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Dear analysts, dear investors, good afternoon, and -- secretary to the Board of the Directors. Welcome to attend the financial results announcement for the first quarter of this year. First, please allow me to extend my gratitude for your long-term support and care for our bank. Today, we have with us Vice President, also CFO, Mr. Wu Wei; and also the general manager from the head office, for example, assets and liabilities, credit department, risk department, global markets, asset management center; and also the Board of the Directors' office, and we have the head from this department. In this afternoon, we have just held the meeting for the board from which we approved the first quarter financial announcement. Now let's have the General Manager from the Budgeting and Finance Department, Ms. Lin Zhihong, to brief us about the results for the first quarter, and then we will take your questions. And the session will last approximately 1 hour. Thank you. Now let's have the GM from the Fiscal and Budgeting Department.
We will have 4 parts for the presentation. The first part will be about the performance of the first quarter. In the first quarter, we proactively responded to the changes in the market and also the government policy. We have deepened and accelerated our reform, and we have very good results for the first quarter. First, we served the real economy and increased the customer base. The total assets, RMB 9.2 trillion, up by 2.3% for the customers' loans; pre-provision, RMB 4.7 trillion, up by 2.73% year-to-date. And also, we [ ticked ] our potential for increasing our efficiency. And our net profit was RMB 20.09 billion, up by 3.97%. ROAA and ROAE was 0.88% and 13.23%, respectively. And also, we witnessed an increase for the commission fees for the credit card and also the payment-related commissions. And also, the third part, we witnessed an acceleration for our online and offline businesses. And also, our overseas institutions had witnessed a good growth in terms of the total assets by 7.97%. And in the head office, we have the 6 process centers. The pre-provision profit grew by 3.61%. And for our mobile banking, the customer -- the number of the customers grew by 4.99%. And for -- in terms of the asset quality, we witnessed a double decline for the ratio and the balance for the overdue loan and overdue over 90 days. For example, the balance decreased by RMB 11.49 billion and 15.10% -- RMB 15.10 billion for the overdue loans and overdue over 90 days. And for the capital adequacy ratio and Tier-1 capital adequacy ratio were 14% and 10.74%, respectively, which is a high level. And this is the summary of the balance sheet. We issued interbank CDs. And this is the summary for the statement of the profit or loss. The CD operating income decreased by 10.49%. This was mainly due to the issuance businesses witnessed a decline due to part regulatory reasons and also the constraint in terms of the capital for the insurance subsidiary. So our gross operating income declined by 10.49%. And if we adjust for the insurance businesses, then the operating income for the insurance business declined by RMB 242 million. So if we adjust our insurance, then our cost-to-income ratio was 30.18%. And now we will have a review of our performances. We [ participate in ] the policy of the central government, [ reason ] for deleveraging and destocking. We mainly focus our efforts in cash management, supply chain finance, investment banking and asset custody. Our total customer -- our total corporate deposit was RMB 3.9 trillion, up by 1.9%. Corporate loans was RMB 3.2 trillion, up by 1.61%. And we have some achievements in the supply chain finance and also the personal finance. And we regarded the personal finance as the main venue for transforming our businesses. At the end of the -- this quarter, we see deposits from the retail customers was RMB 1.7 trillion, up by 5.96%, and the retail loans was RMB 1.4 trillion, up by 5.24%. And for the credit card businesses, we see the consumption for the credit card businesses was RMB 705 billion, up by 42.27%. For the FI businesses, we stick to the principle of serving the real economy, and for the interbank businesses, we focused on improving our way to serve the customers. Our securities investment scale was RMB 2.5 trillion, up by 3.96%. And for the [ trinity ] building, meaning the building of the physical outlets, electronic banking and relationship managers, we aimed at reducing our costs and increasing our efficiency by innovation and synergy of the channels. The per capita annualized profit was RMB 0.88 million, up by 6.73%. The per outlet deposit was RMB 213.7 -- sorry, RMB 2.13 billion, up by 2.99%. And the electronic banking, the transaction number was 287 million, up by 13%. And mobile banking, we see more active customers and users. We have more than 46 million users for our mobile banking, and the transaction volume increased by 41%. And for internationalization and comprehensive businesses, for example, the internationalization, we constantly improved our ability to offer cross-market and cross-border businesses. The overseas total assets amounted to RMB 1.04 trillion, up by 7.97%. And for comprehensive banking, the nonsubsidiaries relied on the parent bank, their total assets was RMB 333.14 billion, up by 4.54%. And the next slide will be about the asset quality and the provision, coverage ratio, the allowance. The provision coverage ratio witnessed an increase. The fourth part is about our work in the next step. It's more complicated operating environment for achieve for high-quality growth. For example, we'll increase our efficient customers, increase our core deposit and increase our intermediary businesses income and reducing our risk costs and capital consumption. And we will mainly continue to serve the real economy. We will take out the customers' needs, and also we need to enhance our risk management and guard against the risks and to maintain a good asset quality. And we will also further promote our BoCom Strategy for us to enhance our future and also deepen our reform. Thank you. Now we will have the Q&A. So we welcome your questions.
Analyst from CIBC.
The liberalization for the deposit, the impact on your bank. And what is your strategy for pricing of the deposit and the NIM trend for this year?
I'm the CFO. I will answer your question. Recently, the PBOC increased the cap for the pricing of the deposit, the range. Main consideration is that we need to further accelerate the liberalization of the deposit rates. So for banks, or be prudent in using this policy in terms of the pricing of the deposit or stable -- or keeping stable pricing. So we allow ourselves with the market and also the regulatory in terms of the pricing for deposit. And looking forward, we will witness a decline for the deposit for the liability of costs. For the first quarter compared to the same period of last year, we see good momentum. But the NIM decreased a little. And -- but the deposit stabilized. So compared to the previous year, we see a stabilized deposit base. We hope that we'll increase the efficient customers as we increase our deposit base as to reduce the cost of the liabilities.
From Shenwan Hongyuan Securities.
Watching the new policies for the asset management policy, so it will be effective starting from May. So what will be the impact on your good bank, actually, the on-balance sheet nonstandardized credit assets? And what will be your pressure in terms of the noncredit assets?
I'm from the asset management center. Our new policy starting from the previous year, we are participating in the draft and discussion of the new policy. We believe that we have learned the experience of the international peers and international regulators. And for the asset management of the bank's securities and insurance companies, they will have a uniform room. For the bank's asset management and businesses in the short term will witness a restructuring pressure. And this pressure is already being felt starting from last year with a decline in growth rate for the asset management businesses. And this can reflect the future trend. And in the long run, we think the asset management policy, after becoming effective, will be conducive for the sound development of the bank's asset management businesses. Starting from the last year, our asset management center in terms of the product line and also cultivation of the customers and also our capability in the IT system and also the researchers and consultant will be active in the discussion of the regulator. And also, we are well prepared for the IT system and the new product line. So we have already laid a solid foundation for the new policy to become effective. So we responded to the regulator's requirement, for example, reducing the nonstandardized assets. And we are also marching towards the way that is supported by the regulator. For example, we have increased our human resources to, for example, the [indiscernible] product. So we are fully confident that we will be -- have a smooth transition and so that we can have a sound development for our bank's, as I mentioned, businesses. And second question about the nonstandardized asset, this is the key problem that we need to reduce the nonstandardized asset, which is the direction of the regulator. At present, the nonstandardized proportion is around 10%, and the regulator's requirement is -- cap is 35%. So we can see that we still have a very small proportion. So we have a -- we can say we have a very sound structure for the standardized and nonstandardized asset. So the pressure for us to switch to standardized asset will not be that huge. And from last year, we increased our investment to the standardized asset. So we are following the trend of the requirement from the regulator. So compared to the peers, we feel smaller pressure.
From Bank of China International.
We see in the first quarter the ROE had an increase year-on-year. Is it the impact of the implementation of the IFRS 9? So do you think -- for the whole year, do you think the ROE will increase?
From the whole year, we can maintain the level we have achieved of the quarter 1. We had some calculation adjusted for the impact of the IFRS 9. We still have an increase. So for the following quarters, we will still maintain our stability of the profitability so that our ROE will be maintained at a sound level.
That was Mr. Wu Wei, CFO and Vice President of the bank. Mr. [ Joe Hanna ] from [ Swiss Bank ].
Probably my question has been asked by other peers. So I would like the management to further clarify on the net interest margin, which had fall quite significantly on quarter-by-quarter basis. Could you elaborate a little bit on the reason and your outlook for the net interest income for the whole year? And as you mentioned that the NIM has dropped by 11 basis points compared with the past year, however, as you -- this is quite different with the number you released in 2017. Is there any reasons about the methodology?
The NIM in the first quarter is 1.4%, 11 point basis drop. In -- then last year, this dropped by [indiscernible] basis points. So if you're looking from this perspective, the NIM has come relatively stabilized. Another from an absolute term, in terms of asset allocation that local government bond and the Treasury bond take a quite large proportion of the total assets. So if you overlook the taxes and exemption of this part, our NIM was still at a quite good level. There are also -- there are some positive elements on our NIM as the macro policy was quite stable. Secondly, the PBOC has recently cut our ratio, which is very beneficial for the liquidity and stabilization of reliability and to the -- drop our liability costs. So from an external and internal perspective and from the requirement on further contraction on our liability, we expect our NIM to be kept at a stable level and slightly increase over the year -- full year.
That was Ms. Lin, the General Manager of Budget and Finance Department.
So there was -- the NIM is up. If you overlook the tax exemption, the NIM is 1.56%. If you could tell the number of 2017 NIM, if you overlook the tax exemption, it was around 1.6% or 1.7%. So if -- actually, if you see that -- the tax was quite low if you invest in the Treasury bond or local government bond. So looking into the future, are you still looking to enlarge a proportion of the local and the Treasury bond in your whole asset portfolio?
The investment in the local government bond and the Treasury bond is quite in line with the requirement to support the real economy and local economy because the real -- because the main financing tools for the local government is issuing the local government bond. So we still have to support this kind of activity. As being high liquid assets, the Treasury bond and local government bond is very beneficial to enhance our liquidity and also consume less capital. It's a very ideal asset class for us. In the future, we still keep it at a reasonable proportion, although -- and there is also -- the tax on the investment will also -- just a slight drop.
From Huatai Security.
I'm Chen Shujin from Huatai Securities. Firstly, I would like to ask -- further ask on the NIM. In the first quarter, the deposit has recovered a little -- the growth of deposit has recovered in the first quarter. On an average level, what is the growth of deposits? And amount of deposits, I have noticed that the bank had planned to allocate more term deposit. And I would like to understand the proportion of structured deposits of total deposit. And looking to the cost of the deposit, whether it has been improved compared with the first quarter. Secondly is about the commission and fee income, which has dropped slightly in the first quarter, although this is in line with the industry -- it's quite common among the sector. So looking into the future, will these be improved? And another one is about asset quality. I have noticed that nonperforming loan ratio is quite stable. I want to understand the level of the overdue loans over 90 days or within 90 days, whether they have been kept stable. The next question is about the foreign shareholders of financial institutions, where we have noticed that HSBC has -- is holding quite a large proportion of the [indiscernible] shares and due to the reasons [ relaxed ] on the shareholding. Will HSBC enlarge their stake?
Ms. Lin will take your question about the NIM.
The question is about the average growth of our deposits. I will give you a figure after I found the number.
The second question about risk, the commission and fee income. I'm from the asset and liability department. In the first quarter the deposit grew -- growth was quite stable. At the real time, it grew around 3%. And the daily average is also -- kept quite reasonable growth. And this is growth level between the top 4 banks and other smaller shareholding banks. From the structure perspective, the time deposit and the term deposit all dropped and all are showing a drop in trend, especially on the corporate deposits. The whole banking sector has seen a negative growth from the corporate deposits with destabilization of interest rates. All of the commercial banks are -- have issued a structured deposit, and we are in line with the banking sector. And about the commission fee income, the growth of the commission and fee income in the first quarter, we have faced quite a little bit of stress. However, if you look at our peers, they are commonly facing pressures on commission fees as well. However, we do notice the quite good growth from our credit card -- from our card business and also our custodian business. So in general, we are quite confident to keep our commission and fee income at a stable -- to keep a stable growth of our commission and fee income. The average balance of our deposits is RMB 5.6 trillion. RMB 240 billion is growth compared with the past year.
And then a question about structure deposit.
In the third -- in the first quarter, the structured deposit was quite flat because we are designing our structured deposit product, and we'll start to issue the structured deposit products in the second quarter.
So the question -- next question is about asset quality. I'm [ Shou Lonjin ] from risk management department. From the first quarter, the overdue loan grew by RMB 2.9 trillion -- RMB 2.9 billion. And the NPL ratio was flat. The overdue loans over 90 days and overdue loans all dropped. The overdue loans over 90 days was RMB 61.7 billion. And the overdue loans over 90 days and overdue loans have all dropped, as you have noticed that overdue loans over 90 days is smaller than overdue loans. The next question is about cooperation with HSBC, which is very good. We have kept -- maintained a very close relationship with HSBC, which is strategic. So as -- with the regulatory adjustments, foreign institutions can take larger proportion of financial institutions. However, HSBC did not give very clear intention on that. And we will release to the market if HSBC has come to any -- made any decision. And we have also no intention to have -- to conduct an equity finance.
Investors Security.
I have 2 questions. First is about IFRS 9, and which was -- the impact of which is not very sufficiently released by most banks. And we have noticed that ROA has increased quite a bit. And I want to understand how much of this increase are due to the IFRS 9. And we have noticed that the deposit -- some of the deposits has been allocated to the noncredit field. And in the first quarter, we have noticed that the bank has been quite slow in terms of credit allocation. And is this because of declining of the whole year? Or because we have a quite smaller credit quota?
For IFRS 9, the difference is because on the provisioning method, the change is -- we have to be covered more on the expected loss basis. From this perspective, our provision has increased around RMB 330 billion. If you -- so if we have to comply with the new regulations, we have to be prepared. And right now, our provision coverage ratio is 165%. About the credit extension, in the first quarter, in general, our credit and deposit growth was all around 3%. Looking into the whole year, the first quarter has shown quite fast credit growth. In the whole year, we expect our credits to grow around -- at around 7%. And this is in line with the arrangement by the PBOC. But what I want to clarify, our provision and their provision policy had been subject to quite a little bit adjustment. However, we are not aiming at a very high provision coverage ratio because according to international and Chinese regulatory requirement, the provision -- we arrange our provision to -- according to our asset quality. We do not have a preset provision coverage ratio. And also, currently, the regulators lowered the requirement on provision coverage ratio, which allows commercial banks in China to form a risk appetite that is more in line with their own operation characteristics. So we adjust our provision on our asset quality and our operation condition. That is what I would like to clarify.
Further question on IFRS 9, which has -- I would like to understand its impact on the net asset -- on our equity, which is relatively larger compared with other banks. I would like to understand your provision plan in 2017, whether you will have an increase compared with 2017.
And our equity is quite -- or the impact on equity is smaller compared with others. However, the impact on our equity will be around 3%. And there are some reason for this. Firstly, for the corporate loans, the corporate loan take up a higher proportion of our loan book compared with our peers. And secondly, while we are doing the adjustment for IFRS 9, we are more prudent on the modeling and testing. So we have done a very thorough work. Personally, I think it's beneficial for the bank to estimate our asset quality and to recognize nonperforming loans. And I think after the adjustment, we think the demand for the provision is quite flat and will show a slight increase. And I think that's the general situation.
I would like to understand the cost-to-income ratio. In the first quarter, the cost-to-income ratio increased slightly compared with the past year. I think there are many reasons for this. Looking into 2018, what is your plan on cost-to-income ratio?
In 2018, the cost-to-income ratio, the first quarter increased by 4%. There are 2 reasons. Firstly, there is a little bit change and subject to regulatory constraints about BoCommLife. And there are some business constraint from the regulatory change. After we -- in the past, we calculate our cost-to-income ratio on a gross basis. However, on a netted basis, we could -- our cost-to-income ratio increased by 2 basis points. So half of the reasons is due to change of this part. From the cost perspective, the card business, especially the cost-to-income ratio on card business is quite high. In history, the card business, the cost-to-income ratio on card business is 35%. And in the first quarter in 2018, the noninterest income from the card business is quite good. And the total spending on the card has exceeded the total spending volume of Bank of -- ICBC and China Construction Bank. Looking to the 2018. So looking in the future after our -- we will still increase our investment in IT and human resource. And as our -- we have seen a lot of development in our online business. We continue to contract our physical outlet. And this has released quite a little bit of room for our -- for us to continue to make an investment in the IT system, which are solid foundation for future business.
I will have a question about the capital adequacy ratio. We see the impact of the IFRS, a negative impact, but for CAR, Tier 1 CAR has been stabilized and has been standing at a stabilized level. So for the 3-year forward, do you have a plan for a specific number, for example, Tier 1 and total capital adequacy ratio? What would be the trend in the 3 years?
We have a release in previous meeting for the Board of the Directors. Tier 1, 8.5%; and the Tier 1, 9.5%; and the total, 10.5%. So the total CAR, 11.5%. This is our plan. And this will be the bottom line.
Now with the -- it is now at 14%. So do you think that the future CAR will be [indiscernible] over 14%? Or you -- we expect the fluctuation?
Well, in the short run, we will be stabilized at the 14% approximately for Tier 1. And common equity Tier 1, it will downward pressure in the short term. We do not have plan for seasoned equity offering. We will announce very immediately a plan for convertible bonds.
Dear analysts, investors, in the first quarter, I will call an end to the Q1 results announcement. Thank you again for the participation. And welcome, our analysts and all friends, we'll have more opportunity to [indiscernible]. The day after tomorrow will be [indiscernible] the May 1 holiday. I hope you will enjoy the holiday.