China Merchants Bank Co. , Ltd. (OTCPK:CIHKY) Third Quarter 2022 Results Conference Call October 30, 2022 9:30 p. m. Eastern Time
Participating companies
Wang Liang – President and Chief Executive Officer
Wang Jianzhong – Executive Vice President
Li Delin – Executive Vice President
Zhu Jiangtao – Executive Vice President
Zhong Desheng – Executive Assistant, President
Conference Call Participants
Yan Meizhi-UBS
Xiao Feifei – Citic Securities
Yang Shuo-Goldman Sachs
Xu Ran – Morgan Stanley
Zhang Shuaishuai – CICC
Ma Tingting – Guosheng Values
Unidentified corporate representative
Investors, analysts, tomorrow. CMB’s third quarter 2022 earnings announcement will now begin. I am the representative of CMB Securities Affairs, the head of Saihan’s office, given the pandemic situation, we will continue to spread our communication online.
First of all, I would like to introduce you to today’s participants. They are M. Wang Liang, President and CEO; M. Wang Jianzhong, Executive Vice President; M. Li Delin, Executive Vice President; M. Zhu Jiangtao, Executive Vice President; Mr. Zhong Desheng, Executive Assistant, President.
On behalf of CMB, I would like to welcome you to today’s assembly and thank you for your long support and investment in CMB.
Today’s assembly consists of 2 consultations. First of all, we would like to give the ground to Mr. Wang to briefly provide the effects of the third quarter of CMB in 2022, it takes about 15 minutes. The moment is the question and answer consultation that lasts approximately 1 hour. The assembly expects to simultaneously import from Chinese to English.
Now let’s turn to President Wang for the arrival of CMB’s third quarter 2022 results.
Wang Liang
Dear investors, analysts, good morning. Last Friday, CMB released the third quarterly report of 2022. And today, with our primary control to meet with all of our investors and analysts, I would like to take this opportunity to thank them for their long time and interest in CMB.
I would like, with my colleague, to have full and open communication with all of you today. I will take a few minutes to give you our CMB Q3 effects and then answer your questions.
It is worth mentioning that the statistics discussed below are based on the IFRS caliber as well as the H Share report caliber. Since this year, in the confusing internal and external operating environment, CMB continues with quality, efficiency of scale, dynamic balance and philosophy of progression. Throughout our direction and objectives to continue building a 3. 0 model and boost our ability in wealth control, threat control and fintech to advertise our point of operations and control.
We achieved a stable expansion in our operational functionality and consolidated our merit in our strength style balance. During the first 3 quarters, we distinguished ourselves through the following 6 characteristics in our operation. First, we remained strong in our profitability and at the highest point of ROAA and ROAE in the third quarter, we achieved a net operating income source of RMB 264. 8 billion, up 5. 3% year-on-year.
Net profit attributable to the bank’s shareholder of RMB 106. 9 billion, a year-on-year increase of 14. 21%, achieving a net source of income over interest source of RMB 162. 13 billion, or 7. 63%. Net source of interest on income, RMB 102. 7 billion, grew by 1. 85% year-on-year. Annualized EBITDA and EBITDA attributable to the bank’s shareholders amounted to 1. 5% and 18. 2%, respectively, increasing 0. 06 and 0. 11 points, respectively.
According to the complex and weighted approach, our CET1 index continued to increase, reaching 12. 85% and 11. 18%, respectively. Second, we secured our expansion into the wealth control business. .
At the end of September, AUM retail, 11. 96 trillion RMB, an increase of 1. 2 trillion RMB through the end of last year with an expansion rate of 11. 16%. The asset control business amounted to RMB 4. 72 trillion, up 9. 26% from the beginning of last year. Asset custody activities totaled RMB 20. 77 trillion and up to 6. 72% through the end of last year.
In the context of the drastic fall in the capital market, the wealth control business maintained a smart expansion momentum, demonstrating strong resilience. During the first 3 quarters, the organization achieved a net source of income excluding interest of RMB 102. 7 billion, up 1. 85% year-on-year. year-on-year. This is a safe expansion based on last year’s expansion rate of 21. 87% and represented 38. 78% of our net operating income.
To see key items, our wealth control payment and commission earnings source, RMB 25. 5 billion, a negative year-on-year expansion of 13. 1%. Source of commission earnings from the asset control business, RMB 9. 4 billion, up 22. 32% year-on-year. Custody business with profits of RMB 4400 million, up 6. 59% from the previous year. Credit card fee earnings, RMB 15. 9 billion, up 6. 54% from the previous year.
Source of settlement and clearing income RMB 11. 5 billion, 8. 87% more than the previous year. Third, our scale of lending is increasing. Credit and consumer card loans have shown immediate recovery momentum. In the banking sector, we actively proposed lending expansion, with total loans and advances amounting to RMB 5. 99 trillion, an increase of RMB 424 billion, an expansion of 7. 62%.
And low-profile general visits accounted for 61% of total assets, an increase of 1. 53 percentage issues from the end of last year. Under the caliber of the bank, our business loan exceeded RMB 125 billion with an expansion rate of 6. 64%, among which the top green loan through RMB 56. 6 billion until the end of last year with an expansion rate of 21. 45%.
Manufacturing loan up to RMB 67. 6 billion, until the end of last year with an expansion rate of 21. 12%.
Among non-public loans, as we see fewer increases in residential mortgages and more increases in loans to SMEs, this really reflects our greater potency for the genuine economy. And we’ve been very proactive about recovering loans to customers after the pandemic.
And as a result, our new loans granted in the third quarter are primarily invested in retail, and we see customer loans and credit card loans experiencing an immediate recovery. They constitute an accumulation of approximately RMB 50 billion and constitute 80% of our total. Building for the low end of the 3rd quarter.
To some extent, offset the strain of an immediate decline in loan yields. Fourth, we see a steady expansion of our visitor base and visitor deposits are increasing in amount while remaining of good quality. At the end of September, we had 2. 47 million visitors, 153,000 more than at the end of last year. Retail consumers totaled 182 million, up 5. 2% from the end of last year.
The expansion of our visitor base has actively and strongly contributed to the expansion of our warehouse. Total visitor deposits amount to RMB 7 trillion, surpassing the threshold of RMB 7 trillion, up 11. 71% from the end of last year, up 18. 08% from the end of last year.
We will continue to subscribe to receive critical deposits in our midst and attract and collect more budget from our clients while managing the amount and price of high-cost deposits.
Non-deposit deposits accounted for 61% of our total deposits, remaining at a higher level. During the first 3 quarters, the deposit ratio visitor charge, 1. 51%, an increase of 11 foundation issues year-over-year, adding for the 3. er quarter, visitors deposit rate of 1. 54%, or 2 higher foundation issues quarter over quarter. The degree of accumulation increased as sharply as in the last quarter.
Fifth, we continue to dynamically adjust our balance sheet and decrease our degree of reduction in the NIM. For the first 3 quarters, our MNI was 2. 41%, a decrease of 7 bps from the previous year, basically impacted by multiple LPR cuts, a low requirement for investment in the genuine economy, and people’s goal of making more term deposits than capital market investments.
To maintain a solid NIM. In the third quarter, we further strengthened our portfolio control strategy on our balance sheet. On the asset side, we are expanding our visitor base, expanding our credit expansion, maintaining value and ensuring our quality to sustainably organize lending. and our assets through the allocation of more bonds and the exit of those low-yielding interbank assets. Our source of net interest income increased by 7. 63% year-over-year.
On the liability side, we support expansion into cheap fundamental deposits and higher controlled high-cost liabilities. Since the third quarter, our yields on interest-bearing assets, 3. 86%. Cost ratio of interest-bearing liabilities, with 1. 61% remaining the same at the start of the second quarter. The third quarter NIM was 2. 36%, down 1 basis point from the second quarter, but the degree of decline was slightly reduced compared to the second quarter, we strictly categorized a strict categorization of assets, and strengthened threat prevention and solution to our threat. affected by the threat brought by our real estate clients and by retail loans affected by a pandemic.
The company’s special NPL mention and the balance and ratio of nonperforming loans are all higher than last year. At the end of September, our NPL balance stood at RMB 57 billion, RMB 6. 2 billion more than last year. up to 0. 04 percentage emissions compared to last year. Special mention loan ratio, 1. 14%, up 0. 3 percentage issues compared to last year.
Default rate, 1. 21%, an increase of 0. 19 percentage points from the end of last year. The company’s NPL 2 loans have been in arrears for 60 days. The proportion is 1. 21%. The annualized NPL formation rate, 1. 13%, an increase of 0. 18 percentage issues year-over-year, basically influenced by the new formation of non-performing real estate loans and the unique adjustment of our popularity of credit card loans and the migration of popularity. of loans that have been past due for 50 days or more as delinquent loans.
Focused on existing operating environments, the company will continue to adhere to our prudent and robust provisioning policy. Our provisioning policy index, 455. 6%, is down 28. 2 percentage points from the end of last year. Loan provisioning rate 4. 34%, down 0. 08 percentage points from the end of last year. Still, there is still a superior capability for threat compensation.
The Company’s annualized credit charge 0. 81%, an increase of 0. 32 percentage points year-over-year, primarily due to prudent forecasting and accrual of provisions for loans and advances.
Looking ahead to the fourth quarter, given the very complicated external environment of the economy, the monetary and geopolitical environment, the repeated appearance of the pandemic, the adjustment of the real estate market, the fall in interest rates and the fluctuation of the capital market, we still face strong pressure.
CMB will remain our unchanging strategic positioning, i. e. the bank. The President has assumed the duty under the leadership of the Board of Directors, our business formula and the stability of our skills team to continue to take customers to the medium and create price. for our clients and continue to develop our capabilities, build in wealth management, fintech and threat management, surrounding the price chain of expanding quantity, revenue, power and price to comprehensively strengthen our management, save it and threats to build our new competitive merit and shape a new Malik curve and continue to build our CMB investment price over the long term.
Thank you. That’s all for my introduction.
Unidentified corporate representative
Thank you, President Wang. We will now enter the question and answer session. Please follow the commands given through the operator. And enter your call and the company you will submit before asking the question.
Now we will ask the first question.
Q&A session
Operator
[Operator Instructions] The first comes from [indistinguishable].
unidentified analyst
Is it about the existing external environment and will CMB think about business strategy or trading tactics in the new external environment?
Wang Liang
Thank you for the question. This year, you will see that monetary institutions have already faced a very complicated external environment. And first, I gave you a brief preview on what we accomplished this morning for the first 3 quarters.
While we have achieved such solid growth, this is basically because we stick to our retail banking strategy and the retail business is the backbone of CMB’s overall business.
Therefore, in the existing external environment, everyone can see where CMB is emerging the most and by our merit and our own special characteristics and also how we can provide investors with a solid return. I know it’s a great interest and a great fear of the market, but it is also the same corruption towards which control is directed.
I think the explanation for why we have been given up to this point today is because, first, 20 years ago, we already clarified a lot the direction of our strategy in retail banking. 20 years ago, our former CEO, Mr. Miao Jian, said, if you don’t do wholesale banking today, you may not be able to succeed today. But if you don’t do retail banking, you may not be able to succeed in the future.
At that point, the long term means that now is the time for us. Therefore, we think that if we don’t do the details today, we cannot succeed. So, if we don’t do retail sales in the long term, it’s also the same, we probably wouldn’t succeed in the long run. That is why last year the Board of Directors reconfirmed that the bank will have to rebuild itself in creating more productive prices with a broad business model, we that this is in line with the classic benefits that CMB has lately, and is also in line with the trend of the times and the new era.
So what’s the trend now right now?China has become the largest economy of the moment in the world, and we have an average elegance of around 400 million. And our purpose is to have equivalent prosperity. Therefore, this is in line with the national goal and also in line with visitor demand.
And this is a conclusion that we have drawn on the basis of our efforts for more than 25 years, and we have accumulated enough of our experiences, our global and comprehensive formula and also our knowledge in those areas. That is why I say that we will surely have to stick to what is [attributed] in this path that we have already taken.
And last year, the chairman of the board had already advanced the concept that CMB would have 3 capabilities, namely wealth control capability for fintechs, but also threat control. The 3 main capabilities. One of them is that wealth control makes a decision about how accurate or how fast we can pass and also that generation makes a decision about how fast we can pass; Threat control makes a decision about how far we can go.
So, the president also has: that the requirement of the board of trustees and also the president also explain the long-term direction of CMB. So as long as we can stay on this path and stay true to our original goal. We are definitely able to offer price, create price for our investors and also create price for our employees, for our shareholders, for society and also for our customers. Thank you.
Second question, please.
Operator
The moment comes from Mr. [indistinguishable] China City.
unidentified analyst
In fact, we now see that there is some kind of deficit in the percentage price of CMB. And investors are very concerned about whether CMB will replace this market mechanism.
Wang Liang
Thank you for the question. Yes, in fact, recently, the percentage price, especially from October, has fallen again, and has even been damaged now that the PV is even below 1. Therefore, there are many considerations about the investor component, as well as many reports in the media. for management. On the other hand, we believe that we do not care much about your concern. Investors, analysts and also media reports. I have already read your reports and have an idea about them. I think other people are interested, first of all, whether the CMB market mechanism can continue.
Second, they are concerned that in this economic slowdown, especially when the genuine economy faces difficulties and national policies will be such that monetary establishments genuine economy. Will this have a negative impact?Or will it replace CMB’s strategy?So how can CMB balance jobs within the real economy and CMB’s special strategy?
And third, I know that investors are involved in CMB asset management, wealth management, if CMB is going to replace its strategy in those 2 business areas. And combining your questions, I would like to share with you my percentage as a director. I believe the market mechanism for CMB will not replace it.
CMB was established in 1987 with only one hundred million in capital. And now our net assets exceed $900 billion. And if we calculate on the basic proportion of Level 1, we are ranked 11th among all banks in the world. We started from the Shekou domain in Shenzhen, then moved on: we became the national bank and became a foreign bank.
The explanation of why: One of the explanations for our good fortune is that we have a market mechanism. I don’t think it’s a market mechanism. It is not an undeniable slogan, it has this internal logic. First of all, it can be reflected that first CMB works through itself and profitability, CMB is guilty of its own profitability.
I know it’s pretty simple to say right now, but at the time, at the beginning of the period, it was a very complicated time and a complicated solution when we started in the 1980s. So certainly, we will insist on that.
And secondly, another image reflected in the market mechanism is that the way in which our talents, i. e. our leaders, can be promoted or demoted based on their functionality and their income can be even higher or lower depending on their functionality. Performance is indeed vital to our staff. And even for us, as managers, we have a 3-year term, we are appointed through the board if you can manage the bank, then you will still be appointed through the sister board not to be selected through the Board.
And also for our middle managers and bank audits, they will have to compete for a promotion based on their performance. So, and I still don’t forget it at first, when other people started joining CMB at the beginning. Start period, they think it’s not a guaranteed task and a start, and we can emphasize this: focus on the professionalism of our workforce. It is very important and is ingrained in our genes.
And third, we have a strong corporate governance structure. From the beginning, we appointed, demonstrated this, an executive director, who assumes all functions of the bank under the leadership of the board of directors. And also, in the profession. We depend on pro control to manage the bank.
And all this is based on the mechanism of the market, we can ensure the progress of the bank. I still don’t forget when we started: we first introduced the credit card sector and also the personal banking sector. We have also brought professionals from other leading money establishments to register with us within CMB to help expand the credit card and also the personal bank card. Even some of them are still noticeable with CMB today.
As you can see, we have already established strong corporate governance and also made sure that CMB can be market-oriented, especially since we are indexed in Asia, the H stock market, and this is also helping our market mechanism a lot.
In addition to deeply understanding each and every verbal exchange with investors or analysts, I know that investors and analysts, you and your recommendation on our strategy are also something vital for us, it is very valuable, it means a valuable price for CMB. . That means how you can improve our strategy and improve our mechanism.
We who in recent years have already shaped our own characteristics, and will continue to do so, and our President, Miao and the Board of Directors have also continuously demonstrated that they are mandatory: WBC will have to not forget 3 things without altering.
First, the Director General assumes all functions under the direction of the Board of Directors. The secondary marketing mechanism will remain unchanged. Third, the solid remains unchanged. And that’s why we’ve been successful in the past. And those are the same explanations for which or the same things that will continue to settle in the future. To be sure, the market economy also means a flow-based economy. economy.
And anything else, we stick to the market mechanism. This means that we will have to operate in a compatible way. This means that we must stick to the contract according to our interest in our consumer and if we have to take responsibility, the market mechanism does not mean great praise for performance, but at the same time it has praise, at the same time it also has limitations.
You will have to: when you have the merit of the marketplaceplace mechanism, you will also have to endure the limitations of the marketplaceplace mechanism, such as adjustment, control can be promoted or degraded, and revenue can be maximum or minimum depending on your performance. There are 2 aspects and the negative that must be assumed. That’s why I say we’ll have to stick to the marketplaceplaceplace mechanism and make greater use of it to make sure we get our worth.
Secondly, we are involved in that [several] and some adjustments to our strategy. I believe that serving the genuine economy is not contrary to our strategy, it is in line with our strategy as a bank at the service of the genuine economy is our natural duty, only with a strong economy can we have forged finances.
In recent decades, especially after the 2009 currency crisis, Chinese banks have become increasingly stronger. We are part of the four or five lists of Chinese banks among the 10 most sensible banks in the world. The main explanation for why China has become the largest economy of the moment in the world because the economy has strengthened. That’s why, and it’s more commonly banks that have become stronger. And CMB also benefits from immediate economic expansion after reform and opening-up.
It is our herbal duty to render our service in the service of the genuine economy and, by serving the genuine economy, we can continue to develop, this is undoubtedly true. And at the same time, CMB is a bank founded on, operates in, based on the mechanism of the market. And also, we have our own special feature. It is mandatory to adhere to the differentiated form.
When we expand our balance sheet, we also want to concentrate on the threat price list, which is the precept to which it must abide. And so that you can have a greater progression of yourself and also serve the economy and CMB, we also think that ESG is a very vital duty that we will have to assume.
That is why we advertise green loans and also green assets, green bonds in which those business sectors are in line with the national strategy and also for prolonged control of wealth, we respond better to the demands of residence, control of wealth and for inclusive prosperity.
Therefore, all methods are completely in line with the national strategy and also with the express characteristics of CMB. Therefore, serving the genuine economy does not contradict CMB’s strategy and we can maintain a balance. These are very close to each other. and we can expand our own bank.
And at the same time, we will have to be smart for the economy and serve the genuine economy, and assume our social duty, the social duty. The fear of the moment is a balance between our own progression and corporate and national orientation.
And third, I know the media reports, so some have focused on violating the loss of Mr. Tian Huiyu. And there is a report on this, and I know that some investors are very involved in this, if it will have a negative effect on the wealth control business or CMB asset control.
What I can say is that Mr. Tian’s case is his individual case. It has nothing to do with CMB. And at the request of the president and the board of directors, we will have to stabilize our robust mechanism, our functioning and stabilize our workforce. So you can see that we are very strong on all fronts, which is also reflected in our operational performance. And nothing from CMB cared in Tian Huiyu’s case.
And each and every company is on the right trajectory, as I just said, the custody business has an increase of more than 20%, and our wealth control business, an extensive wealth control business, even if it is negatively affected by capital. market, the volatility of market capital.
Even though we are going through a pretty tough time for new mutual fund sales, other corporations are progressing healthily, in a healthy way, and with smart momentum. strategy and create price for our investors.
And we appreciate your feedback on [indistinguishable], that’s why I’d like to take this opportunity to tell you: percentage with you, my comments. Thank you.
Operator
The following is from Ms. Yan Meizhi of UBS.
Yan Meizhi
I am Yan Meizhi from UBS. As you just mentioned, Chairman Wang, in threat management, I have an interest in asset quality, especially for real estate activities.
We noticed that by the end of September, real estate activity had declined from quarter to quarter. I would like to know if there is any change in your growth strategy in the real estate sector from the previous agreement. We see in the third quarter that real estate arrears exceeded 3%, and we continue to see defaults of developers or unfinished projects and the market, which affects the state of the market.
I would like to know that from the end of this year until the next, what do you think is the evolution of the delinquency of the real estate business?Where is the peak? NPL formation index, provisioning ratio and divestment rate, what is your system?And what are the threat situations of residential mortgages, credit card loans, and other non-public loans in your key areas?That’s it for my questions.
Wang Liang
The will will be answered through Mr. Zhu.
Zhu Jiangtao
Thank you for your questions. As for real estate risk, it is a factor that interests many people.
So, CMB, our strategy is that we will remain consistent with our previous agreement with no major changes. As for the retail industry – NPL real estate, we pay special attention only to the proportion, but also to the peculiarity of the education ratio.
The NPL index is influenced by many factors, such as scale, such as collection rate, collection may reflect the trend of adjustments in the industry to see from the first quarter, the education index is 4. 7 billion RMB. Second quarter, RMB 2. 7 billion and 3rd quarter, RMB 3. 5 billion. And, in general, the hole is narrowing. That’s a trend we’re seeing.
From my point of view, in the fourth quarter and next year, we will continue to see the trfinish. This is the real estate business threat condition on the sheet with respect to the off-balance sheet threat until the end of September. The wealth control product i. e. with underlying assets in real estate is RMB 145 billion, of which RMB 66. 4 billion is not standardized, basically targeting state-owned enterprises so that threats are under control.
The company’s sales balance amounted to RMB 38. 4 billion, of which corporate agencies sell RMB 4. 1 billion, and the maximum of this is ArrayPB’s default company sales revenue, RMB 34. 1 billion, or 10% of our peak. So, currently, those who have already been deported amounted to 4900 million RMB, which focuses on a very limited number of customers, and we already have enough assets as collateral.
Therefore, in the future, we will continue to strengthen our control of the existing era and conduct active communication with the asset manager. And we will go up to achieve its controllability and functionality and protect consumer rights. These are the quality situations of off-balance sheet assets. With regard to the control of assets and products for firm sale.
And like the policy of threats and removal of generals, we will apply it to the real estate business. We will continue to build on our strengths and take multiple measures, with the exception of classic measures such as collection. We will also take other investment banking segments like [AMC], etc. , the removal of threatening assets takes some time. We perceive that it will take a long time to eliminate it.
And as far as provisioning for the real estate business is concerned, the provisioning point for our real estate business is already double our overall provisioning point for corporate banking. Therefore, it has a fairly strong resilience. As for the case to which you pay close attention, it is the occasion of stop that occurs in some projects.
By the end of September, we expect the total volume to be RMB 369 million, or 0. 02% of the ratio, to make the threat point controllable. That’s my answer.
Wang Liang
Thank you, Riesgo, Executive Vice President, Mr. Zhu. Next question, please.
Operator
Next is from Xiao Feifei of Citic Securities.
Xiao Feifei
Question about the allocation of assets and liabilities. As we see the asset shortage continuing in the banking sector, I would like to know your asset allocation strategy — asset allocation by category for the fourth quarter and next year, i. e. , the rate of expansion of general loans and advances and general loans and general assets. And I’d like to know if you’ll still settle for expanding lending to Americans to your new loan schedule?
Wang Liang
Thank you for your question. This year, we have based our budget on the growth of deposits. The ability to raise capital and the percentage of our portfolio in the market, as well as the figure announced through the PBOC and also our asset structure, and those points in combination contribute to our budget for the coming year. Loan growth for the year. So this year, because of adjustments in the market, we’ve made some pretty significant adjustments.
The explanation is that we do not have a sufficient effect of credit demand, the general expansion of RMB 300 billion loans, RMB 120 billion commercial loans and retail loans RMB 170 billion, and the rest comes from invoices and the extension of non-bank loans. [FI].
Based on the increase, we see the business loan, which is about 60 billion RMB, which, to some extent, has made up for the hole in the extension of loans to individuals. In such circumstances, we see a sufficient loan extension.
And as a result, we have made corresponding changes by strengthening our investment efforts, adding investments in local government debt, political bank debt, and also foreign currency bond investments to flexibly organize our asset allocation and make smart use of our capital utilization. .
In the fourth quarter, we will act on our plan set out earlier this year and make every effort to achieve our loan extension target. We will decrease the extent of lending to interbank expenses and assets and inspire our aid for bank credit card loans and corporate loans, which is also what we’ve noticed in the afterlife: for the third and fourth quarters, credit card loans and retail and customer loans are recovering with a smart recovery momentum.
And I think that momentum will compensate, to some extent, for the hole we’re seeing with other types of non-public lending. We will also inspire the extension of credit to SMEs in the coming period. And we hope that, although we have achieved our budgetary target for loans to SMEs and for those types of loans, we will continue to maintain our objective in this area.
For corporate loans, we will continue our efforts in extending loans to the corporate banking sector, specifically for M loans.
For next year, on the one hand, we will have a smart end of year and we are also preparing for a smart start for next year and making applicable and corresponding plans for the loan extension for next year. Like last year and in the previous steps, we will have an adequate expansion rate based on our RWA allocation capacity to our final capital expansion capacity.
With limited RWAs, we will complete our long-term investment and loan extension plan to ensure the expansion of our retail loans and the expansion of our net interest earnings stream to achieve our overall and ultimate goal of earnings expansion.
And, of course, we will act according to our threat checkpoint and not act too aggressive, too fast, or too slow in our development speed. We will make a very moderate arrangement of our loan extension plan. And we’ll also take a look at the expansion and speed of lending nationwide. I think we’ll have a double-digit expansion in our lending expansion, similar to what we’ve done in recent years. It’s because of the size.
In terms of structure, we will stick to our established strategy, inspire our extension of lfinish to retail banking, SME, retail, consumer, real estate, mortgages, etc. Make our plan accordingly until the end of September.
The residential loan was only over CNY 18. 8 billion, which is well below the target we set in our budget. And therefore, we will have to innovate in the way we advertise those activities and our efforts in promoting second-hand homes. And this for the structure of the loan.
And when it comes to extending bank lending to businesses, we will serve the genuine economy: SMEs, green finance, commercial lending, and those facets will be our priority. We will act in accordance with our distribution of our industry and our regional approach. All of those situations will be significant points in our plan for next year.
Operator
The following comes from [indistinguishable].
unidentified analyst
Thank you very much for giving me this opportunity. Mine is about asset quality, because we see in the third quarter report that the NPL ratio has remained low, even below 1%. But anti-social loans and special loans are on the rise. What is your opinion on the overall quality of your assets?
Zhu Jiangtao
Looking ahead to the fourth quarter and next year, the bank’s overall asset quality will remain strong and the NPL ratio will remain low, at a relatively low level. For corporate banking during the first 3 quarters, comes the new form of NPL of the real estate sector and about 70% I think for that.
But they see that, as I just said, sequentially, the new real estate NPL formation is falling. And so, the other sectors remain stable. For virtual banking, we think the threat has increased a bit compared to half the year. And the main reason, one is business. In fact, the moment is real. And third, we ourselves have strengthened our criteria for identifying threats.
Therefore, our delinquency rate for mortgages is only 0. 29% and also for retail in general [0. 49%] it is at a low level. Credit card signals are working longer than we have at the moment or first quarter.
So, for credit cards, we will stick to our policy with a stable and low volatility policy to mention the threat of credit cards at a controllable level. Thank you.
Operator
The next one comes from Mr. Yang Shuo of Goldman Sachs.
Yang Shuo
My query is about NIM. How good it would be for the moment part of the year and for next year. How will the value of the NIM revise next year?How will you take measures to counteract the negative effect of the revaluation?And the third question is about your opinion on reducing your deposit rate. And will it be September next year?
Unidentified corporate representative
At the organizational level, NIM is down 7 basis points year-over-year for the first 3 quarters. As for the third quarter, sequentially compared to the current quarter, it is down only 1 basis point. Therefore, the degree of decline has been greatly reduced. As you may recall, in the current quarter, we have a sequential decrease of 14 basic problems. In the third quarter, we saw some very transparent improvements.
And going forward, we believe the downward trend in NEM is still very evident. And [indistinguishable] for us managing the NIM is very important, the biggest tension comes from the asset side, especially there is a lack of industry demand in the market, and there is a fierce festival of quality assets. That’s why banks reduce the cost of investment to compete for quality assets. That’s why, for many asset projects, there is some value distortion. Some of the loss values are even lower than your deposit rate. It is a kind of irrational festival in the market.
So, for CMB, a rational path must be taken so that the festival in the [indistinguishable] market has to cover the threat and other costs. For loans that are very, very low, we can simply forgo the festival for the types of loans they can’t cover. The threat. That’s why, on the asset side, we still face downward pressure.
And on the liability side, since the third quarter, there are 2 basic problems for the charge of liabilities, even if it continues to increase. One of the reasons for the accumulation in the deposit charge, because this year the capital market is working well and consumers would then prefer time deposit products or time savings deposits. Therefore, to meet the demand of our consumers, we want to supply these types of products to our consumers.
Another piece of good news for deposits is that federal banks are absorbing portfolio banks. In September, we jointly lowered our deposit yield by 10 basis points, helping us reduce our deposit burden and maintain a strong NIM. This is the first time that banks have collectively shown to lower deposit costs, and this reflects the marginalization of the market, the liberalization of interest rates. This is also the rational course of banks.
So in September, after adopting the new deposit rate, it will have a positive effect in the fourth quarter and also for next year, it will help us reduce the burden on deposits. So, in general, we believe that NPL – NIM will remain under pressure.
Another thing to say about this value revision this year for the long-term LPR has been 35 basic problems. And for first-time homebuyers, the price came before the 20 basic problems under the LPR and all of that can be reflected in the first quarter of next year. I found that after the third quarter release, some banks showed a symptom of negative expansion in operating income.
I think for asset return and deposit charges and fee expansion, if we can balance that now, we wouldn’t have any more pressure on the role of operating income. Therefore, we would possibly want to have a transparent brain. and smart judgment of the external environment and making sure our technique is sound next year to minimize the effect of LPR’s price revision on our operating income. And our goal is to achieve solid expansion next year.
And that’s also a very important thing [indistinguishable] the procedure in the fourth trimester. We are already starting to take steps to counter the negative impact on the LPR price review.
Operator
Next is from Morgan Stanley, Xu Ran.
Xu-ran
The consultation of the source of expenditure of the profit. In the earnings payment source, we see in the third quarter that regardless of the non-interest earnings source, commission earnings source, or commission and payout profit source, the decrease is greater than that of the interim report. And I would like to know why and what your outlook is for next year when we face so much uncertainty in the external environment. What are your expectations for growth in commission and payout earnings?
Unidentified corporate representative
For commission and payment revenue, we recorded 102. 7 billion yuan, up 1. 85 percent year-on-year. This is a secure expansion on a higher basis than last year’s 21% expansion. This is an expansion of 1. 85% based on last year’s top base. It is not very easy to get.
One of the main reasons for our decline is due to the strong sales of our fund business. The degree of decline is approximately 40% year-on-year. We face the fluctuations, demanding situations and difficulties presented by the capital market, and have taken multiple steps to deepen our other asset business. To offset this negative effect on the bank’s branch sales, we achieved achievements in branch sales of insurance products and wealth control products in asset control, asset custody and source of income of the bank. Card fees and settlement fees. All these assets contributed to a solid expansion to offset the negative influence of the capital market. This is the overall scenario in the third quarter.
You can see in the quarter-over-quarter growth, the source of commission and payout revenue has slowed down a bit, it’s declined. Source of interest-free income in the third quarter 31. 3 billion yuan. is around 7%. This is basically due to the fluctuation of the capital market. And we’re seeing even more drastic, more drastic fluctuations in the market.
And in terms of source of commission income on insurance products, we declined a bit in the third quarter. And during the first part of the year, insurance revenues are very good, which has brought us a downward spread. Over the next year, we will take a number of steps to do some expansion in the source of interest-free income and the source of income from commissions and payments. On the one hand, we will make efforts on various assets, and we will not have sources of income from commissions and payments. Revenue in a single product type in case of adjustments in the external environment.
And for the time being, we will continue to expand our visitor base, expand our AUM. The trap, the AUM, will force us to expand. Although the environment is very unsatisfactory, we continue to increase our AUM sales through CNY1. 2 billion. As AUM scales larger, we still have assets that can ensure production contributes to profitability trends. As a result, we will remain true to our strategic approach to comprehensive wealth management. By leveraging this capability, we can embellish our roles in asset management, custody and other secure lines of business. And that’s what we can count on for our long-term growth.
We, that beloved wealth control strategy, can further optimize our source of profit structure. And as a result, we can maintain solid earnings growth, especially the non-interest net profit source.
Operator
Next up is from CICC, Zhang Shuaishuai.
Zhang Shuaishuai
I have a query in the domain of patrimonial control. As we have noticed [indistinguishable] from economic expansion and the headwind is the real estate sector. He also discussed some of the demanding situations in the wealth control industry. I would like to know your idea, your [indistinguishable] long-term retail clientele and do you have expansion?seeing a decline in their retail wealth control business. I think CMB is one of the banks in the retail wealth control space. And I’d like to know what the highlights of your wealth control business are. And if there are rebounds in market capital, will you be bigger and bigger than your competitor?
Wang Liang
Just now, M. Wang – Chairman, Wang, discussed the source of income from commissions and fees in extensive wealth management, is under pressure. Therefore, your query is very relevant. CMB’s retail banking business, specifically in wealth management, is our core competitiveness. What is our main competitiveness? I would like to answer your inquiries about clientele, AUM activities and some other aspects.
So, first of all, AUMs are key to your retail banking business. This year, our clientele has an expansion this year. Retail consumers now stand at 182 million in the third quarter, up 5. 2% from a year earlier. Expanding our type of consumers, we distinguish ourselves through the following four characteristics.
First of all, our consumers tend to be younger. Gold card consumers have shown an immediate pace of expansion. Among gold card consumers point consumers, we see that the proportion of young consumers increases from 28% to 33%, which represents a fact that identifies us through our young consumers, especially students. .
The moment is that we have noticed an immediate expansion in giant groups of cities, such as the Yangtze River Delta and some other regions. There is a higher proportion of expansion from those 20-point foundation spaces.
The third feature is that online wealth control has been discussed. The omnichannel wealth control business grew to $42 million, up 11% from last year. So sometimes speaking, acting within our retail structure, the portfolio itself is reasonable. Fundamental point to the map point to the golden card point to be above the structure, is now rational and qualified.
Therefore, we are satisfied with the effects we have achieved on the management of our visitors. Although influenced by some external points, such as pandemic control, our visitor acquisition is possibly a little lower than last year since we have not finished this year, but the quality of the control is higher than last year. In particular, we have extensively promoted the finances of the organization. It has generated effects.
Main result of the group: The central organization solution is a closed-loop business operation of consumers to see and be. It’s built into corporate identity and retail finance, and we’ve noticed a pretty healthy progression path in that regard. It’s about our consumers.
The moment facet considers the AUM. We’re seeing a pretty smart expansion in our assets under control, up to 1. 2 trillion yuan from last year. We are also seeing structural replacement due to influenced external factors. Deposits have increased significantly, and the timing relates to banking and wealth control products. General because there are fluctuations in the capital markets. Therefore, investors, our clients tend to focus more on hedging risks.
And therefore, we will provide an applicable agreement due to our understanding of the schedule and provide it to our clients. This is also reflected in our non-interest income. As a result, there will be a decrease in revenue from our firm sales fund.
But at times, CMB has developed a very long-term capability in our wealth control business. First of all, the first facet is our price. We have taken the visitor as popular and created a price for our visitors. That has been our main price. This is strongly related to the understanding of our people, the evaluation of functionality, the formula and sometimes the proven results.
The moment is that our tree asset allocation philosophy has been fully launched. TREE, T-R-E-E mapping is imperative to integrate our visitor segmentation and categorization to better perceive your consumers and we have established an action-based allocation field for our customers. A very clinical evaluation to see how much equity product to allocate to what kind of assets. Therefore, it also reflects our philosophy of putting our visitor at the center. It is complex in the domestic banking sector and we have ended the status quo of the system.
After the implementation of this system, CMB will be even more resistant to fluctuations in the capital market. And we can also improve our competitiveness in the market.
For the third aspect, insurance products, and this year has been developed: the provision of insurance products. It’s not just smart functionality based on our effect statistics. It is also a mirror image of the building of our capacity, our allocation. capacity. The design we see in building insurance products is basically normal paid insurance products. It is a confusing product and we depend on the capacity of our system, the capacity of our staff and the ability to choose products: can we supply such a solution for our customers?And that’s what we’re saying we’re increasing our ability to grow in our wealth control business.
Therefore, building our ability to create insurance products has given us confidence overall. Well, really, the slowdown in the third quarter really means we’re doing too well on this year’s target. As a result, we’ve proactively slowed down. In addition, we will stick to our overall strategy and follow the direction given by President Wang to continue building our capacity.
And fourth, online capability. This reflects our success with our customers, expanding our power and further cutting prices until the end of September. Equity clients who have a position greater than 11% year after year, that is, in certain metrics. Clients in asset control operations increase their redemption rate to 3%.
The 3 percent issues are very important, representing our ability to function better online compared to previous steps. Our online base or virtual exploitation capability in the wealth control industry has been further enhanced.
From January to September of this year, the agency’s sales gain through the online channel maintained double-digit growth. Although budget promotion activity for agencies has been a challenge this year, the online channel has maintained double-digit growth. It is some other facet that reflects our ability.
The third aspect, I would like to tell you about some of the problems that interest you. First of all, accept as true products based on. We’re really seeing a pretty significant drop in acceptance of the company as true revenue based on. We also see functionality in the overseas market. Non-standardized acceptance as true with internal products: the days are over. Earlier, Mr. Zhu commented that CMB has left most of the products and remains some volume in this product. Therefore, the output is also reflected, to some extent. , in our non-financial income, even though we remain a very limited proportion of these activities.
And the facet of the moment is the product based on equity. As capital markets fluctuate, we are also seeing a very herbal decline in sales by equity fund agencies. To address this situation, we have taken multiple measures, such as expanding our visitor base. and verifying our variety of products with our visitors. And as a result, you can see that we have secured our position in the market, and we expect additional market warming and that our equity-based products will bring a greater visitor to delight in our visitors.
And we think it’s another key thing we want to pay attention to when faced with market fluctuations in how we serve our customers, and we think it’s also a smart time to assign stock-based products to our customers at the lowest point of the market. We have continued with our duties and therefore have full confidence in the future.
Operator
The following is [indistinguishable].
unidentified analyst
I have 2 questions The net operating source of revenue increased by 14. 1%. So, there was a bit of slowdown compared to the first part and what Mr. Wang said. So, looking at the overall leader, what will be your catchment domain for your opinion on operating profit and net profit for the full year?Secondly, we are looking for [indistinguishable] with sufficient capital, what will your net profit be?and the goal of ROE?
Unidentified corporate representative
During the first 3 quarters, our earnings increased by 14. 1%, which is again in line with our expectations. But the negative we face is a slowdown in our operating profit. The operating result is now just 5. 31%. Compared to our peers, it is above the average level, but in fact there is a downward trend. And one of the reasons is the contraction of NIM and a slowdown of NII and also a fairly low expansion in the source of commission income. All of this has resulted in a slower operating source of revenue expansion.
We that operating profit in the existing situation, that is, we continue to face the lack of genuine effective economic demand. In this negative environment, the voltage for NIM is very high.
And the downward trend in operating profit expansion is still there as well. And in terms of profits, we will try to maintain profitability. But the key is asset quality, where we face a slowdown in the source of operating income with smart assets alone. Quality ensuring that there will be no loss or erosion of threatening things. So, that’s the key to the bank’s profitability. Otherwise, profitability and operating source of revenue will now be to meet our expectations.
I don’t forget in 2018 and 2019, we had a single-digit operating income. Now we still have double-digit earnings growth. Well, the explanation for why this is that we have very clever threat control and time control. same cycle again. What we seek to do is to do everything we can to maintain a strong operating result and better manage the threat aspect and ensure asset quality, lower credit charges and maintain strong profitability. This is how we can realize the price chain. You will have to generate income to generate profitability.
And look at the next 2 to 3 years, what are our predictions about it?I think we want to look at the adjustments in the macroeconomic environment and look at economic policy and economic markets and we want to look at ourselves, how we can price and how we can value loans. And also for payment income, how we can accumulate payment income. Therefore, it will depend on many factors.
My judgment is for CMB. Je will try to be more neutral. I deserve not to be too positive or pessimistic. So frankly, I think CMB [indistinguishable] our ROE at a higher point and why the praise or the price for investors, investors will be items worth investing in. That is the goal or objective for which we are running. We have to take a look at marks like profitability, capital constraints and structural change, credit disbursement. So it is genuine economics and threat management.
And how can CMB maintain solid operation in the downstream cycle?I think many have insisted on all five areas. It’s like the five digits of the hand. This is the transformation, that is, the transformation from the classic banking commercial style to the new banking style based on a broad patrimonial control based on virtual operation. Without a doubt, it will have to be avant-garde. Innovation means a broader mindset to make sure you reap the benefits of innovation. In the past, we succeeded because we were avant-garde and will continue to be so now.
And third, it’s about maintaining the quality of our assets and preventing threats. Fourth, have a more powerful staff, especially for control. This deserves to be in line with the long-term evolution of our banking system. I think that’s the key to the bank’s good fortune: it’s control. We want to control as load control, threat control, strategy control. These deserve to be the one concentrated in the five, it is as if the five digits in your hand could only have five digits, none of them in the end seems to be up to the other. And then, if it registers for all five fingers, it will be a fist. So make sure that the bank’s capacity can be increased and take a step forward. so that profitability can be returned to investors. That’s why I say those are the five years we want to focus on and make a strong force to maintain a strong operating result and that will praise [indistinguishable].
To ensure the interest of all investors, that is why we have broadcast this earnings conference. Many investors came, not only for online participants, but also decided questions by email. I think the questions are precisely the same as the one you raised earlier.
Now, I would like to return to a query that is much more representative through email. Our colleagues will disseminate — percentage of the consultation.
In the third quarter, at CMB, in the credit loss structure, as you can see, our provision for loans is expanding quite rapidly, but the provision for asset loans is decreasing a lot. What is the explanation for this? And for the total year and next year, what is your opinion on your existing relationship, the credit charge?And this query will be answered by Mr. Zhu.
Zhu Jiangtao
Thank you for the question. You may be struck by the fact that the provision for losses is an expense. The first is due to the threat coming from the real estate sector and COVID is also affecting the retail lending sector, so it has noticed a higher provision for losses.
But for now, loan assets are also affected by two factors. The first considers interbank assets, basically repo, versus repo assets. Its total length has decreased by 90%. And second, for contingent assets, because last year we provisioned a lot of that. And this year it’s down a bit. Those are the main reasons for the decline in the provision for non-credit assets.
For the year as a whole, we believe that the existing index until the end of the year will be somewhat reduced from what we had at the beginning of the year, but we will continue to decrease the relatively high point. And for the credit charge, at the end of September, the point of companies is about 0. 81% at the end of the third quarter. And through the end of the year, we think it will be smaller than what we have in the third quarter, but it will be higher than what we have at the end of the year.
Last question, please.
Operator
Next is Ms. Ma Tingting Guosheng Securities.
Mom Clinking
This year, in fact, the expansion for 6 months has continued to decline, but it seems [indistinguishable]. So does CMB have a plan to raise capital or respond in a capital market?
Unidentified corporate representative
CMB will have replenished our market capital over the past 10 years and our own local capital expansion is our own requirement. And right now, we don’t have any plans for that. And as I mentioned, our purpose is a solid and moderate profitability trajectory, and profit is important to replenish our capital. This is one of our methods to achieve this.
Operator
Due to time constraints, CMB’s third quarter 2022 earnings convention is now closed. If you would like to receive more information, you can search for our third quarter report online or via live chat with our IR team. Thank you very much for taking the It’s time to attend today’s convention and thank you very much for your collaboration with us. We will continue to do our homework and provide a greater return to investors. Thanks a lot. Good bye.