency, which supports the bank's reported cost-income ratio outperformance mentioned in the earnings call. This efficiency is crucial as the bank navigates economic pressures and prepares for increased capital requirements.
The InvestingPro Tip noting that CICHY is "trading near 52-week high" is corroborated by the significant price returns over various timeframes. The 6-month price total return of 27.06% and the year-to-date return of 42.09% reflect growing investor confidence in the bank's strategy and performance.
For readers interested in a deeper analysis, InvestingPro offers 11 additional tips for CICHY, providing a comprehensive view of the bank's financial health and market position.
Full transcript - China Construction Bank Corp (CICHY) Q3 2024:
Operator: Ladies and gentlemen, welcome to the meeting. Now, let's give the floor to the moderator.
Li Jianjiang: Distinguished investors, analysts, and friends from the media, ladies and gentlemen, good afternoon. Welcome to CCB's Q3 press performance release. Thank you for your attention and support and interest in CCB. Today, we have with us Chief Finance Officer, Mr. Sheng Liurong; Board Office Asset and Liability Management Department, Finance and Accounting Department, Asset and Liability Management Department, Credit Risk Management Department, Corporate Finance Department, Financial Inclusion Department, Personal Finance Department, Housing Finance Department, Credit Card Center, Financial Market Department, Group Asset Management Department, Fintech Department, Corporate and Cultural Development. I'm Li Jianjiang, Vice President of CCB. Just now, we've announced our Q3 results. I'd like to briefly report to you the performance. CCB has been insisting on President Xi Jinping's philosophy and to implement the requirements and arrangement of the central government and further fulfill our responsibility as a large bank. We also aim at developing high-quality development and also fully serve the real economy and to seek high-quality development. By the end of the third quarter of 2024, the total assets stood at ¥40.9 trillion, up by 6.87% from the end of 2023. The loans and advances is around ¥25.7 trillion. In terms of liability, the total liability spread at ¥37.6 trillion, up by 6.9% from the end of last year. The total deposits is around ¥228.5 trillion. For the first three quarters, our net profit stood at ¥257.1 billion, up by 0.7% year-on-year. The average ROA is around 0.87%, ROE 11.03%, MPL ratio stood at 1.35%, slightly down. That is 0.02% compared with the end of last year. The PCR stood at 237.03%, PTL or provision to loan ratio, 3.2%. Since this year, we have also been making progress in serving the real economy and to better serve the people. We have strengthened our investment to further promote the high-quality development of the economy. At the end of the third quarter, the corporate loan stood at ¥14.6 trillion, personal loan ¥8.4 trillion. We will focus on the financial services for priority areas to support to modernize the infrastructure development, and also in transportation, inventory, et cetera. Also, including manufacturing, the mid-to-long-term support for manufacturing industries, also, to support the priority strategies of the central government and to focus on the main areas, like the greater Bay Area et cetera, to support the development. This year, we have been also trying to do a better job in the five priorities of the financial sector. We built the financial service system to develop a lot of integrated financial solutions to support financial and innovative enterprises, especially offering them differentiated solutions. At the end of the third quarter, for strategic new emerging industries, the loans extended ¥2.4 trillion. These have actually achieved rapid growth. In terms of green finance, we saw the different green finance development to promote economic and social development, especially in a green manner. At the end of the third quarter, the green finance loan is around ¥4.5 trillion, up by 17.95%. For our own proprietary bond investment, especially to green finance, it has also made great achievements. For ESG rating, our rating is much higher than the market tiers. For financial inclusion, we focus on micro and small enterprises to better serve the agri-related customers, focusing their needs and demands to better serve those clients. By the end of the third quarter, financial inclusive loans is around ¥3.9 trillion. Agri-related is ¥3.35 trillion. In terms of pension finance, we have strong support for the pension industry, offer differentiated solutions thus to implement the national strategies on this part. We guide our credit resources to the pension-related industries to better promote the pension finance and also the pension services to create the pension-related ecology. In terms of digital finance, we continuously promote the mobile phone-related development, the digitalized development of our services. For example, we have the Star APP, and we're also trying to support the digital economy. For Q3, the total loan stood at over ¥750 billion, up by 15.98%. Since this year, we've continuously strengthened the granularized management at the group level. We stick to the commercialized and sustainable development of the bank to continuously improve the digital transformation of the bank and to enhance the granularized management of the group. We've also strengthened the asset and liability management, and we established the enterprise-level fund to offer integrated financial services. In terms of the business management and in terms of the net interest income, it is better than our peers. In terms of fee structure, we've also optimized the fee structure. We've increased the cost-to-income ratio that stood at 25.25%. We've also strengthened the intensive capital management to continuously improve the capital efficiency and to guide capital or resources to the asset-light and high-return industries. The current ratio stood at 19.35%, to provide a very solid foundation to serve the real economy. Also, we continuously put to strengthen the fintech development to actually allocate our fintech resources to satisfy the customer's needs and also strengthen the risk prevention and structure. And also to strengthen the digital asset management, optimize the service solutions to our customers to improve the efficiency and the customer experience. Since this year, we've also been trying to enhance the comprehensive risk management and stick to the concept of risk prevention as the priority and uphold the principle of stability, prudence, and comprehensive risk management to establish a comprehensive, active, proactive, and intelligent modern risk management system. To strengthen the active management of asset quality, we have dissolved the risk in certain key areas and to strengthen the IT risk management, and ESG-related risk, as well as other new emerging risks. By the end of the third quarter, the NPL ratio is around 1.35%, maintaining stable asset quality. Currently, the global economy momentum is a little bit weak, with major economies exhibiting different or divergent performances. For example, like in US and developed economies, their interest rate is positive in a downward cycle. To guard against risk in key areas, we have made achievements in this aspect. Also, we have promoted high-quality development, so as to provide very good conditions for the sound development of banking sector. Going forward, CCB will continue to promote high-quality development to continuously strengthen the risk awareness, comprehensive awareness, customer-centered awareness, et cetera. We will also try to stick to innovation to focus on our main businesses and will shoulder our responsibility of the financial sector to improve people's well-being. We'll take real actions to continuously bring return to our stakeholders and also the shareholders. Thank you.
Operator: Now, we're entering into the Q&A session. In order to enable more investors, analysts to have opportunities to ask questions, I suggest you limit yourself to one question and identify yourself before asking questions. Thank you. Ladies and gentlemen, we're now into the Q&A session. [Operator Instructions] The first question is from J.P. Morgan. Thank you.
Li Jianjiang: Can you hear me?
Yun Li: Yes, we can.
Li Jianjiang: Thank you.
Yun Li: Thank you for this opportunity to be the first one to raise the question. I would like to know the profitability of the first three quarters, any changes to the first-half of the year? So, how can we view the performance for the first three quarters?
Li Jianjiang: For this question, I would like to invite Mr. Sheng to answer the question.
Sheng Liurong: Thank you. Thank you for your question. And also, I'd like to welcome all the analysts and investors for joining us at the meeting because it's actually not the working hours right now. So, thank you for your time. Thank you for Madam Li's question. Since 2024, in accordance with the central government work arrangements, we focus on high-quality development as our first priority. Especially, we focus on our main businesses to serve the high-quality development of the real economy. During the process, we've also realized the benign development of ourselves. So, we have maintained a stable operation. The net profit has increased by 0.65%. The key financial indicators have also been quite good, for ROAs, 0.87%, ROE 11.03%. According to our knowledge, we are in a leading position among our peers. So, generally speaking, in terms of operating performance, there are several features. Let's look at the revenue and the cost. There are four features. The first one is the net interest income maintained stable. The NIM's job has been narrowed down. So, firstly, we have been strengthening serving the real economy and unleashed resources in multiple channels. For the first of three quarters, the earning interest rates have been up by 0.81%. You can also see that actually, for the total asset, it grew by around 6.8%. The interest earning assets actually grew by 8.1%. That's higher than the total asset growth rate. For loans and bonds, all these assets, they have actually accounted for a large share. So, for the first three quarters, the loans and bonds investment, the percentage has been up by 0.92% points. We're also trying to expand the value loans and control the cost of our capital. Thirdly, we've tried to enhance the refined management of the loan pricing. For the first three quarters, the NIM was 1.52%. We're still ranking among the top among our peers. So, compared with that of last year, NIM has been narrowing down, has been decreasing. We can also see that for a lot of the loans, there has been a lot of decreasing in terms of the interest of the loans. And then, in terms of serving the comprehensive services of the customers, the non-interest income has been decreasing. We can see that for the total banking sector, the fee and commission of the banking sector has been dropping. Also, we can see this is true for the whole industry. For the fee shrinkage, the shrinkage market is now down and we have been deeply rooted in building the scenarios. For example, for credit cards, a very important source of income, credit cards and key products have kept a steady growth. For non-interest income, had year-on-year increase of ¥19 billion, that is because RMB forex has been adjusted back. So, forex gains and losses have been affected. We have also enhanced securities investments. At the same time, for our subsidiaries, there are some equity assets. Mainly, the market fluctuations have affected the fluctuations of assets so income increased. Third characteristic is cost management has been quite effective. Cost income ratio is leading versus our peers. We have a comprehensive cost management to increase the output-to-input ratio and we have also kept very good in refined management of cost. More financial resources are allocated to strategic push of customer account expansion. For the first three quarters, cost income ratio is 25.25% according to international accounting standards. This has been kept at a leading level versus our peers. And fourthly, in terms of the risk and cost control, the risk control has been quite effective and down to earth. We have gotten it very well, the bottom line of risks. VP Zhihong has mentioned NPL ratio is 1.35%, a decline of 0.02% points compared with the end of last year. And PCR has kept a very high percentage and assets liability ratio has kept very good sustainability. You also asked about the outlook for the whole year. We can say that China's economy is faring well and turning for the better with more and more favorable factors. You have paid attention. I'm sure that since September the 24th to promote high-quality economic development, macroeconomic policy regulation has been enhanced. Different departments of the government has released a series of measures including for monetary policies, RR and interest rates were cut. And for fiscal policy, debt limits have been raised and special bonds have been issued. Support was given to key areas to help local governments to alleviate their debt level. And for the real estate sector, there have also been favorable policies. There are also favorable policies for the stock market, unprecedented favorable policies. Therefore, if you look at the October situation, since the launch of this series of measures, as you know, capital market began to rally. We can see for real estate sector the transaction volume began to rally too including some agency business. For example, agency insurance, agency fund. Transaction volume has begun to rally and pick up. So, taken as a whole, market expectations are turning for the better. And the operating environment is also gradually turning for the better. Going forward, we'll center around high-quality development, lay a solid foundation for long-term sustainable development and seize opportunities to have better results for the key priority areas. It is estimated the whole-year profit level can be kept at a stable level. Thank you for your question.
Li Jianjiang: Next, Xinhua News Agency, China Economic Information Daily, [indiscernible], please.
Unidentified Analyst: Thank you. I have a question on loan disbursement and pricing. As we all know, currently, the loan growth rate has been slowing down. So, my question is, for 2024 credit plan of CCB, how is the progress of implementation? Disperse to which areas and pricing level of Q3? What is the level and what is your outlook for Q4 and also the credit amount of 2025? Thank you.
Li Jianjiang: Thank you for the question from the journalist of Xinhua News Agency. I will respond to this question. At present, domestic economic, new and old growth drivers are switching and the structural adjustment is going deeper. Loan growth rate has been slowing down for the whole society. CCB has kept its support for real economy. We are the main force for serving the real economy and the balance for maintaining financial stability. For the first three quarters, we dispersed loans and advancements increased by ¥1.9 trillion compared with the beginning of the year, higher than the average level of the whole industry. And we are also consolidating the leading position in retail sector. Volume and price are balanced for personal loans and inclusive finance loans. Balance reached respectively, about ¥8.7 trillion and ¥3.29 trillion. Both kept a leading position compared with peers. For the first three quarters, personal housing loans and inclusive finance loans, disbursement has been leading in the industry. Personal consumer loans, incremental part also leading in the industry. The profit level is also kept at quite a good level compared with peers. For corporate loans, corporate loans have been growing rapidly. For key areas share, the percentage is increasing. First, we supported the economic application transformation. Green manufacturing center and the sci-tech innovation sectors share of loans have been increasing. We have been supporting the green and low carbon transformation of society. Green finance, green credit balance is ¥4.58 trillion, an increase of 17.95%. This is to support and for application and transformation and manufacturing center, more than ¥3 trillion. This has effectively improved the sci-tech innovation enterprises, ¥2.74 trillion for sci-tech enterprises loans. For tech enterprises, balance is ¥1.94 trillion yuan. Second, we have also been consolidating traditional growth drivers credit for infrastructure-related industries, electricity and heating sectors, loans, growth rate more than double digit. For other sectors of infrastructure and growth margin, it is kept flat compared with last year. We are also ensuring the delivery of housing for people. We are working on the three major projects in real estate sector and for real estate loans, incremental part basically kept flat compared with last year. Going forward, our country is pushing forward economic application and transformation with a lot of favorable policies, which are playing out with good effect. Mr. Sheng has talked about that. So, the series of new policies with a blockbuster effect means the national economy will continue to turn for the better. This means loan demand will continue to rally. CCB will fully tap the effective credit demand and convert reserve projects to real growth so that credit will have a balanced growth and orderly dispersed. Also, promote retail credit projects and consolidate traditional advantages of real estate and keep the steady growth of personal consumer loans and tap the potentials of self-employed individuals, MSE, merchants and farmers. We also strengthened the financial support for vulnerable sectors of the real economy and continue to work hard on the five major initiatives and strengthen the support for strategic and emerging industries, tech finance, green finance, inclusive finance, pension finance and digital finance. You mentioned the Q3 newly disposed loan suppressing. At present, since LPI is lowered and personal housing loans lower limit is eliminated and competition is fierce in the market, for weighted interest rate of corporate and personal loans still at historical low, at the lower level. This is true in the whole industry while supporting the real economy in order to increase the income level and keep the order of the market. We will adjust the credit structure and enhance our capability to have differentiated pricing with quite good results. In Q3 2024, CCB newly disposed corporate loans, inclusive finance loans, personal consumer loans and corporate business loans, interest rates of these loans have kept at the leading level versus peers. We have been keeping the pricing advantages. That's all for my response to your question. Thank you for your question again.
Operator: Next question, Citibank, Zhang Zhuojia, please. Thank you.
Zhang Zhuojia: Thank you, Senior Management, for this opportunity to raise a question. I'm analyst Zhang Zhuojia from Citibank. Senior Management Team, I have a question. On September 24th at the State Council Information Office news conference, Central Bank said it will cut RR and interest rates and this is having neutral impact on interest rate. What is CCB's estimate of the overall trend of next year?
Li Jianjiang: I would like to ask Assets and Liabilities Department to answer the question.
Unidentified Company Representative: Thank you for your question. In terms of the policy impact, LPR is lowered and also cut of interest rate for housing mortgage loans and cut of interest rate of the interest bearing assets of the bank. The RR cut can release low cost available stable funds and the deposit rate synchronous cut can also help banks to offset assets lowering of income. About the overestimated number, the impact at this moment is neutral, but in terms of the repricing of loans and deposits, the cycles are different. So, in the short-term, for the liabilities products, the impact is limited and NIM of banking sector will continue to be under pressure. About the NIM trend for the first three quarters of this year, CCB's NIM is 1.52%. CCB continued to keep a leading position compared with peers. Since LPR was lowered and the loans are being repriced and the effect is to be played out and the existing housing interest rate is also lowered down. Therefore, deposits will be more long-term deposits and switch to wealth management products. Therefore, in 2025, NIM will still be under pressure. In light of such complex operating environment, in light of the market interest rate, changes will make adjustments and optimization of assets liability structure, product structure, regional structure and term structure and customer structure. In the first three quarters of this year, CCB's loans, securities, interest-bearing assets percentage is further increased for high-cost liabilities are kept at a reasonable level. NIM's indicator of this year will enjoy a very solid foundation for good bearing and going forward, we will work hard from the following four perspectives to improve NIM so that 2025 NIM can continue to be kept at a leading level compared with peers. First, we will optimize assets allocation to promote assets ROA to further increase while increasing high-yield assets in light of the market environment and our strategic goals. We will appropriately reduce low-marginal yield assets allocation to increase the profitability of the overall assets portfolio. Second, we will also enhance our liabilities management capability so that the liabilities cost can be driven down steadily. Digitalized, differentiated, refined deposit management structure can be realized so that we can increase the customer viscosity so that settlement funds can be increased. At the same time, we will guide and control high-cost deposits percentage so that term deposits and long-term deposits impact will be reduced. And third, we will also have segmented management of peers, customers through optimizing the assets and liability structure so that inter-peer deposits, financial securities can be used while ensuring stability of the peers' loans. We can also more proactively manage the liabilities and have a more diversified liability structure. Fourthly, we will also continue to optimize the pricing strategy by establishing disciplinary mechanisms so that while the interest rate is kept at a good level compared with peers, we can maintain the assets overall return level and stability of the asset return. Thank you.
Operator: Next, from CITIC Securities. Thank you.
Unidentified Analyst: Thank you. Thank you for the opportunity. I'd like to ask the Senior Management, have you observed that in the policies responding to insurance market, our agency insurance and agency fund business have actually experienced some growth? I would like to know what's your future plan for wealth management business?
Li Jianjiang: Personal finance department, please.
Unidentified Company Representative: Thank you. Thank you for your question. For the bank insurance business, we have this new legislature policy for consistency with submission and implementation. We can see that the total volume has been driven down. But actually, for the long time, it's good for the high-quality development of our insurance industry. Recently, due to the unleash of a rack of policies like monetary and fiscal policies, the risk preference of customers have been increasing. The capital market is turning for the better. Since the quarter of 2024, the agency business of CCB – the decline has been improved. The growth rate has been narrowed down in terms of the slowdown. In terms of agency, fund business and insurance business, our market share as compared with the Q2 has been improved. Going forward, we'll continue to strengthen or stick to the philosophy of strengthening wealth management business and leverage our specialized team for wealth management to better serve the customer and use better asset allocation strategies to serve the customer. Also, we will strengthen to improve the asset allocation for customers and to improve customer experience and create values for them and promote the asset value to be increased and preserved. In terms of agency insurance business, we've been actively adept to the new environment of assumed interest rate to enter into the 2.5% environment. We further promote insurance products to transition from the fixed interest rate plus floating interest rate products. We will make insurance products for customers to resist financial risks and to better satisfy customers' need for pension and old age care. In terms of agency fund business, we'll try to expand the AOU of the fund business and to grasp the market opportunities and optimize the strategies and stick to the equity plus fixed income products to better supply more products and to enrich our product shelf. Also, we'll focus on fixed-income products, monetary and technology-related products to actually establish a CCB brand to improve our professionalism in serving the customer. Thank you.
Operator: [Operator Instructions] Now, Huatai Securities, [indiscernible], please.
Unidentified Analyst: Thank you. Thank you for this opportunity. I would like to ask about the question concerning deposit because we can see that there has been a rally on the Asian market. I would like to know if you have noticed that actually the customer for such business are increasing and what are the impacts for our deposit business? Also, is it that the interest rate for the deposit also dropping?
Li Jianjiang: So, this question goes to the Asset and Liability Management Department.
Unidentified Company Representative: Thank you for your question. Generally speaking, the deposits have grown steadily. By the end of September, the total past deposits is around ¥28.7 trillion. So, we can see the personal loans have grown fast compared with that of last year and it has been increasing by ¥1.28 trillion. That is 8.5% growth. And in terms of the total percentage, it's about 57.6%. For time deposit, term deposit, we can see by the end of September, it has increased ¥959 billion. The percentage has increased by 6% points. It's also in line with the market trend. Also, for the time deposit to move to mid- and long-term, this has been eased. For the above three years' time deposit, compared with that of last year, it has dropped. For the stock market, whether the active stock market will actually divert some of the funds from our deposit, I think, generally speaking, it's limited impact. But customer mentality has changed. We can see that there have been decreasing customer deposits, personal deposits, and increasing non-bank deposits. So, the active capital markets have a limited impact on our general deposit. By the end of September, there are a series of policies from the government. Our general deposit from September 23 to October 11, it has increased by around ¥190 billion. And so, it was slightly higher than that of last year. For CTS (NYSE:CTS), this customer is around ¥992 million. So, with the improvement in the Asian market, a lot of the customers, we can see that there has been net inflow between the bank and the securities. So, we can see that it has reached a peak to around ¥24 million. So, with the A share dropping from its peak, we can see that the net inflow has been dropped to the normal level and the non-bank deposits have grown very drastically from September 23 to October 16. It has increased around ¥600 billion. So, looking at the interest rate changes, the effects have been unleashed. We can see that the interest rate of deposits has also been dropping. Also, we have been trying to develop the system to expand our customers to better introduce the capital with low cost. Also, we have tried to better manage the long maturity loans in order to maintain a very good mix of customer loans to resist the dropping interest rate. So, for RMB personal loan, the interest rate is around 1.61%, a little bit drop from that of last year. That's the lowest since 2019. Thank you.
Operator: Next, China News Agency, [indiscernible], please.
Unidentified Analyst: So, I would like to ask a question that concerns the market. Since the end of September, we will adjust the mortgage rate. So, have you accomplished or completed the rate adjustment? How much do you think it will be downward adjusted? What is the impact, especially with so many housing policies have been rolled out? Thank you.
Li Jianjiang: Housing Finance Department, please.
Unidentified Company Representative: Thank you for the question. For reducing the mortgage rates of existing housing loans, this is a very important measure. We will implement PBOC's announcement and respond to the market-based pricing to promote the downward adjustment for personal mortgages. In October, we've issued the relevant announcement on adjusting downward the mortgage rates. After calculation, eligible loan is around ¥120 billion. After the adjustment, it will ease the customer's difficulties in repaying the loans. Since September 24th to the 30th, we can see that there has been a lot of repayment of customer loans. So, going forward, we may still need to wait and see. Since the September 24th announcement, there has been a lot of policies. In September, the fourth week, the daily processor loans have actually increased. After the National Day holiday, the daily processor loan has also been increased. We'll continue to implement relevant policy to improve customer's service to repay the mortgage loans and to better improve their needs for housing. Thank you.
Operator: Next, [Mary Lynch] (ph), [indiscernible], please.
Unidentified Analyst: Thank you. I would like to ask a question about the investment yield. We know that there's a lot of adjustment to the bond market in response to the policy changes. I would like to know the yield returns on our bond investment and also our future asset allocation strategy.
Li Jianjiang: Financial Market Department, please.
Unidentified Company Representative: Thank you for your question. For bond investment business, it's a very important tool and also a focus area of our asset allocation with active participation to the financial market, supporting the physical policy and to satisfy our own needs. So, this year, the yields have been dropping, generally speaking. After the policies of the Central Bank, we can see that the yields have been rising. A 10-year government bond has actually recovered from 2.4% to 2.6%. So, in terms of bond investment, we maintained the philosophy of stability and soundness and we mainly rely on interest income. We will adjust to the tax-free effects in bond investment. Under the current interest rate environment, we would like to invest in stable instruments with high return. We will also grasp the whole investment amount and will try to ensure the performance. So, the total financial investment increased by 14% going forward. We will continue to follow closely the financial market development to improve our asset allocation to make it more granularized and more proactive through qualitative and quantitative strategies to leverage the maturity, the product types, and even the yield curves, et cetera to optimize the investment structure and to promote bond investment business to maintain a stable and sound manner. Thank you.
Operator: [Operator Instructions] Thank you. Now, let's welcome Financial Times, [indiscernible], please.
Unidentified Analyst: Thank you. I'm from Financial Times. I would like to know the small and medium-sized enterprises, especially the renewal policies of such loans, because we know the optimization required by the renewal policies of the SMEs. I would like to know going forward, how can we actually better balance the renewal of these companies?
Li Jianjiang: Financial Inclusion Department, please.
Unidentified Company Representative: Thank you for your question. On September 24th, the NFRA has issued the renewal requirement for SME loans to improve their operation. Again, such a background, it's better for SMEs and private-owned enterprises and also the cultural households to improve the situation. It also applies to medium-sized enterprises for a period of three years. So, after we get the regulatory requirement, we have been improving credit extension work to increase and optimize the services for SMEs. First of all, we have optimized the modeling light of their characteristics, risk levels, serviceability. We are optimizing our loan service model for SMEs. We are appropriately setting the terms of the loans so that the repayment models of settlement can be diversified. Second, we have enhanced the loan renewal efforts to constantly improve the loan renewal products and functions so that SMEs can avoid the scenario of bridge loans due to inability to repay the loans. For qualified customers, if the loan should be renewed, then we will renew the loan. Thirdly, we have also improved the due diligence exemption mechanism, NPL tolerance, and performance evaluation. Due diligence accountability waiver have been combined so that when the liability should be waivered, it is waivered so that the supply is insured and the price structure is appropriate for the SMEs. We will proceed from serving high-quality development of the economy to deepen the supply-side structural reform and optimize resource allocation so that we can better serve the real economy with an inclusive credit system.
Operator: Next question, GF Securities. Yi Jun, please raise your question now.
Yi Jun: Thank you, Management Team, for the opportunity to raise the question. I'm Yi Jun, banking analyst for GF Securities. CCB assets are kept very well so exposure pressure for real estate sector loans have been alleviated. What will be the future areas that we should pay attention to?
Li Jianjiang: Thank you for the question from the banking analyst of GF Securities. I will respond to this question. CCB has been implementing the decisions and deployments by central government and CPC Central Committee on the real estate sector. We are now fully aware of the current situation and guard the bottom line of risks very well to ensure robust asset quality to support high-quality development. At the end of Q3, the asset quality of CCB has been kept stable, and for key areas, risks are controllable. As was mentioned, NPL ratio of the whole group declined by 2 BPs. If you look at the current situation, we have effective mechanisms and measures to cope with the risks. One thing is we stick to serve high-quality development of the national economy. We deem it as a systematic project to take effective measures to serve the real economy for key areas, key strategies, and the vulnerabilities of key areas. We provide quality financial services so that we can address the problems while developing the loans for inclusive finance, green finance, and sector industries have been stabilizing and turning and increasing. We are also forming synergy for risk control. In light of the new challenges in terms of risks, we will have synergized efforts for different customers and different business lines. They have different characteristics and risk profiles. We have accumulated a series of effective control measures and means. Risk mitigation and NPL resolution quality is also increasing. Overall, asset quality is stable, and key areas of risks are within control. Risk compensation capability is also strong. For corporate business, including real estate sector loans, NPL ratio has followed the trend of declining of Q2, so stabilizing and declining. For personal loans, NPL ratio has also been kept at a good level. Although at present, the economy is faring, it's still facing some problems and challenges, but China's economy is resilient. I'm sure with the playing out of a series of favorable policies, the economy will be rallying, and for the risks of key areas, they will be managed better. We'll continue to keep calm in our management and do a good job in risk determination and adjudication. Therefore, the new challenges will do a good job in risk mitigation to ensure robustness of asset quality and ensure the risks are within control. Thank you for your question.
Operator: Next question. CIC, [Lin Ji] (ph) please.
Unidentified Analyst: Thank you for the opportunity to raise the question. I'm Lin Ji from CIC. The government is planning to increase the core tier 1 capital of large commercial banks. What's the plan of CCB? What is your plan for the uses of the capital? When asset quality is kept stable, will you increase the percentage?
Li Jianjiang: Assets and Liabilities Department, please answer the question.
Unidentified Company Representative: Thank you for the question. For the capital replacement measures, it fully reflects the central government and CBC Central Committee's strong support for state-owned banks. This can boost market confidence and maintain stable operations of the financial system. CCB is actively following up about the specific arrangements of the Minister of Finance for capital replacement, and everything is going orderly. Although for the new capital rules, face-by-face, it has increased the CAR of our bank, but for the capital measurement rules adjustment, the favorable policy is mainly reflected in Q1. While we keep doing a good job for serving the real economy and have reasonable concessional profits, our profitability in terms of the accumulation of endogenous capital, it has been slowing down. The support for macroeconomic policy will result in the stable growth of core assets and endogenous capital accumulation will not be adequate to support the capital consumption. For core tier 1 capital, it is still showing a downward tendency. Since CCB is a G-SIB, at the beginning of 2028, we need to meet the requirement of TLAC phase 2 requirement, no less than 22%. Capital replacement needs to be put on our agenda. CCB will continue to anchor on high-quality development theme, will resolutely promote high-quality and efficient management, and transform the model, structure, and improve the quality to work hard on the five major initiatives and support the development of new quality productive forces while the economy is transforming and will provide strong financial support for that. CCB will continue to stick to the combination of endogenous accumulation of capital and capital replacement from outside so that we can have more high-quality and efficient management of the capital. Especially, we should make full use of the low-utilization level capital so that we can create better value and serve the economy with higher quality and provide capital guarantee so that capital increase will have good return. Currently, CAR and ROA, ROE, among the major state-owned banks, we are having a leading position. We have very high shareholder return. We will continue to work hard in this round of capital replacement. We will strive to have more support after capital is replenished. Our capital position will be further consolidated and enhanced. Our ability to reduce risks and to grow and make profits, the situation will turn for the better. We will continue to monitor the wishes of the shareholders and keep doing a good job at dividend payout ratio to return, to pay back to the trust of shareholders with very good performance and dividend payout.
Operator: [Operator Instructions] Now, the floor is given to 21st Business Herald, Yan Qi, please.
Yan Qi: Thank you, Senior Management Team, for the opportunity to raise the question. My question is for the favorable policy. Replace old ones with new ones, it is also very favorable and total retail sales of September growth rate is more than 3% for credit card consumer loans and other consumer loans. Have you realized the rapid growth NPL ratio has been slightly higher compared in the first-half and how about the second-half of the year?
Li Jianjiang: Now, I would like to invite Credit Card Center to respond to the question.
Unidentified Company Representative: Thank you for the question. We have noticed since the beginning of the year, the government has released policies on consumer goods, replacement of old ones with new ones. From January to September, personal consumer loans newly dispersed more than ¥28.7 billion and monthly disbursement of loans have been stabilizing and turning for the better. That means consumer confidence is increasing in terms of credit card business. In light of the spirit of the central economic work conference, we are promoting this business to benefit the people and drive consumption growth so that we can also drive green finance. We have enhanced the credit circulation and interest-bearing credit extension. By the end of Q3, CCB's credit card loan balance reached ¥1.27 trillion. We are the first bank whose credit card loan balance exceeding ¥1 trillion. Since Q3, credit card loan increase has been on the right track for this quarter compared with the first-half. It has been increasing and market share is also steadily increasing. Going forward, we will continue to focus on key customer groups, key scenarios, and key areas so that online payment deployment and consumer scenarios can be further deployed so that we can work on consumer finance and inclusive finance so that daily consumption, auto loans and housing loans can receive support, including efforts to drive the development of the new energy vehicle so that new energy vehicle sector can be a new highlight of consumer loans. We also continue to expand the scale of credit card loan balance. Thank you.
Li Jianjiang: In terms of the loan asset quality, I would like to add the following points. For personal consumer loans, NPL ratio is kept at a very stable level, although slightly higher than the year beginning, but still at a good level. Credit card and NPL ratio is also better compared with peers. We will stick to high-quality development and seizing policy opportunities so that we can expand domestic demand and expand consumption and keep dispersing loans with higher quality. We also proactively adapt to new challenges and new situations so that asset quality will remain robust. Thank you.
Operator: Next question, Securities Times, [indiscernible]. The floor is yours.
Unidentified Analyst: Thank you. Dear management team, I'm [indiscernible] from Securities Times. We can see banks are conducting bills, increase business with CCB's situation. How do you ensure earmarked funds are used for the earmarked purposes?
Li Jianjiang: Thank you for the question. Up to now, CCB has formulated and released stocks of repo loans for listed companies and the major shareholders of listed companies. We have seen their demand. The users cover stock repo and increase. In order to ensure the implementation of the business, we have organized a business outreach session and training session to expand the policy background, product characteristics, and working requirements. The principle is market-based and law-based. We need to monitor the situation and we are working on it steadily. By the end of October 30, state-owned enterprises and private enterprises, some of them, we have reached agreement with them. Once the procedure is completed, we'll work hard and do a good job at the loan disbursement. In terms of the funding uses in the management measures on stock repo, we specified the procedures and operation requirements. The listed company, which is the applicant and the major shareholders should have separate accounts to be dedicated to the use of repo of shares and increasing the holding of shares. We also start to monitor the management of the loans so that the loans are used for the earmarked purposes and it's a closed-loop operation. Thank you.
Operator: Next question, CITIC Construction Investment. Ms. Li, please.
Unidentified Analyst: Thank you for the opportunity to raise the question. I'm from CITIC Construction Investment. I have a question about the other non-interest income. The CCB performance is very good for the first three quarters. The growth rate is expanding compared with the previous year. What are the main drivers behind this?
Li Jianjiang: Finance and the Accounting Department, please.
Unidentified Company Representative: Thank you. Thank you for your question. Just as you mentioned, for the first three quarters, the non-interest income has been performing quite well. Just now, Mr. Sheng, when talking about profitability, has also mentioned about this. Our non-interest income has actually constituted CCB, the negative growth of profitability. It's a very important driver. For the first three quarters, the total non-interest income is around ¥26 billion up by ¥19.1 billion. So, the increase was 226%. And that's 3% points higher as compared with that of last year. Our analysis are as follows. There are four reasons. The first one is because of the PBOC's forex stability and also forex structure. For the first three quarters, our forex business of CCB has increased by ¥7.2 billion. The second reason is because of the decreasing bond yields and also our increasing investment in unrollable profit-related bond investment. That is actually to say our debt investment and purchase have increased by ¥130 million. Thirdly, because of the capital market easing and also a lot of policies ever since the third quarter, we can see that the stock market rally and equity investment, equity tools, especially our subsidiaries like asset management subsidiaries, their equity investment tools including found investment, the gains from these investments have increased by ¥2.8 billion. Fourthly, because with our business operation, we've actively compressed these structured loans ratio. The interest rate payment for such loans have actually decreased by ¥1.8 billion. That is basically the reason behind the performance of our non-interest income. So, mainly, it's because of our business opportunities. Because if you look at the whole year for CCB, in terms of non-interest income, I think it will maintain such a sound momentum. If you look at the figure at the third quarter, the economy has also been making progress amid stability. And for CCB, we'll follow closely to market development and grasp the market opportunities and strengthen market research. So, in this way, we should reasonably arrange the equity and bound instruments allocation. We'll also try to enhance the management for the fluctuations of the fair values of those instruments that maintain such a good momentum. In the meantime, we will also enhance the stability of our operational stability. Thank you.
Operator: Thank you. Thank you, all the investors, analysts, and media friends. Due to time constraints, our last question, please. The last question from QDS, [Yang Zilin] (ph), please.
Unidentified Analyst: Thank you. Thank you for this opportunity. I would like to ask a question. We know that in the latest press release, the regulator said they will use a lot of policy measures to actually ruminate the urban villages et cetera, and also to further improve the housing finance-related policies. I would like to know, in terms of supporting the housing market, what are the measures will you take? Thank you.
Li Jianjiang: Corporate Finance Department, please.
Unidentified Company Representative: Thank you for your question. On September 26th, the CPC political bureau have actually launched a series of policies enhancing the support for the whitelist company et cetera. Recently, the regulator has also issued several supporting policies. I think that these policies will provide very solid support for the recovery of the housing market. CCB will take the following measures. Firstly, we will implement the work arrangement of the central government and the state council. We will follow and comply with the requirements and promote the coordination of finance for the housing market and to strengthen the extension of loans to the whitelist companies or projects. Also, we'll further balance the business development and guard against risk. We will follow market and law-based principles to treat the housing projects in a balanced manner and equal manner. Secondly, we'll also ensure the work related to whitelist companies or projects. We will promote the coordination mechanism for housing finance. Going forward, we will also follow relevant requirements to implement the compliance of those projects. For projects that should be supported, we should extend loans to them and optimize the loan extension methods or ways to those companies to strengthen the asset or capital management for those projects to better meet the rigid housing needs and also their needs for upgrading apartments et cetera. In response to the question, to what you mentioned, the monetary allocation of around 1 million renovation projects for urban villages or shanty houses, we communicate with the regulator regularly to get to know the specific requirements in this regard. We will also try to study the strategies for the business. We will also work out the specific measures within the bank. On the other hand, we'll also work with the local government to use all these policies to ensure our policy selection and screening and also to help unleash more housing needs to try to promote the housing market to develop in a stable manner. Thank you.
Operator: Since time is up, so much for the Q&A session. Thank you for your time. Just now, the Senior Management and the related department heads have actually shared with you in a very candid and in-depth manner. I hope that this will help you to better understand our strategic measures, our business operation and performance. If you have any other questions, please contact our board office. The performance release conference is over. Thank you and wish you a good day. Thank you.
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