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[Interpreted] Dear investors and analysts friends, good afternoon. Welcome to the first quarter of ICBC earnings call. Thank you for the support to ICBC in the past on behalf of Board of Directors and the General Manager of Corporate Strategy and IR department.
Today, we are joined by ICBC Board Secretary, Mr. Guan Xueqing; and the heads of 14 relevant departments from the head office, such as the General Manager of Credit and Investment Management, the General Manager of the Finance Accounting Department and the General Manager of Assets and Liabilities Management Department.
Before the Q&A session, I would like to introduce the highlights of the first quarter's results. In the first quarter in 2019, ICBC have recorded a solid and a high-quality growth, which can be interpreted in the following effects.
First, a stronger momentum of profit growth. In the first quarter, we reported the PBOC of CNY 161.8 billion, a 12% -- 12.5% growth year-over-year. The net profit was CNY 82.7 billion, a 4.6% growth year-over-year. Secondly, asset quality remains broadly stable across our franchise where the key indicators in these effects, such as the NPL ratio, the gap between overdue loans and NPLs, have continued to improve. The NPL ratio was down by 1 basis point to 1.51%, which registered the decline for 9 consecutive quarters. The gap between overdue loans and NPLs stood at CNY 34 billion, CNY 800 million less than the beginning of this year. Thirdly, we -- more support has been provided to the real economy sector. In the first quarter, the newly domestic RMB loans increased by 491 -- CNY 492.1 billion, increased by [ CNY 159.4 billion ] compared to the same period of last year. The newly incremental loans mainly extended to the key project and the tariffs related with [ people's lives.]
Fourthly, the market competitiveness has further been enhanced. In the first quarter, the customers recorded an increase by 1.17 trillion, which is a record high over past several years. And in the first half, customers increased over 115 million. Fifthly, the first quarter was also a quarter of continued and effective transformation. We have increased the fee-based income by over 11% year-over-year, which is the first time of double-digit growth in the past 3 years. We've also made solid progress in the mega retail, mega asset management, mega investment banking, international operation, diversified operation and the same [ practice we use]. In the future, against the backdrop of increasing complexity in the financing and global economic and financial situation and increasing uncertainties, the momentum of changing for better in China become -- will remain unchanged partly due to continued focus on deepening the supply set structure reform continues to provide more and better services to real economy sector and speed up of transformation for us to maintain and achieve a responsible and a sustainable growth. Thank you. With that, we're happy to take any and all questions. [Operator Instructions] Now the first question, please.
[Operator Instructions]
Yes. This is Anil Agarwal from Morgan Stanley. I just have one question. There has been a change in the chairman where the Bank of China Chairman has moved to ICBC, which is kind of unprecedented. So how should we think about that from the perspective of impacting competitive behavior in China going forward? Why is that happening?
[Interpreted] Thank you for your question, the attention you paid to the Chairman of ICBC. Actually, the -- to nominate Mr. Guan Xueqing to be the Chairman of ICBC and also Executive Director for ICBC has been approved by our Board meeting today. And extraordinary shareholders meeting will be convened on 20 May. When this nomination approved at the extraordinary shareholders meeting, then we will report to CBIRC. After we get approval from CBIRC, the Chairman should -- also, Mr. Guan Xueqing, as ICBC will take effect from then.
Maybe you have already received the resignation of Mr. Guan Xueqing at Bank of China from which he was highly -- he was highly acknowledged. So I also firmly believe that under his guidance, ICBC will strive for a better and a more valuable growth and more responsible growth in the future. In that course, he can lead the Board of Directors and the management by utilizing the dividends brought by China's economic growth as well as the momentum of global market to ensure a better return to our shareholders in the future.
So just now you mentioned the impacts on China banking's competition brought by this change of the China, I think you may answer -- ask that question 3 years later based on his performance.
Thank you for your question. Second question, please.
[ Foreign Language ]
[Interpreted] My question is about the deposit management. The first quarter, ICB reported solid growth in the deposits. Since last -- the second half year last year, the commercial bank has risen its -- the [ rise ] of interest-bearing or interest rate -- interest-bearing rate as on the demand for this. I think this is the reason because [ of innovative ] deposits, right? So my question is that I'm wondering what is ICBC's tactics on the deposit management as well as for the innovative deposits?
[Interpreted] I'd like to ask Mr. [indiscernible] from the asset and liability management department to take your question.
[Interpreted] As we mentioned that, in the first quarter, ICBC reported fully the growth in deposit. I think we have 3 distinctive features in our deposit growth. First is the size is quite large in the total size. Second, structure is quite optimized. And thirdly, we have strong capability in the deposit pricing.
While we have achieved -- seen a coordinated growth in total volume as well as pricing, there is a good tendency in higher digit deposit side, that is the growth of our loans was slower than our deposit growth.
In terms of our deposit mix, we have maintained solid growth in our corporate deposit. And in terms of our savings, the personal deposit, the structure between -- the proportion between time deposit and demand deposit has been quite good.
Firstly, due to the strong capability in deposit pricing, we managed the course of deposit quite good, which have also contributed to the stability and the stable, improved NIM in the first quarter. So the 3 features have [ vastly ] interpreted our tactic in the innovative deposit management. To develop innovative deposit products is -- [ vastly] our management, our coordinated growth of both passive and active deposit management. This also showed our forward-looking capability in utilizing social fund.
While we have taken a proactive perspective in this arrangement and aiming at growth both in the size and the prices, our targets for the innovative deposit product is to achieve a proper and reasonable growth. The proportion of the innovative deposit products is quite more compared to the total borrowing of RMB 20 trillion deposits. This also shows that ICBC is leveraging on our comprehensive strength of check customers rather than use lower price to check customers. And on that, we have now only 3 active liability products, which is the structure deposit, principal guarantee deposit and the large denominated CDs. And all those 3 are our active liability products and mainly for those upon which [ current neutrality. ] So based on the risk management of our interest rate where we will take a comprehensive approach to develop them. Thank you for your question. Third question, please.
[Foreign Language]
I have a question regarding NPL. In 2018, you slightly changed the definition of NPL to 90 days overdue loans, and there's talk about this being changed once again to 60 days. If that would be a -- if that were to become fact, what would the impact be on ICBC? What would it add to credit costs? And what would it cost in terms of profits?
[Interpreted] I'd like to invite Mr. [indiscernible] General Manager of Credit and Investment Management to comment, to answer your question.
[Interpreted] Thank you for your question. Based on the solid economic growth in China as well as in the financial sector in the first two quarters, I think the -- there is the thinking -- there is a type of thinking inclined to stricter management of NPLs. I think there is consideration that overdue loans of 90 days will be transferred to overdue loans of 60 days to NPL, but so far we have not seen any regulatory regulation in this regard.
For ICBC, we have always taken a prudent perspective in the asset quality and classification. For those with real risk, we put them -- we classify them as special mention or NPLs.
For the part with underlying [ engine], we've seen the real risk. Even there is loan overdue of 1 day, we will classify them as NPLs. So if for the regulators requirement in classifying overdue of 90 days to NPLs, we have already done this. And for -- just as I mentioned, even for some parts of the loans result, any overdue, we -- if we've seen the risks, we will classify them as NPLs. So if -- I mean, so if we assume that the regulators will require us to classify overdue loans with over -- of 60 days to the NPLs, I see no impact on our profit or on our NPL management, on our NPL classification, as ICBC has already adopted a much more stricter standards in the NPL management. Besides, we have set aside adequate provision allowance to the capital impairments loss, and we have also adopted some proactive measures in advance in terms of the overdue loans management for the gap between overdue loans and NPLs. So we have already taken into consideration all the stricter standards in NPLs. And last, I would like to emphasize that even if the regulators impose the tightened regulation in this regard, I think it will be more conducive for our large state-owned commercial bank like ICBC because we will have a more favorable credit risk environment externally. So that will also be better for our asset management.
[Foreign Language]
[Foreign Language]
[Interpreted] For your first question, you asked about the lending, the credit extension in -- that [ includes the ] finance and the future arrangement. The second question is, although we're seeing the Chinese economy is changing for better, so we still have concerns for the long-term stability. So I would like to ask a word about your project reserve on the corporate side. And what is the basis -- what is -- or can you give us some color on your residential mortgage in ICBC?
For your first question, I would like to invite the inclusive finance department to take your question.
[Interpreted] In the first quarter, the inclusive trends of ICBC achieved a quite fairly good growth. We increased inclusive finance by CNY 59.2 billion, which is 60% of the yield plan accomplished.
So as to the future arrangement in the next 3 quarters of this year, we will continue to develop inclusive finance as to the plan we made at the beginning of this year. Thank you.
I would like to make some add-ins as to the second half question to the future arrangement of inclusive finance. So our future plan is that we will develop inclusive finance according to the requirement of the market. As long as there is market, there is a requirement [ demand ] of market, we will develop further to inclusive finance in the future. Secondly, we will strive for target and the quality of customers and making efforts to develop quality product and services to our clients. Thirdly, by use of fintech and [ the round of ] credit by experts with expertise, we will achieve growth both in the speed and quality of inclusiveness. There may be concerns for our -- from our investors since the first quarter has rapid -- such a rapid growth offer in inclusive finance. We may take a slower step to develop inclusive finance in the second and third and fourth quarter of this year. The second concern is that we might be not so persistent to our commercial sustainability principle that is not commercially market-based enough. I would like to ask our investors, we assure -- we believe about this concern. I would like to assure that, first, as long as there is market, we'll continue to do inclusive finance. Secondly, our commercial sustainability will remain our guiding principle to do inclusive finance. So your second question touched upon 2 parts. The first is the project finance at a corporate side. Is there any effects to the demand?
For this part, I would like to invite Mr. [indiscernible], Deputy General Manager of Corporate Finance department, to take your question.
[Interpreted] Thank you for your question. Against the backdrop of continued supply side reform and new drivers for economic growth, proactive fiscal policy and demand ] prudent monetary policy as well as Tax cuts, China's economy is changing for better in the first quarter. So against the good backdrop of China's economic growth, we've seen the enterprises in China also maintain the price stable performance and the operation, and we've seen the rise of investment demand in the market also. So correspondingly, we have increased our landing at the corporate side. In the first quarter, the corporate lending -- the lending at the corporate side increased by RMB 340 billion. In terms of the loan structure, we increased the more lending to the infrastructure area, which are countercyclical and which can provide a more solid footing. Along with China's efforts to reoptimizing the economic structure, we also increased more lending to 3 areas, namely happiness industry as well as the manufacturing industry and Internet and the Internet of Things industry. All the lending as above mentioned 3 areas increased by RMB 70 billion. Focusing on the advanced manufacturing of enterprises of 136,000, we also increased our lending to these newly emerging industries by over 23%. In the private sector, we also increased our support and the services to the real economy sector on the market space, legally-based and commercially-based approach. And the lending to the private sector also increased by over CNY 100 billion. We are quite optimistic about future demand in the lending -- in the credit side. So far, we have lending projects. We have signed contracts. We have not extended any credit so far exceeded CNY 118 trillion. So the credit reserve is fairly good, which also paved way for us in the future to manage our projects. I would like invite Mr. [indiscernible] from the Personal Finance department to take your question about the residential mortgage.
[Interpreted] We've seen the demand. Actually, the demand for residential mortgage is closely related with the changes on the real estate market. According to the statistics, in the first quarter, the real estate market in China has maintained a quite stable growth. In the first quarter, the sales of commercial real estate projects exceeded CNY 2.7 trillion, registering a growth rate of 5.6%. Secondly, we've seen big changes in the structure of real estate market. The government is encouraging some particular regions, namely at Greater Bay area, [ Changzhou ] economic [ belt] and [indiscernible] area. So against this backdrop, we will see that we can -- we have a stable demand for residential mortgage for the banks in the future. Third, under the regulators adjustment, which means the government has differentiated policies in different cities and regions, we also foresee some changes in our regional structure.
In the first quarter, ICBC has also reported a solid progress in the residential mortgage. We have outrun our peers in the growth of residential mortgage in the first quarter. As a quality product for banks, residential mortgage will remain the main target for us in the future to develop.
I would like to add on to the second question. First, for ICT, we'll always adhere to the principle that houses is for living, it's not for speculation.
Secondly, the principle for us to develop residential mortgage is aiming at key cities, key real estate projects and key developers.
Thirdly, we will try to maintain the good momentum in our asset quality in the residential mortgage. So far, the NPL ratio for this part of mortgage is 0.24%, which is fairly a low level and the LTV ratio of our residential mortgage is 60%. Meanwhile, we are also trying to get a comprehensive income from both our customers of our residential mortgage in other areas. Thank you.
[Interpreted] Okay. Next question.
[Foreign Language]
[Interpreted] My question is about the NIM of ICT. You keep saying you maintained a quite stable about NIM level in the first quarter. So if we break it down from -- we look at it from the asset side and liability side, what are the main drivers behind the stability of our NIM? And what is your outlook on the future NIM for the rest of this year? And recently, we've seen the regulators mentioned more frequently about the integration of the interest rates of the dual check of the interest rate. So what is ICBC's taking on the potential impact of this integration of interest rate? Is there any pressure on your NIM with this integration?
[Interpreted] [ Mr. Jiang ], General Manager of the Financial and Accounting department will take your question.
[Interpreted] The first quarter for ICBC, the NIM increased by 1 bp to 2.31%, maintained a same level as the last quarter, yes. The main drivers is the yield for the interest-earning asset increased by 11 bps, and the interest rate for the newly incremental lending increased quarter-over-quarter. And in the first quarter this year, it increased by 12 bps. And in the first quarter, I would like to mention in particular that compared to our peers, ICBC is the only bank that you see negative growth of discounted bills. And as my colleague from the Corporate Finance department mentioned that ICBC has quite good project reserve at the Corporate Lending sector.
Similar with our peers in China, the costs of our interest earning -- borrowing cost has also increased a little bit, but the growth in this regard is the smallest margin for ICT. And my colleague from the assets and liability management has already talked about the managed costs -- the management of the costs at the deposit side, so I will not elaborate on it. As to the question, you mentioned about integration of the [indiscernible] interest rates. We have been paying close attention to it. If it did come true, we will face pressure in terms of our asset pricing because there will be changes to the benchmark interest rate. So we will continue to pay close attention to it and to make active responses. For ICBC, the pricing mechanism is quite differentiated or dependent on different sectors, industries, areas and target clients. So even that any changes occur to the benchmark interest rate, we will continue to take a comprehensive approach to continue on with our refined pricing management. For ICBC, 80% of our income is from the net interest spread, so that will be the core business for us to manage the asset and the liability dependent on different areas toward us and the target clients.
[Interpreted] I would like to point out that, first quarter, ICBC's NIM is increased by 1 basis point. This is better than peer performance among -- in China. Second, about the outlook of ICBC's NIM, we do acknowledge that we are faced with a huge -- big challenge and also pressure in net -- maintaining the stability of NIM. The NIM pressure for our -- for us to maintain the stability of NIM is at the deposit side is because we are facing tougher competition because of deposits. Some small and medium financial institutions has caused the interest-bearing cost in the banking sector. Second, as you mentioned about the liberalization and integration of the dual-track interest rate, it is become true in the future. We do see the pressure of downward change of the NIM in the future [indiscernible]. Thirdly, as introduced by Mr. Zhang, we will continue to adopt a refined and -- refinery management in the cost in the deposit side so as to maintain basically stable level of NIM. Thank you.
[Foreign Language]
[Interpreted] I have two questions. The first question is, we think that ICBC has achieved double-digit growth in the fees and the commissions income in the first quarter. So I would like to ask what is the driver for this increase. Can we break it down to look at what specifically has driven the growth of fee-based income? My second question is about the wealth management product and the transformation under the new regulation of asset management. What is the proportion of your NAV product?
[Interpreted] In the first quarter, the fee-based income of ICBC was CNY 46.1 billion and registering a growth rate of 10.87%. Both areas with large growth include the following: Firstly, the settlement area, we're seeing a double of the income from the third-party payments. The income from the third-party payment in the first quarter is amounted to CNY 3.6 billion. The second area, which is the proxy sales of insurance products which -- the income of which also doubled in the first quarter. The third area is the corporate side, products like guaranteed commitment, which have seen an increase of CNY 4 billion. The fourth area is credit card. Income of credit card was CNY 10.4 billion in the first quarter and growth rate of 6%.
The fifth area is the investment banking. The income was CNY 5.7 billion, increased by 15% in the first quarter, is kind of recovery growth; and the innovative investment banking products also contributed to the growth. For example, I mentioned innovative product in the investment banking-led loans [indiscernible] the income from this is CNY 560 million. And for the branded investment banking business, the income, it totaled CNY 3 billion, increased by 13%. So that's breaking it down of the fee and the commission-based income. These are the 5 areas where we have seen the positive growth. The income from the asset management business has declined to a certain extent. My colleagues will give you more information on that. So as to your second question about the asset management, our colleague, [indiscernible] General Manager from the field from the asset management department, will take your question.
[Interpreted]
After the announcement of new regulations on the asset management, we have made active efforts to lay out plans to transform our existing asset management business. Now we have already submitted to the Board of Directors for approval, after which we will report to the CBIRC. So -- as once we get approval from CBIRC, we will transform our wealth management and asset management business according to the regulation. Our transformation in asset management business nearly includes 3 areas: First is to compress the conventional product. Secondly, for those conventional and existing products with good conditions, we will also try to transform them to the become NAV product. By the end of first quarter, the balance of nonprincipal guarantees, asset management business, is decreased by 30% compared to April 27 when the revenue regulations on asset management was announced last year. And that area is transformation in the nonstandard products. For the existing nonstandard asset, nonstandard product, we are -- we resort to 3 approaches, namely, this is to develop new NAV product to take over this nonstandard product. Secondly is to bring those off-balance sheet business to take on -- put back on the balance sheet business. Thirdly is to transform these nonstandard products to become standardized products. Firstly is develop actively the NAV product, which meets the requirements of regulators. Based on the cash and fixed income product, we are also making active efforts to develop asset investment derivatives and private funds with the aim to provide a comprehensive product lines to our customers. By the end of first quarter, those NAV product, those asset management products, which meets the requirements of regulators is -- totaled CNY 340 billion. Thank you.
[Foreign Language]
[Interpreted] My question is about the traffic in the first quarter. Since the beginning of this year, we've seen faster growth of lending in the banking sector in China. My question is, from ICBC's perspective, what is the effect of demand from the market in the first quarter and also looking into the rest of present year?
[Interpreted] [ Mr. Li ] from the corporate finance department will answer your question.
[Interpreted] Actually, when I answered the previous question about the projects, financing project reserve, I mentioned our preliminary judgment as to the effected market demand in the rest of this year. Since last year, we've seen the banks are encouraged to provide more support to the real economy.
While China's economy is changing for better and more stable, we've also seen the good trends in the real economy sector, particularly after the central government's [ efforts to trade ] to maintain our stability in 6 key areas. And this has been reflected in the demand from enterprises. For example, in the highway and railway, high-speed railway, effectively around CNY 70 billion and -- CNY 700 billion and CNY 800 billion demand for lending in these 2 areas.
In the infrastructure area, we also predict -- we estimate there will be demand for CNY 12 trillion lending. And through the government special bond, only CNY 2.5 trillion can be provided for infrastructure. So we think there is huge room for the banks in terms of the investment sector, particularly the fixed asset investment for the lending for the credit of banks, particularly in the infrastructure area where we have to shore up the weakness.
Another topic is since last year's Central Economic Conference, the government is encouraging the manufacturing industry to pursue a high-quality growth. ICBC has also made this year that this year for us to better improve our products and services to those conventional industries, which are upgrading their structure as well as those strategic emerging industries. And also by the Internet technology and industrial plus new technology like -- represented with 5G will also bring us more opportunities in the lending sector. In the service industry, China has huge advantage with its large population and markets. So we also increased our lending to the consumer -- consumption-upgrading areas such as medical care, education, tourism and the cultural projects. So in a word, we are price optimistic about the future market demand for lending for credit in the future.
[Foreign Language]
[Interpreted] In the first quarter, we've seen ICT maintain strong growth in the profit, and your profit growth was more than 10%. It's a double-digit growth, and your provision coverage ratio is quite -- also quite high. And net profit growth is more than 4%. So my first question is, what is your consideration to set such a high level of provision coverage ratio?
The second question is, your interest net profit growth will become a high single-digit growth in the second -- in the future of 2019. And another question is about the interest rates level for the inclusive finance. What is the interest rate of inclusive finance in last year and in the first quarter? Because it said that there is a window guidance to decrease -- decline the interest rates to inclusive finance by 1 percentage point over the level of last year.
[Interpreted] Will take your question. Over past 3 years, we've seen the rise of the private course. The provision coverage ratio, the provision increased by 38% year-over-year in the first quarter. The PPOP has also maintained a fairly good growth due to the business rise, the business and more transactions and better improve the management and the stability in the NIM. As to the provision, it's increased. It's not because we are not optimistic about the Chinese economic growth in the future. It's also not because we have a large number of potential risky loan. It's only because we have a stricter standard in the asset quality classification. As Mr. [ Wei ] just now mentioned, we've already classified the overdue loans at the corporate side of 60 days into NPL. And there were a large part between -- of the overdue loans of 1 day to 60 days. If we see some mix in this part of loan, they are also classified as NPL, so the provision is increased. It's because we want to have a much cleaner asset quality. So you've note -- you've mentioned the interrelationship between PPOP and net profit growth and the provision coverage ratio, and I think the main driver for these 3 indicators is because we want to conduct -- we want to implement a stricter standard as in the asset quality classifications so as we can have a more cleaner asset quality so as to ensure our long-term sustainable growth in the future. So in the remaining 8 months for 2019, we will continue to make more effort to increase our net profit growth and also our PPOP according to the plan made at the beginning of this year so as we can better position to offset any potential risk in the future. So my preliminary judgment as to the outlook of PPOP and net profit growth is that the PPOP will be valued good for 2019, and net profit growth will also be maintained at a stable level. My colleague from the inclusive finance department will take your second question.
[Interpreted] According to the annual result, the -- last year, the interest rates of the inclusive finance was 4.95%. The interest rate of SME loans in the first quarter in ICBC is decreased to a certain extent compared to the average raise -- average weighted interest rate of last year. The decline of the interest rates to the SME loans is mainly because of our adjustment of our management. For example, in the first quarter, we put out some new products. So we made some campaign and promotion for temporary.
The interest rate is dependent on the market situation, ICBC's customer and access -- customer entry conditions and also our product. I want to mention in particular that besides paying attention to the average interest rate of this part of SME loans, you should also pay attention to the comprehensive income brought by these SME loans. For example, they can bring us income from the settlement, deposits and the personal financial business.
Secondly, for SME loan inclusive finance, we have targeted RRR part. So in this way, we have several -- we have built in some capital finance from which we can generate good profits from it. Thirdly, by use of fintech and run the inclusive finance by experts, we've accessed the expertise to especially establish the inclusive centers. We have managed the risk in this effect quite effectively. The NPL was always controlled at value, low level for the NPL ratio of the newly extended loans since 2015. It was as low as 0.19%. So in addition to the average interest rate level of SME loans, we should also pay attention to the 3 dimensions, 3 areas I just now mentioned. Thank you.
[Foreign Language]
[Interpreted] My question is about the wealth management business of ICBC. We've all seen that you have already acquired the license to establish a wealth management subsidiary. So can you update us on the progress of this subsidiary? Will it become officially open in the second half of this year? And also in addition to the asset management department that has all these credit risk and the other asset management platforms, what is the role and your outlook on its future potential of this wealth management subsidiary?
[Interpreted] I'd like to invite Mr. [ Yeoh ] from the asset management business to answer your question.
[Interpreted] Okay. First, I would like to update on the progress of our wealth management subsidiary of ICBC. In February 15, we've given the official approval from CBIRC to establish this wealth management subsidiary. Within 6 months, we have to finish the preparation work and officially open it. So by that time, we will also report to CBIRC that we are going to officially open. So far, the preparation on this wealth management subsidiary is full swing.
As to the wealth management subsidiary preparation, our work is focused in 3 areas. First is benchmark with the international peers in asset management sector to make our own strategic plan for this subsidiary. Secondly is we want to make more details, plan or implementation plan -- development plan for this wealth management subsidiary together. We want -- we are aiming at synergies between this subsidiary and the head office and also other asset management platforms of ICBC. We want to achieve greater impact with all these problems.
Thirdly, we are also advancing the logistic issue with the financial department to -- and also relevant departments to fulfill the procedures in tax. And also, we have maintained close contact with our regulators. So soon, you will see that this subsidiary will open. So after the inception of -- establishment of this subsidiary, in the future, ICBC will have much more platforms, mainly wealth management subsidiary, ICBC Credit Suisse, ICBC-AXA and asset investment and et cetera.
So under the strategy of financial asset management of ICBC Group, we are aiming at develop the asset management of ICBC at different platforms with different features, distinct features and with their own focus and also be complementary to each other. So the establishment of this recommended subsidiary based on the multiple channels and multiple platforms for ICBC's asset management, I think it will be more conducive for us to grow our asset management business in the future. And it will be considered as a core platform for us to build an asset management business. So by utilizing the differentiated products, personalized, tailored products and also complementary strengths of different platforms, so we can maintain the funds and also customer within ICBC. Thank you.
[Foreign Language]
[Interpreted] My question is about the cost management of ICBC. In the first quarter, you managed the operating expenses increased only by 2%. It's even lower than the inflation level nationally. As analysts, on one hand, we are quite glad to see that you have lowered your cost to income ratio. And so my first question is, how ICBC managed to maintain this cost to income ratio at such a low level? Secondly, we are also kind of worried that your low cost to income ratio will also mean you may have decreased your investment. For example, your -- the peers in China banking sector have increased their investment in sin tax. So what is ICBC's perspective in this future? And do you think it would become a normal state -- normal level for ICBC to maintain the cost to income ratio at lower than 20% in the future?
[Interpreted] Mr. Zhang from the Financial Accounting department will take your question.
[Interpreted] The cost to income ratio is such -- is low. I think the reasons behind this is, firstly, we have maintained our [ faster accelerating ] faster growth in our income. So in terms of income growth, compared to our peers, I think we outrun most of them. Secondly, I want to point out that the cost to income ratio lower than 20% in the first quarter doesn't mean that this ratio will be as low as this for the whole year. Another reason or factor is the season factor. Based on our past experience, usually at the beginning of the year, the cost will be much lower; and at the end of the year, like in the fourth quarter, the cost will be the highest. Usually, the cost in the fourth quarter will account for 1/3 -- more than 1/3 of the total cost of the year. Thirdly, you asked whether the low cost to income ratio means we also lowered our investment or input. Actually, the answer is no. We haven't made any structural adjustments in the investment. We mainly support investment and input in 3 areas. First is fintech. First, in the technology sector, we have made adequate [ and thousands ] input in the investment either in the fixed asset or expenses or intangible assets. Secondly, we have also made upgrades, input and investments in our channels as ICBC has always post a large number of physical banks, so that's our advantage we're going to maintain in the future. Every year, according to the economic development, different -- the changes of economic difference in different cities and different regions, we're also adjusting our outreach layout accordingly. The third area is our marketing input. We -- the investment on the private and the corporate customer on the marketing course also increase every year. We've also made deductions, mainly in 2 areas. First area is [ most low efficient. ] Secondly is about the investment on those are not in alignment with the development change. For example, ICBC was the earliest discounters in retrofitting the ATMs. So the deduction in those low-efficient businesses has also brought down the amortization cost and the costs like tariffs and water cost. So our investment, the general strategy for us, the tactic for us is to maintain, to ensure the investment in volume while we optimize the structure.
[Interpreted] I would like to add on to this question. First, thank you for the attention you paid to the cost to income ratio, which has also been given importance from our Board of Directors. Investors might be worried that the cost to income ratio is too low, that will impact on our strategic future, so I will have to make some explanation as to it. First, I would just like to emphasize that we increased our investment on fintech spending from fixed assets, the intangible assets like software as well as innovation rhetoric. Secondly, we've also increased our input and investment in the risk management and the compliance work. Thirdly, more assets has also been made to maintain the stability of our core talent and to optimize our human resources. Fourthly, according to our strategies, we are aiming at a better future of ICBC with better management of costs. I think the cost to income ratio for the entire year will be much higher than the first quarter level. We are not pursuing the lowest level of cost to income ratio. As I also mentioned, our operating expenses is much lower than the CPI growth, and this is attributable to [ Mr. Zhang's ] efforts. So hopefully, you will become -- you will applaud the achievements we've made in this area from [ curiosity -- instead of curiosity. ] So I would like to emphasize that low level of cost to income ratio is not our normal level. Particularly, we are not taking too low level of cost to income ratio.
[Foreign Language]
[Interpreted] My first question is about credit. What is your full year target in the volume of the project? And also in terms of structure, what is the specific target at the corporate side and at the personal side? My second question is the target for inclusive finance. At the beginning of this year you said was CNY 100 billion for 2019, but the first quarter registered a faster growth. So in the remaining 8 months, will the management raise the year targets?
[Interpreted] For your first question about the credit extension, I would like to invite Mr. [indiscernible], General Manager of Assets and Liability Management to come in to take your question.
[Interpreted] Thank you for your question. As to the year plan of our loan growth in 2019, it is basically in line and also it's outcome based on our last year's credits. As to the loan mix in the corporate side or at the personal side, we now really want to meet the market requirements. We want to meet the requirements from the real economic sector to provide more support to the infrastructure projects and also in the consumption area. We want to provide more support to those [ first house.]
As to the strong mix in the first quarter, we've seen faster growth at the corporate lending sector as the result of the rising demand from the real economy sector as well as because ICBC has a very strong reserve in the corporate lending. For the cost -- personal -- at the personal bank, we've also seen stable growth at the consumption loan and also the extension market. I would also like to respond from the perspective of assets and liabilities to the growth rate of the [SME]. As Mr. [ Guan ] already introduced those strategic, the inclusive finance is considered as a strategic opportunity for ICBC to grow our loans. So as long as we can find qualified and quality customers in the inclusive finance sector, we will provide also good quality services to them. As to the loan mix, the proportion of inclusive finance to the total loan book is not so fixed at the present, and we've seen fast growth of this loan in the SME. So I think in the last 8 months of this year, the inclusive finance will develop at the same pace as the entire loans for ICBC.
[Foreign Language]
[Interpreted] My question is about the asset quality. You've just introduced that the asset quality of ICBC has been stably improved over the past several quarters, so what is the outlook of the asset quality in the coming quarters of this year? And as to the NPLs of -- in the first quarter, if we break it down at the corporate side, what industries or what sectors have witnessed the most significant changes? And at the private personal side, you mentioned NPL ratio for the residential market is only 0.2%. So what is NPL ratio of credit card business and consumption zone? Because according to the peers just now we heard from, their results announcement, that because of the rising risk on the credit card side may compress the growth of credit card business.
[Interpreted] Generally speaking, the asset quality of ICBC has been stably improved over several quarters, either in a series of indicators like overview loans and NPL ratio, either at the corporate side and the personal side. The good momentum of the asset quality of ICBC can be attributed to the improving of China's macroeconomic growth as well as a more proactive, peaceful power [ guide ] to the government. It also best demonstrated ICBC improved the capability in our credit risk management. At the same time, we are also clearly aware that the macroeconomic potential risk or potential impact to our future credit asset quality, I think it will take time for the low-end manufacturing industry and some logistics companies to release their risks. ICBC has adjusted our credit policy according to the macroeconomic situation. The fiscal policy, monetary policy as well as the encouragement to provide support to the private and real economy sector. So long ago, ICBC has already lowered our credit to the low-end manufacturing and the logistics sector. Against the backdrop of elaborating elimination of those [indiscernible] from the enterprises and elimination of the [ released ] government debt and management as a real estate market, ICBC has always pursued prudent the risk management on these areas so as to ensure the stability of our asset quality. Just now my colleague has already introduced our credit policy as to what kind of sectors and areas we're going to lend more. And in the future, we have high confidence that with our visibility in the risk management, we can ensure our [crisis] asset quality so as to ensure that [indiscernible] [ housing drop ]. As to the question on the NPL ratio of credit card, I would like to invite the General Manager of our Cards department to take your question.
[Interpreted]
[Audio Gap] Answer your question about innovative financial products.
[Interpreted] In 2019, more efforts will be made to promote the [ ICBC 3 ] version. Firstly, we are aiming at a diversified mechanism building by utilizing sales on channels together with third party. Secondly, we are also aiming the opportunities at building a light physical upgrade and by utilizing our online financial platform and also utilizing the changes brought by the industrial integration to provide more services and products to the government and the industry. Secondly, under the strategy of [ full scale ] customer aiming at the promoted customer base, we are also trying to acquire more customers from our online resources. Thirdly, by cooperating with -- providing integrity on our financial services in the transportation areas related with people's life and education so there's more equal [ assistance ] and scenarios with them. As to your question about the financial supply side reform, I would like to invite Mr. [indiscernible] from the Urban Financial Institute to answer your question.
[Interpreted] Your question is a big picture question, but it's also a question of great importance. Over the past several years, the supply side reform has been given high on the agenda of our government's work over the past several years. And as financial institutions is a key entity to provide support to real economy sector. So the financial side supply reform is also a key component to the supply side reform, so that's why not long ago, President Xi officially raised the financial debt supply tax reform. Secondly, the centering -- focusing on the supply side reform, actually, ICBC has been quite initiative and quite active. That's why we have been implementing the transformation step strategy over the past several years with the same goal as the supply side reform, which is to provide better services to the real economy sector and also to manage better the risks. Maybe we didn't mention the financial supply side reform back in those years, but we have done the work of the financial supply side reform. For example, ICBC has made great efforts to provide lending, to provide support to the real economy sector and increase our lending to the SME. Over previous questions, my colleague has provided -- has talked a lot about ICBC's assets in the inclusive finance and in our efforts to support to the real economy sector so this fully demonstrates ICBC's efforts in this regard and also proven that ICBC has made a solid substantial progress in this area. So last, ICBC will continue to attach great importance to the financial supply side reform. Focusing on this reform, we will continue to make more assets to improve our management philosophy to develop better products and services to our customers and to have better management of our risks.
[Interpreted] I would like to add on to it. Firstly, I think the financial supply side reform will be high on the agenda for commercial banks in China in a few years -- in the few coming years. Secondly, you mentioned about the challenges and opportunities brought by the supply side reform. Actually, the same question was raised at a closed door investors meeting after the annual results announcement this year. I would like to refer you to the documents announced in February 20 for the financial supply side reform. It mainly includes the following areas such as to improve the banking system. Second is to build a multilayered and a more flexible capture system and also to improve financial infrastructure and improve the financial product and services. The supply side reform, actually it's opposite side of the demand side, so the aim of this reform is to improve the effectiveness of our services and our risk management and according to the changes of customers' demand. As a big commercial bank, ICBC will strictly advance our financial supply side reform. Firstly, we will continue to optimize our organizational structure to energize our organizational trend. Secondly, we will increase and further enhance our effectiveness of the supply of financial products so as to better meet this demand from the real economy sector as well as financial consumers. Thirdly, in the course of the reform where we will further enhance our risk management capabilities, particularly dependent -- particularly while we advance our global operations, diversified operations as well as the management of cost-improved rates. We will further enhance and optimize our internal process working procedures. For example, in the assessment of credit risks, pledged and secured lending, will be -- will no longer serve as the only products in lending in the future. We will use more technology and fintech, to develop products, so as to better meet the demands of our customers. So in the course of reform, we are striving at valuable and responsible growth in the future by utilizing the opportunities brought by this reform as well as meeting the challenge in the regulators requirements as well as how we can meet the expectation in the minds of our consumers.
[Interpreted] This is the end of the Q&A session. Thank you to Mr. [Wang] and the relevant department for your candid and professional answers. Thank you for joining us in today's meeting. So if you have any questions, you're welcome to contact our IR team. That is the end. Let's call it a day. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]