BACHF - Bank of China Limited (BACHF) Q4 2022 Earnings Call Transcript

2023-03-31 14:59:03 ET

Bank of China Limited (BACHF)

Q4 2022 Earnings Conference Call

March 30, 2023 5:00 AM ET

Company Participants

Yu Ke - Securities Affairs Representative

Jin Liu - President

Xiaodong Zhang - Vice President

Zhang Yi - Vice President

Rong Zhao - Business Management Director

Jiandong Liu - Chief Risk Officer

Qian Meng - Chief Information Officer

Conference Call Participants

Zhifeng Dai - Zhongtai Securities

Katherine Lei - JPMorgan

Presentation

Jin Liu

[Call Starts Abruptly] Of the real estate market and actively cooperated with local governments [Audio Gap] of which the market share of investment in financial assets of domestic banks increased. There were 159,600 private banking customers and the scale of AUM of private banking customers reached RMB 2.42 trillion.

Just now I have mentioned mobile banking of BOC. In recent years, press release of our annual results, I have conducted a lot of publicity for two projects of BOC. One is #1 project. That is our mobile banking project. I used to work in several financial institutions. I also have personal housing mortgage loan. I also have other financial service needs. So I have the mobile banking apps of several banks. So I have my personal customer experience and now I'm President of BOC.

So first of all, I would like to talk about the BOC's mobile banking app. It is the most convenient, most easy-to-use mobile banking app. Together with our customer experience experts, we are soliciting opinions for further improvements. What we want to hear are negative comments, so we can make improvements. But at the same time, we are receiving a myriad of positive evaluations in different mobile banking areas. We have different functions to meet different customers' needs. It's user-friendly interface with very convenient services. So this is the #1 project, mobile banking project of BOC.

Another project is called #1 plus project, that is the enterprise-level architecture, we call it OASIS Project, which will -- I will talk about in greater details later.

In terms of supply chain finance, firstly, BOC helped to preserve and stabilize the supply chain, providing liquidity support to core supply chain enterprises amounting to nearly RMB 2.5 billion in 2022 and providing on and off balance sheet, trade finance support to upstream and downstream enterprises amounting to over RMB 2.2 trillion, representing a year-on-year decrease -- year-on-year increase of 14% and 31%, respectively.

Secondly, we strengthened our tech capabilities to launch innovative online financing products and put into operation new online supply chain financing services such as easy credit providing customers with a digital scenario-based and intelligent supply chain finance experience.

Thirdly, we launched a brand-new sub-chain, BOC Smart Chain, to extend quality supply chain financial services to national strategies and key areas such as Logistics, Green Chain, Aviation and Home Appliances.

In the area of county finance, we focused on consolidating the achievements of poverty eradication and supporting rural industries in the countries to promote the comprehensive revitalization of the countryside with the power of finance. In 2022, county institutions achieved a significant growth in deposits, loans, revenue and profit before provisioning balance of agricultural-related loans and inclusive agriculture-related loans grew by 20%, 38%, respectively. 160 key helping -- key pairing of counties recorded loan growth rates of over 17% and financial services such as credit, consumer assistance, mobile banking and national student loans reached 157 key pairing of counties.

In 2022, 28 new accounting institutions were opened by BOC, including 3 in key support counties, more than 550 rural revitalization outlets have been established with a coverage rate of over 63% in the counties. The number of monthly active customers for mobile banking in counties grew rapidly, and the beautiful countryside version of mobile banking project was launched. The bank launched Seed Industry Loan and Agricultural Machinery Loan and put into operational credit village farming express loan online product with regional characteristics. BOC Fullerton has maintained its position of being rooted in the county, supporting agriculture and small businesses and continue to leverage its advantages in the largest village bank as the largest village bank in China. So these are the measures that we have taken in supporting counties through financial services.

Last year, in ESG, and that is the CSR external rating. BOC is receiving a higher and higher rating. MSCI, ESG rating for BOC has been elevated to A. Domestically, more and more organizations are conducting research on green finance and green development and are also conducting rating in those regards. Corporate social responsibility is fully reflected in county finance and inclusive finance as important components of CSR. Inclusive finance and county finance should be incorporated into ESG and corporate social responsibility ratings.

BOC and many our peers, in terms of inclusive finance and county finance, we have a lot of pairing of counties to help for rural revitalization and a lot of achievements have been made.

So in terms of corporate social responsibility rating, those achievements should be fully reflected.

Thirdly, we deeply integrated into the new development pattern of dual circulation with One Mainstay, Two Engines developing in a synergistic manner. In 2022, we fully supported the construction of the country's dual circulation and the opening up to the outside world at a high level, enhanced our integrated global service capacity around the Chinese elements, optimize the global account management system, focused on core customer groups such as Fortune 500 enterprises in China and large Chinese enterprises going global and strive to build a system of 1 point of access, global response and comprehensive services.

The BOC has also been working on the development and security of overseas markets, grasping structural opportunities and revising its one bank, one policy, differentiated development strategy. The global service network continued to be optimized and BOC Macau Limited was opened. Significant progress was made in the construction of overseas regional headquarters with the IPO original headquarters in the EU successfully established and operating. Regional synergy development steadily was promoted and overseas institutions operate safely and smoothly. The Group's profit contribution stabilized and rebounded as overseas commercial banks recovered well. The comprehensive operating companies responded appropriately to changes in the external environment, strengthening the competitiveness of key institutions in the market and further extends enhancing their business expansion capability and Group synergy.

Firstly, the Group's digital transformation progressed solidly and operational efficiency continue to improve. We continue to invest in technology and focused on building 10 new digital talent teams. The OASIS project was iteratively promoted. The value of digital assets was accelerated and elevated and digital processes, data and mechanisms were continuously enriched and improved. We continue to upgrade our new technology platform and achieve the retail results in the fintech application. We further enhanced our network security operation capability and continue to ensure business continuity. We accelerated the upgrade and iteration of online and mobile services, iterated mobile banking to version 8.0, released a white paper on financial scenario 2.0 and launched digital inclusion, digital CIIE and Smart enterprise treasury, apps and platforms. We have explored a wide range of digital financial solutions in different industries and fields and our tech-enabled financial services have continued to improving quality and efficiency.

Fifthly, we integrated development and safety and security and continue to improve our comprehensive risk management capabilities. We have promoted the construction of a comprehensive risk management system, gradually established a multilevel and comprehensive risk and emergency management mechanism, continue to optimize the closed loop risk management and accelerated the construction of an intelligent risk control system. The forward-looking and practical nature of industry policies continue to improve, guiding the continued optimization of the credit structure. We improved our early warning and monitoring and asset quality control system, insisting on early -- identification early warning, earlier detection and early disposal and maintain stable asset quality. Market risk and liquidity risk management were actively and effectively managed while internal control and operational risk management continue to be strengthened and the Group's major risk indicators were in line with regulatory requirements.

The year of 2023 is the first year for the full implementation of the spirit of the 20th CPC National Congress and the key year to the Group's 14th 5-year plan. Our risk management culture is being strengthened, both at the macro and micro level capabilities have been further improved in BOC. Recently, in the financial sector, there have been high volatility. First, it started with SVB, Silicon Valley Bank and then Credit Suisse is merger with UBS and also the risk incidents encountered by some other financial institutions. For Chinese financial institutions, risk management, it offers a warning bell. So the risk management business line, the risk management department and other related departments of BOC have quickly responded to offer an active and fast response and timely conducted objective, comprehensive and in-depth risk analysis and judgment in various domestic and overseas business areas. We conducted stress testing immediately and reported to the regulators. This has fully reflected our professionalism and our capabilities to respond to risks, especially market risks.

As I mentioned just now, the year 2023 is the first year for the full implementation of the spirit of the 20th CPC National Congress and the key for the Group's 14 5-year plan. We will continue to promote the implementation of the plan and serve the high-quality development, both in terms of economic development and also societal development.

Support the development of key sectors and key areas as was the weak links by providing credit support and also follow closely the strategy of expanding domestic consumption and also effective measures will be taken.

Secondly, we will actively seize strategic opportunities to consolidate our advantages around the whole world and also improve our market competitiveness as well as group contribution.

And the third is to deepen the integration of business technologies and improve the efficiency of our services. And next is better risk management to make it more sensitive and also effective. And pay close attention to cross contagion, making sure that there will be no systematic risks and Bank of China will continue to strive to build a world-class modern banking group with a sense of mission and a sense of urgency as for a sense of responsibility. We will continue to follow the road of developing ourselves as the top financial institution in the world so as to create greater values for shareholders, customers, employees as well as the whole society. Thank you.

Question-and-Answer Session

A - Yu Ke

Thank you. President Liu, for the fantastic presentation. Next, we'll move to the Q&A session. And we want to invite investors and analysts to raise questions, but please identify your name as well as your organization before raising the questions. And if you want to raise a question, please raise your hand. Okay. Mr. Dai.

Zhifeng Dai

Thank you, management. And my name is Dai Zhifeng. First of all, I want to congratulate the management. Given the complex business environment, such a financial result is very good. Yesterday, we actually looked at the results, and we felt that over the years, the asset of Bank of China has been growing in such a positive way, especially last year, the domestic RMB loan has increased to such a level. So we want to ask for 2023, what is the target for credit growth? And also how about the demand for credit? And specifically, what would be the strategies for credit allocation for Bank of China, for example, what is the pace and what is the structure and what would be the industries and regions that you want to prioritize?

Jin Liu

Thank you for your question. Well, credit allocation is a major approach for banks to serve the real economy. And the data on this topic really has been something that the market has been paying close attention to. And we want to invite Vice President, Xiaodong Zhang in Boao, to answer your question.

Xiaodong Zhang

Thank you for your question. Well, yesterday, in Boao, together with the President Liu and other colleagues, we took part in the Premiere session of Boao Forum. And also we took part in other activities today, and we can fill the momentum and the vitality of Chinese economy. And that strengthens our confidence in serving China's higher level opening up as well as higher quality development. And we know that finance is the lifeline of the national economy and serving the real economy is our duty. Bank of China always keeps in mind our mission and responsibility. We tap into our own advantages and resources and try to find our way to serve the new development pattern in terms of door circulation and also accelerates the construction of our strategy of One Body, Two Wings and increased financial support in key 8 areas and to implement our structural reform from the supply side, so as to better contribute to the development of our national economy.

2023 is the first year in terms of implementing the spirit of the 20th National Congress of the CPC and several key tax have been mentioned in the government work report. We will center our work on that. And the overall tone is to keep stability while making progress. We follow the overall asset growth target of the Group. We estimate a growth rate of 8% to 10% and maintain steady growth of RMB loan, increased the vitality of RMB bond investment. We want to expand our advantages in terms of foreign exchange businesses for high-quality development.

Since the beginning of the year, Chinese economy has been accelerating its recovery and also the total scale of financing has increased and the credit demand has been on the rise and also there has been marginal increase for the credit from residents and domestic RMB loan for Bank of China has increased more than last year.

And plan for this year. First of all, steady growth of credit on the premise of meeting macro prudential management requirements will continue to support the real economy, and we will moderately expand the scale of new loans and maintain overall growth rate of loan at a reasonable level.

And secondly, credit structure should be continuously optimized. If you look at the industries, we will focus on the 8 areas for support and supports the key areas and also weak links of our economic development and increased support for scientific innovation, manufacturing, green and energy supply, private economy, et cetera. We will also enhance inclusive of financial support for MSEs as also as a rural revitalization and county economy. And from a regional perspective, we'll implement the national major regional strategies as well as regional coordinated development strategy improved the credit support in key areas, for example, Yangtze River Delta, Greater Bay Area, Beijing-Tianjin-Hebei as well as [indiscernible] area and also make sure that credit demand in remote and backward areas, revolutionary basis and ethnic minority areas will be met and promote the balanced and coordinated development of the Eastern, Central, Western and Northeastern regions in China.

In terms of credit for personal individuals, we focus on the strategic deployment of stabilizing the housing market. On one hand, we follow the city-specific policy, increased investment in personal housing loans and insurers improved housing demand will be met and make differentiated credit policies. On the other hand, we will support the upgrading of residents consumption, improve people's demands for different types of services centering on the new consumption new scenarios, et cetera, to promote the expansion of non-housing consumption loan.

Thirdly is to reasonably arrange the pace of credit supply, we will carry out the requirements of monetary policy and also adjust the pace of credit supply according to the demand of the real economy so as to make accurate decisions. And we want to make sure that we'll have a reasonable growth of credit, making sure that we will be a stabilizer of the real economy to serve the development of the real economy.

Yu Ke

Thank you. Mr. Xiaodong. Next question, please. Mr. [Juan] from China Life Insurance Asset Management.

Unidentified Analyst

Thank you for the opportunity. My name is [Juan] [indiscernible]. This is a great opportunity for me to ask a question about net interest margin. In the past 1 year, Bank of China has been supporting real economy. However, you performed pretty well in NIM. So I wonder whether you can elaborate the reasons behind? And also with the multiple rounds of LPR declining. How would you expect the trend of NIM in 2023?

Yu Ke

Thank you for your recognition. Let me invite Vice President, Zhang Yi to answer your question.

Zhang Yi

Thank you, Mr. Juan for your interest in this topic. As we've mentioned before, last year, the NIM of the group was 1.76%, that was an increase instead of a decrease. So the stability of NIM from Bank of China perspective was way better. And if you look at the factors, last year, actually, there were negative factors, but also positive factors. And in terms of negative factors, as you mentioned before, LPR would decrease for many times for 1-year LPR and a 3-year LPR. And actually, the return rate of RMB asset actually dropped quite a lot, 16 basis points, and that actually lowered the interest margin of the group by 12.29 basis points. And if we look at positive factors, there are 2 as well. First of all, our own management and secondly, the market condition.

In terms of the management, we have been voluntary optimizing our asset and liability structure. By doing this, we can improve NIM by 7.52 basis points. And in terms of asset structure, the growth of low-yield interbank lending and other assets was controlled and the investment of high-yield assets was increased. So the average balance of loans accounted for actually 63.82% increase of 1.31% over the previous years. And the debt structure -- the point is that to focus on the marketing of demand deposit by building platforms and expanding channels of businesses by using technologies, the percentage of demand RMB deposit has been increased and also high-cost deposits as a proportion has been reduced. So in another word, for example, we have different types of agreement-based deposits, deposits with more than 5-year maturity, et cetera. And over the years, we are talking about 1 percentage points declining. And because of that domestic RMB liability cost has been decreased a lot. And the domestic RMB deposit cost has been down as well.

And as President Liu Jin mentioned, Bank of China is quite international. Last year, with the multiple rounds of interest hike in overseas markets, that actually led to improvement of our foreign currency spreads and increase our group interest spreads by 5.14 basis points. Most foreign currency loans of the bank are priced at a floating interest rates, while a high proportion of foreign currency customer deposits are priced at listed interest rates. So the asset duration is shorter than the liability duration. These are several reasons. Looking into 2023, this year, there is still great pressure in terms of NIM. And from RMB perspective, LPR declining to us in terms of the impact will be greater than that of last year. For Bank of China, as 1 example, RMB loan. Actually, for the fixed rate, it accounts for over 90%. And in terms of the foreign currency interest margin, last year actually was good. But this year, as everybody estimates that Fed's interest hike will slow down.

Another thing is that foreign currency debt, as time goes on, in terms of repricing, it will only accelerate. So the cost for this part will increase. And the level of improvement in this regard will be weaker than last year.

Overall speaking, overall NIM for Bank of China will be declining to a certain extent. However, despite the pressure, we will provide quite active management. First of all, we want to focus on both the quality as well as the quantity. I am relatively new to the management. And the first meeting was led by President Liu in terms of improving the strategy for liability and RMB deposit cost of Bank of China is 1.88%. There is still room for improvement. First of all, is to manage price, look at the market increase and also to improve our internal pricing mechanism, look at the demand costs and also maturity so as to manage this in a better way. On the other hand, manage the structure, take the 8 areas as the starting point to improve our products and also to increase the outreach to key customers and also upstream and downstream customers. So we could do better in this aspect and increase the percentage of low interest asset.

And another part is about the optimization of the asset structure. On top of supporting the real economy, we probably will increase the investment in retail loans, so as to support consumption expansion and also to activate the existing assets to reduce the proportion of low-return assets, making sure that our NIM will be within a reasonable range. Thank you.

Yu Ke

Thank you, Vice President, Zhang Yi. Next question, please. Mr. [Ma], sorry, Ms. Ma.

Unidentified Analyst

My name is [Ma Ching Ching] I have a question. Actually, we have noticed that the Central Economic Work Conference and the latest government work report both pointed out that this year, the priority of our economic work is to expand both domestic and international demand. So domestic consumption and the recovery of the consumption would be considered as a priority. And also for the first time, it has proposed the concept of consumption for everybody as was the scenario-based consumption. So I want to ask what measures have been taken by BOC and also in terms of consumer finance, what would be further measures to be taken?

Yu Ke

Let's invite President Liu Jin to answer this question.

Jin Liu

Thank you for your question. At the Central Economic Conference and the two annual sessions, if I -- my memory serve correctly, about consumption and investment is as the fundamental role of consumption and the driving rule of investment should be given full play. So consumption plays an important role in driving domestic demand, expanding consumption to serve people's livelihood and serving the real economy. So consumption has an important mission. Therefore, consumer finance has an important mission in expanding domestic demand-boosting consumption, serving people's livelihood and supporting the real economy. The bank has conscientiously implemented the national decision and taken many measures to help stabilize the housing market and promote consumption with remarkable results.

During this process, we have borne in mind the political and people-centered nature of financial services to meet the financial consumption needs of the consumers at different levels and giving full pledge to consumer finance also is beneficial to BOC in terms of higher profitability and higher quality of development.

Last year, we focused on three areas of work. First, we promoted the stable and sound development of the real estate sector, mortgage loan is an important component of the consumer finance. We followed closely the [151] policy measure of the national strategy to help stabilize the operations of the real estate sector. Personal loans balance realized a steady growth, and we have also determined appropriate mortgage loan rate and implemented the requirements of the long-term mechanism for the dynamic adjustment of the interest rate policy for first home loans, so as to effectively reduce the financing costs for homebuyers. There has been a lot of debates regarding the real estate market in recent days. The problems are concentrated on when will the real estate market be rallied back how the increment of housing mortgage loans will be brought back to the normal levels.

This spring, I had separate meetings. I had separate meetings together with my colleagues meetings with several large private real estate enterprises and some medium-sized private real estate developers. Why do I mention private instead of state-owned real estate enterprises? Because state-owned enterprises, are abundant in funding, they do not worry about their liquidity. However, if you look at the completion rate of real estate projects and the sales restoration level of state-owned real estate enterprises, they are performing much better than their private counterparts or private peers. That is to say the credibility, the past track records of an enterprise is highly valued by banks. So I had separate meetings with these large-scale private real estate enterprises and some medium-sized private real estate enterprises.

I am having depth discussions with them. And I found that they all expressed confidence in the market in the future, and they have also made detailed explanations about their green development and digital transformation strategy in real estate sector, including their internal restructuring efforts and results. Through the in-depth exchanges with them, we now have more confidence in supporting the study and sound development of the real estate sector in China. I'm sure that for -- all the major financial institutions of China, they have the same judgment of the situation.

In November last year, I went to Hong Kong. The only visit to Hong Kong during COVID. I attended the post-COVID, Hong Kong government organized large financial institution Summit in Hong Kong. Dozens of famous European and American financial institutions and a large number of Southeast Asian financial institutions, senior management and Board of Directors attend the Summit. Many of them were discussing the real estate market in China said -- they said that so many defaults of the real estate enterprises, so many housing projects of construction, what would be the future of real estate? And for the real estate sector's NPL ratio, what is the genuine ratio? These are the questions they were discussing during the summit.

During my speech and my interactions with them, I have repeatedly explained to them. I said, please rest assured that the Chinese government, the Bank of China and the President of large financial institutions like BOC and more are focusing more and more interested in the sound development of the real estate sector and the NPL ratio of the real estate sector. We are seeing -- reading the financial statements of the sector every day and we are paying high attention to the progress in the construction projects already stopped and then resumed. We are also taking active measures. Imagine since the latter half of last year, the related departments and authorities of the central government released a series of measures to support the sound and steady development of the real estate sector. There are sporadic loan defaults and overseas loan defaults. Those problems have been resolved one after another.

Some members of senior management of European and American financial institutions asked how about the default of U.S. dollar debt? I said don't worry, if some of my large customers have certain default, not so many small enterprises could buy such debt, such bonds, most of them are large medium-sized real estate enterprises. If they have such overseas debt default in a certain phase, we prefer that they pay your debt back first and then pay our debt. And we actually did so. Many of the Chinese financial institutions did so. So you don't have to worry. With the implementation of the series of measures to support the real estate sector, it takes time, takes a process for the real estate sector to get back to normal. I'm sure with these effective measures, they will be back to the normal.

In particular, the central government is having multiple measures, multipronged measures, including leasing and purchasing. I'm sure these measures will prompt a better mechanism for the sound development of the real estate sector. So we are fully confident of the real estate sector, we are even more confident of the economic recovery of China. So in real estate finance, which is an important component of consumer finance, we are also fully confident.

Second, we are making active efforts to promote consumption and boost the domestic demand, especially residence consumption for non-housing consumer loans, new loans increased by 50% credit card installments in growth are also leading versus our peers. We have also helped boost bulk commodities consumption based on auto installments. We have also helped to boost market confidence. Last year amount receivables and investments for auto installment growth better than our peers, especially for new energy vehicle installments and our cooperative brands, we are also leading. At the same time, we are making full efforts to support convenient consumption and this conversion to online through mobile banking.

We are continuously improving service efficiency, reducing service cost, optimizing pricing structure. And while meeting the regulatory requirements, we are having appropriate pricing level to concede profits to the general public, to the consumers and facing the rural customers and young customers, we are in increasing support for consumer loans to help revitalize the countryside and provide services to new citizens -- new customers.

This year, after the two annual sessions, the central government's policy for boosting consumption has been released and is now being implemented, I'm sure more impetus will be injected into consumption. I'm sure BOC financial services will play an important role in that process. I attended the Boao Forum for Asia over the past two days, I can see that the shuttling buses and vehicles are all new energy vehicles with green car plates. So free trade island with a high-level opening will be greener island. And this trend will become a reality in more large- and medium-sized cities.

Thirdly, regarding consumer finance, that's the consumption of financial services. Finance is consumption itself. For example, mutual funds or products provided on the shelf in the form of various financial products, they are important components of financial consumption. In addition to working on mobile banking as an important and the most convenient interface to serve our customers, BOCIM, securities, wealth management have all made innovations in boosting consumer finance and providing better services. Together with European asset management companies and the joint venture wealth management subsidiary called [Hui Huang] Wealth Management, which is located in Shanghai. We are working on this.

We also have BOCI in Hong Kong and BOCIM and asset investment. With so many brands under BOC with the economy recovering with the recovery of residents' financial services needs, we will have more innovations and create more suitable individuals, personal finance products to meet the needs of different residents. This is also an effort made by us to provide financial services for -- as inclusive finance to realize common prosperity for all. So mortgage loans, consumer finance loans and other financial product needs. These are important three aspects of consumer finance that you'll see we will work on. Thank you.

Yu Ke

Thank you, President Liu. Next, we'll switch back to Hong Kong venue. I'll invite Senior Manager of Board Secretariat Mr. [indiscernible] to continue to invite investors, analysts to raise questions.

Unidentified Company Representative

Okay. Thank you. Please raise your hand if you wish to ask a question. So the first opportunity will be given to JPMorgan Chase, Madam Lei.

Katherine Lei

Thank you for giving this opportunity for me to raise a question. I'm a banking analyst, Captain Lei. My question is related to the handling fee income. I can see last year, the growth rate for fee income slowed down. What are the reasons? How about the growth rate of 2023 for fee income? What measures and means will be adopted to realize your growth rate target?

Unidentified Company Representative

Thank you for your question. I would like to invite Business Management Director, Zhao Rong, to answer this question.

Rong Zhao

Thank you, JPMorgan analyst of Hong Kong venue for your question. In 2022, the group's net fee income amounted to RMB 72.24 million, a decrease of more than RMB 9 million or 11.27% year-on-year. There are 3 main reasons for this. Firstly, due to the structure of the bank's fee income, the volatility of the capital market had a greater impact on the bank. In 2022 to the Asian -- Asia indices declined significantly and the bank's capital market-related fee income declined significantly. In contrast, the generally better domestic international capital markets in 2021 led to a significant increase in the Group's fee income, which objectively resulted in a high base. Secondly, the bank has actively responded to the call for fee reductions and concessions. In particular, we were the first among the big 4 banks with the annual fees for personal debit cards and small amount management fees since February last year.

Second is because of the structure of our income -- our fee income. And when we talk about the structure, for example, the percentage related to the capital market is pretty high in 2022, the percentage is 38% and even higher in 2021, probably 43%. And you know that in 2021, the capital markets was pretty good, both in China and the overseas market. And with that, we had a lot of growth in terms of fee income. And with that, the base was pretty high. But then in 2022, A&H market declined. And also with that, our fee income dropped dramatically. For example, our wealth management fund and agency-related fee dropped.

And the third reason, is because the weak links that we are still suffering. We are quite clear in understanding that there are still areas which we need to do better if compared with our peers, especially for settlement clearing business-related fee income. Now this part accounts for a low percentage. And in 2022, it was only 39%. At the same time, we should be aware that in 2022, for certain products, the growth rate was pretty good. For example, in 2022, we increased support for the real economy. We increased the credit provision and also syndicated loan fee income increased by 27.5%. And also, we had been promoting online consumption with that online payment-related fee increased by 21%. And also we have been promoting the pension custodian services with that we see 6.9% fee income in this regard. And also, interest rate fluctuation was an opportunity, and our fee income in this regard increased by 14%.

For this year, our expectation as well as the strategies for fee income, overall speaking, we're thinking that while we serve the real economy, we can provide higher-quality services to customers, making sure that the whole year fee income will have a positive growth. And so we want to do better. And the specifics, there are 4 aspects. First of all, we want to further improve the foundation, meaning that we want to better serve and also to expand our basic services, for example, deposit, et cetera, and also improve the fundamental role of clearing any settlement related businesses.

And the third is to further increase the momentum. Right now, the Chinese economy with great momentum, consumption and investment indicators are recovering. And for Bank of China, we will continue to do more services in this regard, which that there will be more income or fee income. And given China has the common prosperity. So we want to improve our wealth finance business.

And thirdly, we want to expand into new Frontier lines given that we are a comprehensive global bank. We want to expand our network of overseas customers and also to provide both RMB and foreign currency businesses and also to maintain our market position in, for example, settlement as well cross-border businesses, et cetera.

And the fourth aspect is to be compliant with regulation, making sure that we fulfill our responsibility and implement different government policies reducing and exempting fees so as to serve the economy and also be up to standard in terms of fee collection. Thank you.

Unidentified Company Representative

Thank you. Ms. Chao, next question. Next question, Mr. Cho. Sorry, Ms. Cho.

Unidentified Analyst

Thank you for the opportunity. My name is [Joe Lin], and my question is, what is the prospect of asset quality and credit cost in 2023? And also what are the main pressure points for this year?

Unidentified Company Representative

And for this question, let's invite Risk Director, Liu Jiandong to answer the question.

Jiandong Liu

Thank you. Ms. [Joe], for the question, asset quality has always been a topic of great interest. I just want to briefly introduce our situation in 2022. In 2022, the overall asset quality was quite stable. And in terms of our key risk indicators, we actually performed pretty well. First of all, the group NPL maintained stable and NPL balance increased by CNY 22.9 billion compared towards the beginning of the year. And NPL ratio was 1.32%, down by 0.01 percentage points compared towards the beginning. And the domestic NPL dropped sharply and NPL and also special mention loan for corporate actually increased and also the NPL ratio as well as balance for individuals for retail customers increased. And also, we've been resolving this, especially cash collection percentage has increased. Last year, we actually achieved a lot of progress in this regard, and we collected more than RMB 13 billion in this regard and also a lot of progress in dealing with the major projects and all these contributed to stable asset quality.

And secondly, it's about optimized credit asset structure and also quality of asset has been improved, especially emerging strategic industries, fintech, green finance, inclusive finance, et cetera. The loan for these areas actually increased more than the average loan increase rate. And also the asset quality has been pretty good.

And thirdly is the group's better capability in fighting against risks as we mentioned, that -- for example, the provision coverage ratio, et cetera, actually was better. Looking into 2023, overall speaking, Chinese macro economy is recovering. And now it's becoming very clear. And also, there will be more fiscal as well as monetary policy support and consumption will be boosted and there has been recovery in the real estate market and infrastructure manufacturing investment pretty strong, et cetera. So the foundation is good. Chinese economy doing better, meaning more opportunities to banks, and that's why we are confident for the future and we will continue to provide credit support so as to support high-quality development of the real economy. However, as you probably have noticed, we have to make sure that we keep tabs over the complexity of the real economy. And for uncertainties and the potential risks, we should be highly alert.

Looking into the Chinese domestic market. I think there are 3 main pressure points. First of all, real estate. President Liu Jin just elaborated on the situation in the real estate market. Overall speaking, the real estate market in China is still recovering and in this process because of the unique feature it takes longer time to solve the problems. That's why it drags on the overall asset quality. So this will be captive for a certain time.

And second, is, for example, COVID as was real estate issues will lead to declining government revenue as was increased government expenditure. So we have to pay attention to localities with a high debt so as to prevent regional systematic risks.

And the third pressure is driven by global declining especially with a declining export. And we have to pay closer attention to trade-related risks because this is our future business, and we pay close attention to that. That's the domestic situation and international situation. Right now, the global situation is very complicated and a lot of turbulence and there has been some issues in the banking sector in U.S. and European markets, even though we do not have a direct exposure -- risk exposure, so it's under control. However, the overall overseas situation, especially the impact of the banking problem on the financial system should be paid attention to. And the geopolitical situation such as the Ukrainian situation will also have a huge impact on the global economic and political situation and the fluctuation of commodity prices, declining of the world economy definitely will mean challenges over the quality of our overseas assets.

In addition to traditional credit risks as, for example, liquidity market and also operational and reputational risks should be paid attention to and there is higher requirements and greater level of pressure. Considering both domestic and overseas situation, in 2023, we will continue to proactively to solve systematic financial risks. This will be considered as a priority. We want to develop a business with high quality, but also prevent and control risks.

We want to emphasize our supervision over key areas and key localities. Overall speaking, we're quite confident in maintaining stable quality of the assets. To be more specific, several measures would be taken. First of all, we implement different economic policies issued by the State Council.

We will support tens of thousands of market entities to develop, and second to deepen our overall risk management and to identify and manage different types of risks better and also to avoid the contagion of risks among different sectors. And the third is to identify and also to alert as well as to resolve the problems as soon as possible. And we need to screen risks in different sectors and to keep close eye on key areas so as to resolve potential risks and to better resolve the NPL ratio.

And for this year, we compared with the 4 will take different strategies at the beginning, especially in Q1, we will strengthen our collection work making sure that collection will be done better. The purpose is to, of course, make sure that there will be sufficient room to deal with unexpected situations coming in the future.

So overall speaking, for the whole year, we want to maintain stable asset quality instead of paying attention so much to the balance among different quarters. And the fourth is to optimize the credit structure, so as to have a solid foundation for high-quality development. And fifth is to analyze different regulations and risks, also evaluate risks and also to be better capable of hedging against the risks, our provision coverage ratio should be reasonable. We are confident in maintaining asset quality as well as stable credit cost.

Unidentified Company Representative

Thank you, Mr. Liu. And next, one more question from Hong Kong venue, please. Morgan Stanley?

Unidentified Analyst

Ms. Yang, thank you for the opportunity. I'm with Morgan Stanley. I have a question about deposits. In 2022, deposit growth of Bank of China reached a new high, especially demand deposits, which grew pretty well. And also the interest payment ratio was very well managed. Could you elaborate on the deposit growth as well as the bank's strategy in this regard in 2023? And how is your expectation of the interest payment ratio in this year?

Unidentified Company Representative

Thank you for paying attention to BOC's efforts and also achievements in deposit. I want to invite Vice President, Zhang Yi, to answer this question.

Unidentified Company Representative

Thank you, Ms. Yang for recognition of our business, especially for deposits, we know that deposit is a fundamental basic business of a commercial bank, and this is the foundation for our business. As you probably know that there has been some issues in the banking sector in overseas markets. Actually, in this regard of the reasons, ultimately, it comes down to deposit business. So Bank of China actually pays close attention to deposits. We have taken a lot of measures last year, we can say that we achieved such progress in both quality and quantity. And last year, we can summarize 3 aspects of achievements. First of all, the percentage of customer deposit and liability has improved. That shows that our liability stability has been improving.

And secondly, the growth rate of deposit of the group actually is faster than the growth rate of loan, meaning now we are better improving the matching between the deposit as well as the loan.

And the third is daily average demand deposits. For this part, we're doing better and higher cost of deposit for 2 years as a percentage has been declining. So in terms of deposit interest payment ratio, we have been managing that pretty well. This year, if you look at the situation within China, with the various measures taken by the central government to stabilize economic growth, economic faring will be better in 2023. If you look at the first 2 months, total RMB deposits, new deposits reached almost [indiscernible] growth rate is a 7-year high. That is to say, spending from the society is adequate. We adhere to the overall principle of high-quality development of deposits. We formulated very proactive and aggressive expansion markets, the targets will gradually improve deposits market at competitive edge. First of all, we will sink to lower level of services by serving specialized and innovative enterprises and serving local government bonds, we will get deposits from -- by providing services.

Second, we will build the four strategic scenarios to lead innovation through product scenarios and realize technology empowerment. So technology empowerment can give us more deposits.

Thirdly, we will work on the sources through improving agency payroll services quality. We can use such service quality improvement to have better cash management who will conduct third-party custodian services for deposits so that we can get more deposits through product portfolio expansion.

Internationally, the overseas banking crisis incidents have prompted us to conduct analysis, most of the banks in the crisis due to the monotonous customer type in their operating structure. BOC is a bank with the highest level of internationalization and globalization among all the Chinese banks.

We follow closely such market developments, we use more advanced operating philosophy to attract customers, and we also strengthen efforts in low-cost deposits to ensure stability of the debt sources and through the asset business adjustment, we can dynamically adjust the long term and pricing so that the asset liabilities terms and the pricing levels are well matched so that overseas business can have very stable and sound development.

Just now Madam Yu also mentioned the estimate or projection of interest payment ratio. I've answered the question previously, but I would like to repeat again. With the yearly increase rate hikes for foreign currency funding cost this year may have a larger growth rate compared with the last year for domestic deposits, I mean, new deposits, the growth part will have continuous pressure. And the deposits will be more time deposits. That is the trend.

So for domestic and foreign currency, and RMB deposits will put us under great pressure. We are facing these difficulties to improve the interest rate model and optimize the structure to prompt high-level development of deposit business. Thank you for your question.

Unidentified Company Representative

Thank you, Vice President, Zhang Yi. These exchanges have also responded to the investors' concerns -- concentrated concerns of the investors. That's all for the questions and answers for investors, analysts. Now I would like to give the floor to Spokesperson of BOC, General Office Director, [indiscernible], to moderate the Q&A session for media journalists.

Unidentified Company Representative

Thank you, Madam Yu. There is a famous saying in China. If you meet each other, physically, you feel more intimate and closer. Last year, the 2021 results release, we mentioned that we can have face to face -- we hope we can have face to face results release. So we are very happy that this year, we have the 2022 annual results release on site physically.

I'd like to thank you again for your long-term support for BOC, you have our sincere gratitude. The society interest in BOC's business and the customers' interest in BOC's business have always been topics of interest to the media. I'm sure that you are fully prepared with the questions, but due to the time constraint, each media organization can only ask 1 question. First of all, media friends from the Beijing site. Beijing venue, please identify yourself and your organization before you raise the questions. Thank you. Now the floor is open.

Unidentified Analyst

Thank you, the management for the opportunity to ask a question. I'm from China Securities Daily, my name is [indiscernible]. My question is about cross-border finance. In the 2 annual sessions this year, it is said that efforts will be made to continue to give full play the driving rule of import and export for economic growth. We know banking group with cross-border finance as a future business. So in stabilizing foreign trade and promoting important export, what remarkable achievements have been made in BOC and what new measures will be taken in the future?

Unidentified Company Representative

Thank you, China Securities. Thank you for your question. This is a very BOC specific question. BOC has been operating overseas for more than -- close to 100 years in cross-border finance, we have accumulated a lot of advantages in our D&A is there. So I would like to invite Vice President, Zhang Xiaodong to respond to the question.

Unidentified Company Representative

Thank you for your question. Foreign trade development cannot go without financial support, just now media journalists have mentioned BOC is a mid-channel for foreign trade financial service, stabilizing foreign trade is a measure to follow through on building channel into a stronger trading country, but also an important effort to consolidate our market competitive edges in cross-border financial services. In 2022, we have a combination of measures and yielded remarkable results. First of all, we strengthened the top-level design. In quarter 1 2022 we released a series of measures to have co-cycle adjustment to stabilize foreign trade. We have also intensified efforts to seize RCEP foreign trade opportunities. At the end of the year, we responded to customers' needs immediately and was among the first to release -- was among the first to support foreign trade companies to get orders from global markets. We have also organized hundreds of events to support foreign trade.

Second, we have continuously enhanced financial supply centering on customers' needs. In 2022, domestic institutions provided a total of more than 3.4 trillion of international settlement credit and several trillion cross-border RMB settlement support. We directly serve trade import and export finance, which had a big increase cross-border letter of guarantee, et cetera, have enabled us strong market positions.

Third, we have innovative products in 2022 with further deepened cross-border finance, digital transformation, we launched BOC cross border in remittance express train to fastly iterate BOC cross border [indiscernible] products, which effectively supported new momentum of foreign trade development with enhanced shipping online connect program to have shipping direct to connect. So that shipping platform and downstream announced upstream customers can have online freight collection and payment. We handled more than -- around 1 million transactions to have smooth logistics.

Firstly, we have consolidated [indiscernible] and cities have become important fairs for China's opening up to the world. They have helped boost the foreign trade BOC has been the top-level strategic partner of all the 5 fairs, pre fair, during fair, and post fair we provided whole process support, which is highly recognized from different customers.

President Liu Jin has also mentioned that this year, we have a full toolbox so that we can make new breakthroughs guided by the spirit of the 20 CPC Party Congress, we will implement the deployments of the central government on stabilizing foreign trade and having higher quality of foreign trade so that we can make big contributions.

First of all, we help the -- we provide no less than CNY 500 billion for foreign trading companies to get overseas market. And we are also trigger new trade formats and new momentum and new potentials by continuing to do a good job at the providing financial services for overseas market players to boost the bilateral trade growth. And firstly, we are making innovations in cross-border finance products so that we can facilitate cross-border investments and increase service quality.

Fifthly, following the opening pace of financial markets, we are strengthening market product innovation to promote RMB-denominated currency or financial products to be used in neighboring countries.

Sixthly, as Chief Risk Officer, Jiandong has mentioned, we should strike a balance between development and security, while effectively controlling risks, we can -- we hope to realize high-quality development of our business. Thank you.

Unidentified Company Representative

Thank you Vice President, Xiaodong. Now the floor is open for another question.

Unidentified Analyst

Senior management. I'm BOC on Insurance Daily. My name is [indiscernible]. I have a question. In mid-2022, BOC released measures to support SMEs and pro job inclusive finance loans a series of special measures have been taken. I would like to know the results and achievements of the measures. And in stabilizing economic growth and promoting employment increase, what measures have been taken what results are those measures?

Unidentified Company Representative

Thank you for your question. I would like to reiterate your question. You are talking about releasing, not exiting, right? We are releasing -- further releasing inclusive finance measures, inclusive finance is the financial service. It also reflects the value proposition from the perspective of CSR of us now. I would like to invite Vice President, Zhang Yi to answer the question.

Unidentified Company Representative

Thank you for your question. Inclusive Finance is a hot topic that has been discussed and debated over the past several years. Regarding the development of inclusive finance, you'll see attach high importance to inclusive finance, we have improved systems and mechanisms and taken a series of very proactive and aggressive measures. If you look at the situation last year, we have had very good results in those measures, which can be summarized as follows: in 4 aspects. First of all, we have strong and forceful measures to serve the real economy. Last year, inclusive finance loan balance reached RMB 1.23 trillion, increase by 39.34%. And for customers' growth rate more than 20%, while improving quality and expanding market share, we have had very good management of the interest rate of loans dispersed for the new granted inclusive finance loans interest rate is 3.81%. Overall cost of enterprises was reduced by 42 basis points.

Second, digital transformation has quickened pace. The Inclusive Finance digital transformation started later in BOC than our peers. But over the past 2 years, with rapid development last year, we launched 17 new type online digital products. Therefore, the online incremental or new loans share in inclusive finance amounted to 62%. We've also launched the [indiscernible] app to provide financing application, business consulting services, business opportunity, match making and other services as comprehensive financial services. We have also launched I-SMART digital inclusive finance services plus we have more scenario-based products and more diversified characteristic financial services convenience, the services and more convenient risk control is of higher quality.

Thirdly, pro job loans employment is the largest measure for Pro livelihood. Last year, BOC has worked very hard to stabilize jobs and increase employment. We use financial services to provide more jobs and stabilize people's livelihood. Over the past 2 years, we launched 1,000 jobs and reaching 10,000 homes to provide staffing support and creating jobs for SMEs, we issued more than CNY 80 billion of such loans benefiting more than 20,000 enterprises customers.

Fourthly, more and frequent product innovation, we have been exploring innovation in key areas. And from now, we can see that we already have explored our own pathway for inclusive of financial development. So we provide life cycle support for technological companies and we are serving 18,000 so-called specialized innovative companies by offering RMB 345 billion as a credit balance. And also, we published the third phase IP as pledge financing index. And also, we are #1 in terms of the balance as was the number of customers in this regard. And also for the pain points of smaller micro enterprises in the trade sector, we have launched specific solutions for this. And this is a systematic solution. And we also have launched new urban citizen service solution.

For 5 years, Bank of China has been involved in CIIE as President Liu mentioned. Last year, President Liu mentioned about the activities this year and for last year, we attracted 1,200 enterprises from 40 companies. The total contractual amount reached $6 billion. So development of inclusive financial, this is not just about political requirement. It is not just about providing benefits to people, but also out of our own development and transition. We will focus on the following aspects: first of all, to continue the optimization of provision of inclusive financial services to improve both quality and quantity and second, to target at key areas and key customer basis, follow the national policy and also the trend of technological development to support the industrial recovery for retail, trade, catering and also to support individuals to start up the own businesses.

And the third is to accelerate digital transformation, we need to iterate our systems better and also to expand online service scenarios.

And fourth is to have overall risk management. We need to be smart in risk control. So when financial sector performs well, the economy will be well. We have to make sure to provide benefits to the people and follow the strategies of the central committee of the party as was the state council to support the high-quality development of the economy. Thank you.

Unidentified Company Representative

Now let's continue our question.

Unidentified Analyst

Thank you. My name is [indiscernible]. My question is that recently many banking institutions have released their latest achievements in information technology innovation, how is BOC's situation in this regard? And how will it empower your business operation and development?

Unidentified Company Representative

Thank you for your question. Bank of China always keeps tracks on trends and also follow the overall direction of digital transformation to enable our business development. Let me give the floor to Ms. Meng.

Qian Meng

Thank you. for your interest. Last year, centering on the overall group's strategy, we put customers at the center and also focus on innovation and a technological driven business development. We have been implementing major projects as well as the technologies to promote digital transformation.

Last year, we invested more in terms of technologies. We have more than 13,000 staff in this regard, up by 3.45%, accounting for 4.35% of the total staff. And in terms of the investment, we're talking about more than 20 billion, up by 15.74% and the contribution to operating income is also pretty high.

We've been focusing on innovation-driven development with the data, technology, scenario and experiences. We try to improve our capability in this regard so that we can upgrade our fintech. And we are focusing on several areas. First of all, institutional mechanism as the starting point and also better top-level design and also to reform of our management system, so the party committee Director leads the Digital Transformation Committee.

We also have optimized the setting of such committees. So as to have a more strategic and operational management, we also have a department in charge of this topic. So as to manage products scenarios and innovation-related work of the bank, we also have been working on labs and many other mechanisms to encourage the innovation of the group. Also, we've been optimizing the management process as well as resource allocation. So as to be more agile in responding last year, our R&D investment was up by 39%.

And secondly, with the key strategic projects, we try to improve our momentum in this regard. We are pooling resources from the whole group to promote the Oasis project as well as a better capability of the mid-office in terms of marketing, product innovation and business, our digital capability has been improved and our digital platform has been promoted.

We also have been working quite a lot and our network of digital platform has been improved. We have more than 240,000 customers using our different platforms. And the potential of such a vast amount of data is being utilized in sports and many other areas.

We are trying to create scenarios and also to expand the ecosystem reaching over 200 million people and improving our ability by using new technologies to improve the processes and also business concentration as well as a smart management. Cash operation has been managed in a smart way, outlets plus business as the ecosystem has been built, and we are providing over 900 types of business services.

And thirdly, with application, we can better improve our ability. We have developed [foreign language] and many other new generation technological platforms for enterprises. So as to improve our distributed architecture, big data, R&D capability. And to improve our PAOCR, technological platform and reduce redundant manual work. And also IoT, blockchain and many other technologies have been used to reduce cost and improve efficiency.

We also have achieved a lot of progress. For example, by using satellite remote controlling and IoT technologies to support the agricultural sector using artificial intelligence as well as algorithm to prevent fraud activities and also technologies have been used in supply chain financing to better support smaller micro enterprises, so as to shoulder our responsibility.

Also, we have been tracking the trend of most advanced technologies. For example, AI and models, et cetera, have been used to improve customer service. Last year, we have increased 5,000 patent applications and over 600 applications have been granted and in recent 5 years, we're #1 in this regard.

And the fourth is to enable businesses. We want to support high-quality development of the group. On 1 hand, we want to support the smart upgrading of our businesses, released the 8.0 version of mobile banking with more customers using that and online migration of business for overseas market has picked up the speed.

On the other hand, we are enabling 8 sectors to transform, for example, green finance, digital platform and also fintech, et cetera. Now we can acquire customers in a more smart way. We are launching over 20 products, so as to dramatically improve the number of customers and also to innovate e-commerce business.

And the total amount of our business has improved. For example, the supply chain finance, et cetera now are expanding to more customers and also wealth finance now is with a new platform, we are enriching the provision of products and information consumer financing now has a better process in terms of digital businesses. And we are enabling internal management.

We have platforms where the activity from the side of customers has been on the rise. We have more than 200,000 people using that on daily basis, and the customer experience has been improved, we are upgrading our remote working platform so as to improve business continuity with technologies. We also are creating internal ecosystem to improve the experience on the side of our staff.

Overall speaking last year in terms of digital transformation and also fintech innovation, we have achieved a lot of progress. And this year, we will continue to be resolute implementing the strategies of the central committee of the CPC, be firm in our strategies to promote Oasis project, data management and smart management as well scenario construction, et cetera. We will improve data-based marketing business capabilities so as to support high-quality development of the group with data, but also to help contribute to the integrated development of digital economy as a real economy. Thank you.

Unidentified Company Representative

Thank you. Because time is limited. So Ms. Meng actually didn't expand. Mr. [indiscernible] from China News actually raised a very good question, and we welcome your continued interest. Bank of China has a software center and we specifically have a wall where we showcased the patent application, and that's pretty amazing. And also, Ms. Meng mentioned, Bank of China's #1 position in terms of patents applied and also patents granted and you are more than welcome to visit that facility. But because time is very limited so let's just allow 1 more question from Beijing venue, and then there will be more questions from the Hong Kong venue. Thank you.

Unidentified Analyst

My name is [indiscernible]. My question is about International Corporation. We know that this is the tenth anniversary of the BRI, and we want to understand in terms of supporting BRI, what specific efforts have been made by Bank of China? And also, what's the plan for further contributing to BRI?

Unidentified Company Representative

Thank you. Thank you for your question. As an international Chinese bank. Bank of China has been working under the framework of a BRI for so many years. Let's invite Vice President, Xiaodong, to answer this question.

Unidentified Company Representative

Thank you for your question. As the Chinese bank with the highest level of globalization. Since 2014, Bank of China has been following the BRI initiative and trying to implement our strategic targets in this regard. And a lot of progress has been made. I just want to illustrate several points. First of all, in terms of organizational layout, we've been optimizing our financial service network to support BRI between 2013 to 2022. Now our overseas branches now are covering another 24 countries and regions. And by far, the overseas branches of Bank of China are already covering 62 countries in the regions, including 42 BRI partner countries. So Bank of China is #1 in this regard.

And the second is in terms of credit support. Over the years, we consider high standard and also sustainable and benefiting to people as our target to support a batch of key projects, which are healthy, green, digital, et cetera. For example, we are helping Chinese enterprises to be part of a PV solar project in UAE by the end of 2022. In BRI partner countries, Bank of China already have supported over 900 projects, the total credit amount exceeded USD 269 billion.

And thirdly, in terms of BRI themed bond issuance, Bank of China is the first financial institution, the first means the highest amount of issuance, the largest scale and the widest coverage, et cetera. From 2015 to 2019, we issued 5 different series of BRI themed bonds. The total value reached USD 14.5 billion, and the currency includes RMB, U.S. dollar, euro, et cetera, altogether, 7 currencies have been used.

Fourth is to promote people to people exchanges and cooperation. Bank of China has successfully organized 8 editions of international financial exchange activities. And we shared Chinese solutions and wisdoms and talked about opportunities.

And the fifth is to help localities to be part of BRI. Bank of China is committed to provide very accurate and comprehensive financial services and I am still in Boao, take Hainan free trade port with example. With financial resources, Bank of China has been promoting the alignment between BRI as well as the free trade port, and also to promote the implementation of 21st Century Maritime Silk Road which are reflected in the following aspects.

First of all, we are leading free-trade port financial innovations. We are among the first group of banks to have the pilot program of cross-border trade, high-level opening foreign exchange management. And the only bank with all the trade facilitation measures in place for all the 4 current account trade facilitation projects. And we are the first bank to initiate the innovative business of collecting -- of free exemption from registration for reinvestment after receiving the funds domestically.

For three years in a row, we have been hosting China International Consumer Goods expo to support high-level opening up of the country with concrete actions this year marks the tenth anniversary of the BRI. And the country will have the third BRI international cooperation summit will also offer our support for the event.

At the same time, also plan related activities for BOCs, BRI tenth anniversary activities. We will continue to give full play to our globalization advantages and continue to consolidate the BRI cooperation with high standard sustainability improve livelihood as the target so that there can be constant achievements made in high-level development, high-quality development of BRI.

Unidentified Company Representative

Thank you, Xiaodong. Now we hand over to Hong Kong venue. I would like to invite my colleague [indiscernible] to invite media friends from Hong Kong venue to ask your questions.

Unidentified Company Representative

Thank you, Director General Jia. Media friends, if you wish to ask a question, please raise your hand. Ladies first. First of all, the lady in the suit in the middle, please.

Unidentified Analyst

Management team members I'm from Phoenix TV. My name is [indiscernible], just now President Liu Jin has shared with us that for a long period of time, BOC has been actively committed to boosting domestic financing and RMB internationalization. In terms of the debt market, BOC is very active, can you give us more specific information on the business advantage of BOC in this area and the latest business development and what are the future development plans for BOC?

Unidentified Company Representative

Thank you, Phoenix TV [indiscernible] for your question. As you have mentioned, in promoting RMB internationalization BOC has played an important role about the specific practices. I would like to invite Director Zhao Rong to answer your question.

Unidentified Company Representative

Thank you, [indiscernible] from Phoenix TV. Thank you for recognition of BOC's achievement in that market. I would like to share with you the related business developments. First of all, domestically, in the debt market in 2022 within China, the domestic debt underwritten is CNY 1.37 trillion, ranking #2 in the interbank market.

We mainly supported the national strategy and livelihood sectors, including IT, high-end manufacturing, ports, transport and construction, energy, medicine, et cetera, we served Beijing, Tianjin, Hubei, Yangzi River Delta, Greater Bay, Shanghai, New District, Chengdu and Chongqing, Double City Economic [indiscernible] and Shenzhen.

We are ranked #1 in terms of the ABS underwriting volume in 2022. And also number one, in terms of the real estate sector debt underwriting volume and private enterprises debt underwriting. So we are ranked #1 among the big 4 banks in terms of the interbank market.

In cross-border finance, in real estate sector, we supported media group, [indiscernible] groups and Chongqing long for enterprises to have the second arrow that is the private enterprise debt financing tool. In cross-border finance, we give full play to our globalization advantages.

In 2022, our Panda bonds overseas bond by group standards, in terms of the underwriting volume for 7 years in a row have been ranked #1 in terms of the interbank market and China offshore debt market. And on March 2 we released the first Hainan free trade port sustainability-related bonds. It is in line with both international rules and also China rules for sustainability.

Going forward, regarding business development, we can see that the economy is turning for the better and market expectations are being improved and the financial needs of enterprises are getting stronger. So in this area, we are fully confident.

In terms of the business development strategy, it covers 4 aspects. First of all, we will grasp the strong growth momentum to have adequate scale and speed so that more impetus is injected into the real economy.

Second, to have higher level of planning, we will make innovations while keeping stable so that in Panda bonds and overseas bonds we can consolidate our market leading position.

Third is to conduct research on global debt market-related rules, regulations, management and standards so that we can contribute BOC's insights and solutions. Firstly, we'll follow closely the monitory policy of major developed economies and the development of global financial markets so that we can have better risk judgment and guard against the risk so that we will not have systematic risks to keep the bottom line and avoid collapse of the financing system -- financial system. Thank you.

Unidentified Company Representative

Now I would like to invite [indiscernible] to invite another media journalist to ask a question from Hong Kong venue.

Unidentified Company Representative

The gentlemen with glasses.

Unidentified Analyst

Thank you, management. I'm [indiscernible], I have a question related to Green Finance. In terms of green finance, in comparable peers, does BOC has any competitive edges to realize your targets because the overall market is moving towards the trend of green finance.

Unidentified Company Representative

Thank you for your question. Green development is an effort to implement national strategy for green development. It is also an important CSR for us. I would like to invite our Chief Risk Officer, Liu Jiandong, to answer the question.

Jiandong Liu

Thank you, the journalist from Hong Kong, for your question, Green Finance is 1 of the 8 financial priorities or strategies of BOC. Green Financial Services Preferred Bank is our goal. In 2022 centered on this goal we have achieved very good results.

As President Yujin mentioned, domestically, green credit balance, more than CNY 2 trillion increase of more than 20% underwritten domestic and foreign green bond scale reached CNY 250 billion and USD 29 billion. In terms of the green bonds, in terms of investment, issuance, and underwriting, we have kept a market-leading position, diversified green financial products and services have also been upgraded and innovated, including Blue bonds and ABS and ABM.

In recent years, BOC has been constantly improving the quality and efficiency of green financial services in terms of the competitive edges, I think we have such competitive edges in 3 aspects. First of all, we have established the green finance promotion mechanism, striking a balance between incentives and disincentives.

Green Finance is deemed by BOC as a long-term systematic project. We have been constantly optimizing governance structure and improving policy system to work on both incentives and disincentives, we have released 20-plus supporting policies and realized policies support tool kit covering performance evaluation enhancement, optimization of economic capital and differentiating authorization.

We have also strengthened the whole process development of credit and investments through fintech enabled management we have built, board plus management plus professional teams governance structure, a 3-layer structure. And last year, we have got very authoritative ESG awards by Global Finance and Euromoney and MSCI ESG rating for us is A, in near future we'll continue to work on both incentives and business incentives to promote high-quality development of green finance.

Second, we are improving green finance global brand influence. Last year, we took the lead in organizing Chinese-funded banks led the ESG sustainability-linked syndicated loan. The first ESG sustainability-linked syndicated loan in China as Chinese-funded bank with the highest level of internationalization.

We support green development across the globe. In 2022, we supported a lot of such projects, and we are ranked #1 in Chinese-funded enterprises in terms of global green loan sustainability linked loans and global offshore green bonds.

In addition to making innovations in products and services, we have also discharged our CSR and was involved in the international initiatives and mechanisms like PRP, TCFD and ESG. In the future, we'll continue to give full pledge to our advantages in globalization to explore green plus tech, green plus inclusiveness, green plus cross-border finance, green plus supply chain and plus consumption in product and service innovations.

Thirdly, we have comprehensively enhanced green finance software power. We have realized online training system covering 8 themes, more than 80 courses, more than 750,000 people have watched and attended the courses. We have also been strengthening green operations management.

We have been among the first banks to complete corporation carbon screening and stocktaking, we have also actively conducted Green Finance forward-looking research for the frontier areas and International Finance Forum.

We have also cooperated with Hainan provincial Green Finance Research Academy. We have also published publications on Green Finance ESG to communicate with peers about latest developments going forward, we'll provide long-term strong support for green finance. Thank you.

Unidentified Company Representative

Thank you Chief Risk Officer, Jiandong. We started from 2:00 now, it's already almost two hours. I'm sure you have many more questions. So now I would like to invite President Liu Jin to further respond and interact with you in terms of the questions of interest to you.

Jin Liu

Dear investors, friends, analysts and media friends, this is the third time for me to attend the annual results release in BOC. All the online friends, at least you have met me 3 times on such occasions. I mean, at least, I mean, I have also attended annual results release of other financial institutions. I'm more than willing to attend such events to interact with investors, analysts and media friends, all walks of life for very in-depth exchanges and communication because listening to the voices of the market and following the pulse and feeling the pulse of market is a posture that is expected of financial institution. We do so not only during annual results release, but also in product research events, product launches and customer events. As was mentioned in our R&D center, we have a wall full of our patent applications and patents issued. I'm looking forward to your visits and look at that wall so that you can have more dynamic in depth and better understanding of BOC in your evaluation of BOC.

Over the past one or two days, all the major banks are releasing annual results. You have to move from one venue to another and you have to type a lot of words on your keyboard. You have been working very hard. The market confidence in BOC is half attributed to you. Thank you for your strong support.

This is a 2022 annual results release actually over the past two years in H share and A share. BOC's performance among bank shares is quite good and we outperformed the major market indicators for A shares in terms of the 2-year dividend payment more than 13% for H share and A share more than 26%, very good return to investors.

Of course, we have been performing pretty well in terms of share prices. However, we realized that the valuation of major Chinese banks, including us, is still relatively low, and we don't think that it correctly reflects our value as being an invested company. And I personally have been investing in listed companies, not that much, several dozens of thousands and I started more than a decade ago. And sometimes right now, the price is still lower than the price that I purchased.

But of course, I'm a long-term investor. But this gives you a sense of the overall situation when it comes to the share prices of major banks. After being listed, the growth rate of total asset as was profit attributable to shareholders of BOC increased by 11%. And also the annual investor return, including dividend from A share market and H share market actually is way higher than others.

And if we consider the to be distributed common stock dividends by Bank of China, we're talking about over 800 billion by Bank of China way higher than IPO as was a refinancing amount. And over 30% of the dividend payment. That is the percentage that we have capped every year.

Bank of China is more than 100 years old. We experienced the hardship for liberation. We also experienced turbulences in overseas market. Thus, we have accumulated a lot of experiences as well as confidence for us to go through difficulties and currently by fully integrate ourselves into the national strategy and optimizing our capabilities, we can better serve China's opening up.

And of course, in this process, our own features are showing as well by implementing the new development concepts, we are doing better in terms of ESG and China has the dual circulation and Bank of China is not just a participant but also a beneficiary, and we try to become an explorer and practitioner in the financial business development with the Chinese features.

So my recommendation for all the investors and analysts is that to focus on the long term and also not just pay attention only to, for example, profitability and also management of the businesses and the stability of asset. But also realize that all of this is supported by the Communist Party of China as well as the creditworthiness of the Chinese government as well the advantages of a socialist policy.

In previous two rounds of results release, I shared with you 3 points where I mentioned. You have to look at this, but also look at that. And today, I want to add another two messages, but I don't want to add too many because that's difficult for you to remember. And also that will further delay the release.

I want to say that we need to look at the share price but also dividend. We also need to look at the current situation as was the long term. We need to look at the financial performance as was the overall performance. We need to look at the growth of emerging companies, but also we need to look at the stability of traditional blue chip companies like us.

We need to look at the general rule and the pattern when it comes to the operation of commercial banks. But also, we need to understand the unique advantages given by the socialism with the Chinese characteristics. So in this way, the Western risk management concepts and approaches and financial management approaches and methodologies can truly be combined with the actual situation in the Chinese market.

And we can, by doing this, jointly explore as we make contributions to our ultimate target. I've been taking part in Global Wealth Management Forum and CDF as was Boao Forum for Asia, et cetera. And I've been talking with stakeholders from China and overseas markets.

CDF. During CDF in Beijing, there were some overseas financial institutions, executives coming and visiting us, people are quite optimistic about Chinese economic growth as was the development of banks in China. And in my conversation with them, as was in my conversation with my colleagues, I always say that our peers in the U.S. and the European markets, our competitors are now quite confident and optimistic about China's development and also about us, then what's the reason for us to hesitate and not confident.

So let's join our hands. Let's be more confident. And let's make contribution to the capital market with the Chinese features as well as modern financial with Chinese characteristics as well as to make a contribution to early recovery of the Chinese economy as well as a healthy development of Chinese economy, of course, make contribution to the implementation of modernization with Chinese features. Thank you.

Unidentified Company Representative

Thank you, President, Liu Jin. One year ago, in last year's annual results release, President Liu mentioned 3 points in terms of you have to look at this, but also that and this year President Liu encouraged everybody to look at a long term and also he has added another 2 points. And I think the message from President Liu is that Bank of China are taking concrete actions to showcase our vision and our confidence about future as well as the fact that Bank of China will continue to improve our business performance to make contributions to the society, to our customers and to generate better return to our shareholders.

Unidentified Company Representative

And with that, today's annual results release has come to an end. And after today's event through our official website as well the WeChat public account, you can have more access to different types of information. [Call ends abruptly]

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Bank of China Limited (BACHF) Q4 2022 Earnings Call Transcript