Q2 2026 BOC Hong Kong (Holdings) Ltd Earnings Call

Speaker #1: For Indonesia, we remain the industry leader in market coverage in terms of the number of indirect tips, participant banks, and became the world's first offshore eSIM custodian bank.

Speaker #1: We maintained our market-leading position in IMB loans and deposits, as well as IMB standard new premiums. Our IMB public bond underwriting and fund distribution achieved business volume growth of 1.4 times and 47%, respectively.

Speaker #1: We bolstered our IMB business innovation capabilities and participated in the Hong Kong ME's IMB Business Facility, covering nine regions and countries across Hong Kong.

Speaker #1: Asia and Europe: We became one of the first clearing members of the London Clearing House to support clients to deposit offshore RMB-denominated Chinese government bonds as collateral.

Speaker #1: We also served as a designated liquidity provider for the Hong Kong Exchange's newly launched CGB futures. In addition, we again assisted the Indonesia government in issuing Dingsong bonds.

Speaker #1: As a firm supporter of Hong Kong's financial infrastructure development, we refined the top-level design of our financial digitalization to enhance services, risk management, and intelligent operation capabilities.

Speaker #1: We were among the first participants to connect with cross-border eSIM transfer services to explore ways to use the e-Hong Kong dollar in the wholesale CBDC pilot for advanced margin payments in the derivatives markets.

Speaker #1: We led our peers in MB transaction volumes and actively explored business opportunities in tokenization. We deepened digitalization to empower business development. In our personal banking, nearly 90% of transaction volumes were online.

Speaker #1: In corporate banking, IGTB transaction volumes rose by 17%, while the number of BOC Connect registered users increased by 33%. In addition, we recorded 8% growth in the BOC PayPlus customer base and 18% growth in BOC Bills settlement volumes.

Speaker #1: We strengthened tech governance and formulated a five-year plan for financial digitalization. We continue to build an integrated generative AI platform and further improve our digitalization KPI system and data governance mechanism.

Speaker #1: We also enhanced our intelligent operations and anti-fraud management capabilities, promoted the use of intelligent office assistants, and continuously supported a culture of technological innovation.

Speaker #1: We strive to fulfill our sustainable development ambitions and enhance our service capabilities in green finance. In the first half, we achieved a growth rate of 7% in green and sustainability-related loans, 36% in personal new green deposits, 42% in ESG bonds underwritten, and 15% in banking book ESG bond investments.

Speaker #1: We supported the implementation of the Hong Kong Taxonomy for Sustainable Finance, and successfully hosted the BOC Hong Kong Sustainable Supplier Forum to promote green and low-carbon transformation along the supply chain.

Speaker #1: We continue to deliver on our CSR commitments and engaged in more than 20 charitable initiatives and over 90 volunteer events during the period. We once again received the highest AAA rating from MSCI ESG and a low-risk ESG rating from Sustainalytics, putting us in a leading position among our peers.

Speaker #1: This concludes the strategy review for the first half. Next, our CFO, Madam Liu, will walk you through our financial performance.

Speaker #2: Thank you, Sisen. In the first half of the year, we faced a challenging market environment and intensified market competition. We grasped business opportunities, strengthened SLI ability management, and expanded revenue resources.

Speaker #2: While we continued to realize net interest income growth, net interest income decreased year-on-year, reflecting a high base in the same period last year. Meanwhile, we improved asset quality through enhanced risk management as a result.

Speaker #2: We achieved a post-tax profit of HK$24.4 billion, up 6.8% year on year. We expanded our high-quality deposit base by providing diversified products and services to meet the needs of large corporates, financial institutions, and government and public entities.

Speaker #2: Including settlement, custody, treasury, cash management, and IPO receiving bank services. With a focus on key personal banking customer segments, we expanded our payroll and wealth management services to attract sticky deposits.

Speaker #2: Our customer deposits increased by 3.2% to HK$3 trillion. This caused our deposits to increase by 4% and caused our ratio to rise by 0.5 percentage points to 53.8%.

Speaker #2: We continued to serve the real economy and capture business opportunities from the development of new quality productive forces and supply chain shifts. Leveraging our advantages in RMB business, syndicated loans, residential mortgages, and customer resources, and with a focus on the Hong Kong, cross-border, Southeast Asian, and other key overseas markets, we deepened intra-group collaboration and pushed forward the solid development of our lending business.

Speaker #2: As at the end of June, we grew our customer loans by 5.9% to HK$1.82 trillion, maintaining the largest market share. All loan types show sound growth momentum.

Speaker #2: With loans for use in Hong Kong up 5.1%, loans for use outside Hong Kong up 7%, and trade financing up 21%. In the first half, facing a year-on-year decline in market interest rates, we flexibly managed deposit pricing and tenors, and optimized the deposit mix.

Speaker #2: At the same time, taking advantage of the recovery in financing demand, we expanded our loan book and controlled the pace of bond investment to stabilize investment returns.

Speaker #2: Adjusted for swap impact, our net interest income increased by 3.3% year on year to HK$29.9 billion, while NIM widened by 3 basis points to 1.57%.

Speaker #2: During the first half, against the backdrop of a volatile Hong Kong capital market and recurring consumer confidence challenges, we enriched our fund product shelf to meet diverse customer needs in asset allocation and risk management.

Speaker #2: We stepped up product promotion and enhanced the convenience of our offline and online payment channels. Fee income from bonds distribution, credit card business, and bills commissions grew by 55%, 12%, and 15%, respectively.

Speaker #2: While securities bridge fee income remained stable at a high level overall, net fee income fell slightly from the high base in the same period of last year, but rebounded by 19% half-on-half.

Speaker #2: We further strengthened the development of our wealth management business. Wealth management income in personal banking rose by 14%, including an increase of 50% in investment product distribution and 18% in insurance distribution income.

Speaker #2: Solid growth was achieved in our high-end customer TRB and private wealth customer base. In our insurance business, the Grouped CSM balance increased by 23.6% year to date, while BOC Life's standard new premiums and value of new business grew by 28% and 56% year on year, respectively.

Speaker #2: We prioritized resource allocation for key development areas in line with the Group's strategic focus. We refined our branch network layout, accelerated the application of AI and technological transformation, pursued low-carbon operations, and deepened the integration of regional operating platforms so as to optimize resource utilization.

Speaker #2: In the first half, operating expenses increased by 6.7% year on year. The cost-to-income ratio stood at 22.5%, continuing to outperform the market average.

Speaker #2: We closely monitored market developments and customer dynamics, strictly supervised high-risk credit portfolios, carried out timely reviews of customers' internal credit ratings, and strengthened credit risk management.

Speaker #2: Asset quality remained solid. As at the end of June, our impaired loan ratio was 0.89%, down 25 basis points from the previous year-end, mainly due to write-offs and loan repayments by certain non-performing customers.

Speaker #2: Our annualized credit cost was 0.27%, down 12 basis points year-on-year. Meanwhile, the total loan provision coverage ratio edged up by 3 basis points to 1.12%, maintaining our robust capability to withstand potential risks.

Speaker #2: Our capital position remained solid, with the total capital ratio and CET1 ratio standing at 25.7% and 23.8% respectively. Our liquidity position was sound, with average LCR and NSFR reaching 174% and 144% respectively in the first half.

Speaker #2: This concludes our interim results review. Season will now share the group's outlook for the second half, as well as the specifics of our new five-year plan.

Speaker #1: Thank you, CFO Liu. Looking ahead to the second half, the global landscape will rapidly evolve, while financial markets still face great uncertainty. The deepening adoption of AI and technological upgrades presents new development requirements.

Speaker #1: For banks, at the same time, the nation’s 15th Five-Year Plan will support Hong Kong to better integrate into and serve the overall national strategy.

Speaker #1: Hong Kong will also have its first five-year plan, which will further consolidate and leverage its status as an international financial, shipping, and trading center.

Speaker #1: As well as being a global hub for innovation and technology and a core engine for the GBA, positioned within the nation's new dual circulation development paradigm, Hong Kong will perform its role as both a participant and a facilitator, thereby injecting strong momentum into the local economy.

Speaker #1: In addition, Chinese enterprises will accelerate their global expansion and pursue high-quality development, while the international use of R&D will continue to grow. Hong Kong's emergence as a critical pivot for major strategic initiatives will create sustained development opportunities for its banking industry.

Speaker #1: Faced with new situations, new positioning, and new challenges, BOC Hong Kong will proactively serve the national strategies and Hong Kong's development. Aligned with BOC Group's strategy and core strategic objectives of globalization, we will deeply implement the concept of sustainable development.

Speaker #1: We will enhance our role as a regional center in order to further optimize the operations and management of our SE entities. We will solidify our role as a business center for the BOC Group's offshore operations, focusing on key businesses such as custody.

Speaker #1: Significant loans, cash management, private banking, asset management, and financial markets. We will continuously improve our capabilities in regional business management, integrated operations, and digitalization.

Speaker #1: With the goal of being a market leader in Hong Kong, a pioneer in the GBA, a deep participant in Southeast Asian markets, and a strategic participant in Belt and Road markets, while striving to become a regional leader in R&D business.

Speaker #1: By strengthening our talent pool, cultivating corporate culture, enhancing smart operations, refining comprehensive risk management, and securing robust financial resources, we will endeavor to set ourselves as a benchmark for regional headquarters, cross-border financial services, customer trust, and employee recognition.

Speaker #1: With the aim of building the best regional bank, we are committed to providing quality support in consolidating Hong Kong's status as an international financial center and continuously creating value for our shareholders and stakeholders.

Speaker #1: This concludes our presentation. Thank you. You are now very welcome to ask any questions you may have. Thank you.

Speaker #2: Thank you, Season and CFO Liu, for the presentation. It's now time to answer questions from our analysts. The Q&A session will be conducted in Mandarin. For our English-speaking friends, please feel free to request simultaneous interpretation headsets from our colleagues.

Speaker #2: 好的，现在我们开始提问环节。

Speaker #3: We will now begin the Q&A session. If you have any questions, please raise your hand. We will provide you with a microphone. Kindly limit yourself to two questions at a time, and please introduce yourself before asking your questions.

Speaker #3: Thank you. Thank you. And congratulations on the interim results. It is a good set of results. First of all, on the special dividend—it is pegged to our stock code, and that's a very special arrangement.

Speaker #3: And I have a question about shareholders' return. Now, if I am correct in my calculation, this return in terms of our CTO impact is about 30 basis points.

Speaker #3: Per year. So, how do we see this in terms of strategy and finance after three years, let's say? How can we keep this rather high CET1 level?

Speaker #3: And for further, why do we have such a high demand in terms of shareholders' point of view? We should look at at least 10.5 billion, and that is after that we expect an upside, as shareholders.

Speaker #3: So how should we consider that question, please? Also, another point about risk management: we see that the NPL ratio and the credit cost and NPL amount have all decreased.

Speaker #3: So, what does that mean? What is the reason for our development? Is it because we are already in a cycle of better asset quality?

Speaker #3: Thank you. Those are very important questions. First of all, regarding the dividend, our CFO will address that question, and our CRO will answer the question on risk.

Speaker #3: Thank you, Gary, for your question, and thank you for your concern for our fine details. Now, first of all, on your question on the dividend, in the first half of 2026, we will face a complicated external environment, and we leveraged a central role in the group's global development.

Speaker #3: We actively served as a key hub for offshore and onshore collaboration, and captured market opportunities coupled with risks and challenges, and steadily advanced development of capabilities, achieving positive results.

Speaker #3: So, for the first half, profit attributable to shareholders rose by 7.1%. ROE reached 13.18%, up 0.3% year on year. We place high regard on providing long-term, stable shareholder returns, focusing on development opportunities, regionalization, and integrated services.

Speaker #3: And we maintained favorable profitability, and we continue to deploy our capital and put business development as our top priority. For Hong Kong, this year's loan market demand showed signs of recovery.

Speaker #3: Our loan growth increased at a faster pace of 5.9%, with Southeast Asian-related loans growing by a high single digit. At the same time, this allowed us to better meet the financial services needs of Chinese enterprises going global.

Speaker #3: We recently initiated the Going Global Cooperation Alliance, and we based that in Hong Kong for cross-border SEA and other overseas markets. Through enhancing cooperation with our parent bank and other offshore institutions, we played an important role.

Speaker #3: In helping Chinese enterprises expand overseas. And secondly, on regular dividend payout, we implemented a quarterly arraignment arrangement, and the board announced a second interim dividend of 0.29, Hong Kong dollars per share, and taking the total regular dividend for the third interim dividend as planned.

Speaker #3: Regarding the full-year dividend payout ratio, we consider the relevant factors and also keep it within the 40% to 60% regular dividend payout range. We strive to be orderly.

Speaker #3: We plan to increase our dividend payout ratio, and the Board has already approved, as we heard, the 2026-2028 shareholder return program, including an orderly increase of the regular dividend payout ratio within the range, and a plan to provide extra returns of HK$10.5 billion over a three-year period. For 2026, the special dividend under this plan is HK$0.2388 per share.

Speaker #3: And going forward, we will effectively balance business and development needs, operating safety, prudent operations, business environment, profit performance, risk situation, capital level, regulatory policies, as well as shareholders' expectations, to review our return program and strive for long-term, sustainable returns for our shareholders.

Speaker #3: For 2027 and 2028, this will be decided after the board's approval and according to the listing rules for disclosure. And for the HK$10.5 billion, regarding the consideration behind that, let me just explain: there are two considerations.

Speaker #3: First of all, the business needs, in terms of its development and also stable operation, and we need to have a certain amount of our organically generated capital to support our strategic and important development going forward.

Speaker #3: And as the CE had already mentioned, this will have to support our further development, including our next five-year plan, as well as the Southeast Asian market, digital transformation, green financing, and other opportunities.

Speaker #3: And also, we will continue to have high development and growth, as well as safe and stable operation. So, apart from satisfying regulatory requirements and maintaining stable resources and funds, we also have to face the uncertainties and impacts in the credit market and in the financial market in general.

Speaker #3: So we have to be very prudent in terms of managing our capital. So we have to be adequate in our capital level, and with this, as mentioned, we will continue to assess our shareholders' return plan. Also, we will continue to be prudent, and if there are any approvals made by the board, we will disclose that to the market.

Speaker #3: So as Gary, you have mentioned and noticed, in the first half of the year, our bank's asset quality had been good. And we have been able to, overall, keep the provision coverage at 124%.

Speaker #3: And it was up 28.9%, and the total loan provision ratio was 1.12%, up 3 basis points, ensuring sufficient provisioning. There are two factors; one is external.

Speaker #3: In the first half of 2026, we see that Hong Kong's economy grew by over 5%. And the macroeconomy is going stably. And we also see that in a number of areas, including our retail and also the trade and residential property market have improved.

Speaker #3: And the office market has stabilized, while retail properties face certain pressures. We continue to closely monitor market information and customer dynamics to strengthen our credit risk management framework and measures, and to maintain strict supervision of high-risk credit portfolios, as well as timely review internal and loan ratings of our customers.

Speaker #3: Benefiting from prudent risk management and a strong customer base, our overall asset quality remains solid with adequate provisions. Impairment and the cost of loans have both decreased. Looking forward to the second half of this year, the market expects a modest rise in US interest rates, while growth momentum for major economies may slightly moderate.

Speaker #3: The steady and positive economic trends for the Chinese mainland and Hong Kong are expected to remain unchanged. Now, we are in a phase of a complex and evolving external market, and we will continue to closely monitor the global political and economic situation, as well as the status of high-risk credit portfolios.

Speaker #3: We will dynamically adjust our credit policies and effectively manage our credit risk. We will strive to maintain a relatively stable impaired loan ratio, ensuring that it remains better than the market average.

Speaker #3: And we will adhere to a consistent and prudent approach, with adequate provisioning. And the global economy and property markets continue to develop steadily.

Speaker #3: Credit costs in the second half may ease sequentially, and full-year credit costs are expected to decrease compared to the previous year. I am Xinhua Michael. Two questions, just to follow up on the return on assets: we have a special dividend this year, and maybe for the next two years we'll have share buybacks and also special dividends.

Speaker #3: We were able to reach our HK$10.5 billion level. And I would like to know, after three years, would you still be able to have a payout?

Speaker #3: And for the per-share dividend, will there be a steady increase every year, year on year? That's the first question. And the second question, I would like to know about the second quarter, where there had been certain pressure.

Speaker #3: Can you look into the second half of the year for us, NIM?

Speaker #2: Thank you, Michael. So, first of all, in relation to capital, indeed, going back to ordinary dividends, from this perspective, in the long term, BOCHK adheres to a prudent dividend policy to balance the interests of shareholders and the long-term development of the bank.

Speaker #2: So the range is still between 40% to 60% of the dividend payout ratio to balance with monetary requirements. We will also adjust to the changing environment, and we'll continue to review our dividend payout policies, subject to the approval of the Board.

Speaker #2: Subject to listing rules, we will make a timely announcement if appropriate. Also, in relation to NIMS, I'll answer that as well. In January, the US Fed paused rate decreases, and in the first half, the average one month so far in HIBOR stood at 3.65% and 2.53%, respectively.

Speaker #2: By 67 and 35 basis points in the first half of 2025, with the options of rate tightening on the table. The yield curve steepened in the second quarter.

Speaker #2: The average spread between one-month and one-year tenures for both HKD and USD rates widened by 9 and 31 basis points, respectively. And now, the HKD and USD interest rates differential has narrowed, contracting by 15 basis points for the first half of the quarter to 105 basis points.

Speaker #2: And now, in the first half, average one-month CYBER and CNY hybrid were 1.48% and 1.61% respectively, down by 26 and 61 basis points year on year.

Speaker #2: In the first half of swap adjusted NIM net interest income reached 30 billion Hong Kong dollars of 3.3% year on year corresponding NIM was 1.57% of 3 BP year on year during the period Hong Kong.

Speaker #2: Interbank rate declined at the beginning of the year and hit a six-month low in March, putting pressure on asset yield. The swap-adjusted NIM in the second quarter was 1.55%, down 4 basis points quarter on quarter.

Speaker #2: The solid performance in NIM and net interest income was primarily driven by dynamic asset-liability management on the liability side. We leveraged strength in wealth management, payroll, cash pooling, custody, and IPO-related business to build a closed-loop funding flow.

Speaker #2: Our accumulating low cost and stable deposit cost of deposit increase by 63.2 billion Hong Kong dollars or 4% in the first half with the average Gaza ratio rising 4.2 percentage points year on year to 56.7%.

Speaker #2: We've flexibly adjusted deposit pricing and tenure, with the average customer deposit rate falling by 48 basis points year on year. On SSI, we capitalized on rising market financing demand and outbound activity by Chinese enterprises, strengthening collaborations with onshore and offshore activity of the BOC Group to achieve loan growth of 5.9%.

Speaker #2: For the second half, from the perspective of interest rate outlook, the probability of further rate cuts in the short term is low, but the market still holds divergent views on rate hikes.

Speaker #2: The actual path depends on factors such as future inflation, economic conditions, government and tariff policies, and geopolitical developments, and may only materialize later this year.

Speaker #2: On the other hand, the steepening of the silver yield curve has caused some disturbances to net interest income. So overall, the NIM will still face certain pressure.

Speaker #2: Going forward, we'll closely monitor market interest rate trends, fully assess the impact of the shift in the interest rate cycle, and proactively and flexibly manage our asset-liability portfolio allocations and term structure.

Speaker #2: We'll adopt multiple measures to alleviate downward pressure on NIM. At the same time, we'll also leverage our advantages in key business areas such as RMB, Chinese enterprises going global, regionalized layout, and more to solidify our business foundation, deepen customer relationships, and drive steady growth in volumes.

Speaker #2: Thank you. Coming up next, Emma, please. Thank you for the opportunity for the questions, and congratulations on the outstanding performance. I've got two questions.

Speaker #2: Number one, the regulatory side has tightened the requirements on investment account opening. At the same time, the Chinese mainland has actually made some adjustments in relation to tax.

Speaker #2: Of on investment product has it caused any implications on your business? Well, on the fee side, we have achieved a good growth quarter half on half, but actually in terms of year on year growth, there is this little a gap.

Speaker #2: Another question in relation to loans. Loan growth in the first half has grown by 5.9%, which is quite robust. However, the industry has been growing by 6.1%.

Speaker #2: So we are lower than the industry average. In previous years, you mentioned that you are trying to gain shares and outperform the market.

Speaker #2: So, how about this year? What is your strategy? Do you want to grow the growth rate and capture more share? Thank you.

Speaker #1: Thank you.

Speaker #3: You've actually asked three questions. First of all, Mr. Chen will answer the first question, and then VP Huang will answer your other two questions.

Speaker #3: Thank you, Emily, for your question. First of all, concerning the cross-border situation, overall speaking, the policies and measures that have been announced lately actually reflect the development of our country in terms of deepening the opening up of the financial market. In this respect, Hong Kong, as an international financial center and a wealth management center, is in a position to link up with the international arena for the mainland, and also work with the Hong Kong government using Hong Kong as a hub for wealth management and asset management.

Speaker #3: This is a time for linking up and serving as a bridge between the two lands. At the same time, we continue to strictly adhere to the regulatory requirements of both Hong Kong and the mainland, and we maintain very close communication with the regulators.

Speaker #3: So as to ensure that we continue to have our advantage. Now, in terms of wealth management and asset management, we look at the mainland and Hong Kong in terms of their integration and also the customers' needs for asset management.

Speaker #3: There is even more demand, as we can see, for this kind of service. There is demand for asset management, as well as for the allocation of their assets and wealth.

Speaker #3: So for the long term, this is important for the market's development. And there had been a number of areas where the capital had been coming back to this area to Hong Kong and this is conducive to a healthy development of the market and in the first half we see that cross-border customers overall had also increased and also the wealth management products had also increased.

Speaker #3: And as we have mentioned inside the CE in the presentation, we continue to see that there is an increase for the first half of 2026 in terms of trade, in terms of retail, and also tourism.

Speaker #3: There has been a certain increase, and also there has been net fee income of HK$6 million as we proactively seek business opportunities.

Speaker #3: So, on the one hand, for fees income, we continue to deepen the customer acquisition and engagement strategy in the brokerage securities business. Also, we proactively seek these opportunities, so there is a slight decrease of 5.8% from the high base of the first half of last year.

Speaker #3: In terms of net fee income, that's up 19% on a half-on-half basis. As for BOC Pay Plus, we have been able to increase our transaction volume on that, also with the Hong Kong SAR government support, as well as statutory bodies and public transport systems. The cumulative merchant acquiring volume was up 17.6%.

Speaker #3: That's for the BOC bill. And these initiatives drove a growth of 12% year-on-year in credit card fee income. And so we were able to have this kind of market performance.

Speaker #3: And if I may go into our insurance, the income for the first half showed a drop of 40.5%, primarily because our distribution income for BOC Life Insurance cannot be reflected in the fee income line due to the consolidation of accounting statements.

Speaker #3: But you can see that the Group's Contractual Service Margin balance rose by 24% from the end of 2025. And during the period, BOC Life launched a series of policy subscription concessions, customer promotions, and wealth legacy service packages. With strong sales performance to kickstart the year, therefore in the first half, our standard new premiums actually increased by 28% year-on-year, while new business value rose 56%.

Speaker #3: In the first quarter, BOC Life ranked second in terms of standard new premiums in the Hong Kong market. For the second half, we will continue to see opportunities from macroeconomic growth, closely follow up on regulatory requirements and policy developments, and develop business in line with our strategic positioning in wealth management, private banking, asset management, and custody services. We will also strengthen our cross-business segment collaboration with the Group, fully exploring the potentials for our customers and broadening the diversified sources of non-interest income.

Speaker #3: Now, thank you for your interest. In the loans form area, and in the first half of the year, both the Chinese mainland and Hong Kong economies enjoyed solid recovery, with GDP growing 4.7% and 5.1% respectively.

Speaker #3: The local residential property market and retail sales showed positive momentum, while imports and exports grew rapidly, driving overall loan demand up by over 6%.

Speaker #3: We see business opportunities, and as of the end of June, customer loans reached HK$1.82 trillion, up 5.9% from last year-end, maintaining our market leadership with a local market share of 16.18%.

Speaker #3: And that has not changed. Now, specifically, what has been growing very well is corporate loans for use in Hong Kong, increasing by 6.3%. This growth is mainly driven by loan growth from SOEs in Hong Kong and local leading enterprises.

Speaker #3: We sustained the top position in the Hong Kong and Macau syndicated loan market, and we grew Hong Kong residential mortgage loans by 3.3%, maintaining our leading position. Also, Southeast Asia-related loans increased 9.6% with enhanced distribution to the group.

Speaker #3: And in the second half, global economic growth may remain low due to various reasons—tariff policies, geopolitical risk, et cetera. But in key markets where we operate, the Chinese mainland is strengthening counter-cyclical policies, accelerating fiscal expenditure, and boosting investment confidence.

Speaker #3: And there are new quality productive forces being promoted as well. Also, with AI-related products, Hong Kong goods exports will continue to develop rapidly.

Speaker #3: Following the signing of the China-ASEAN FTA 3.0 upgrade protocol, trade exchanges will become more efficient, and this will continue to support steady loan growth for the Hong Kong market.

Speaker #3: Well, facing challenges and opportunities, we continue to focus on Hong Kong cross-border, SEA, and other overseas markets. Serving the real economy and leveraging our strengths in RMB business, residential mortgages, green loans, business opportunities in tech finance and commodities, and capturing opportunities from going global, while maintaining strict risk controls, we balance returns and scale to achieve solid loan growth and continue to outperform the market for the full year.

Speaker #3: Thank you both. Next question, please. Thank you, management, and congratulations on this very good set of performance results. I am Sam from Jinrong Capital.

Speaker #3: Now, I'm thinking about the capital returns. It is about $2.5 billion. I've been making a calculation, and at 10.5 every year, it would be $350 million.

Speaker #3: So how should I understand this? Will you be raising your dividend payout, or will you be considering share buybacks, et cetera? Can you please share?

Speaker #3: The second question is as follows: For the revaluation of property, we see that it has already turned positive from negative. Is this a sustainable trend, please?

Speaker #3: And does it mean that Hong Kong's property market has already bottomed out?

Speaker #2: Thank you. This is Liu, please. Thank you for your questions. In relation to shareholder returns programs, as well as their details, the Board has approved the 12th available to us, including special returns as well as share buybacks.

Speaker #2: However, for the details, we have many factors to consider, as we mentioned during the presentation. Going forward, we will consider factors including stock price, as well as other factors, to implement the details of shareholder return programs. We have disclosed the program for 2026.

Speaker #2: However, for the plans for 2027 through to 2028, they are subject to further approval by the Board, as well as listing rules. Now, we are more than halfway through 2026.

Speaker #2: So, to share our operating results with the shareholders as soon as possible, we have disclosed our interim dividend as well as the special dividend.

Speaker #2: And in relation to the property re-evaluation seen in the first half of the year, the office market has resumed, and also the premium locations have been favored by the market, while the rental market has actually increased. Tier one office trading has increased by 56% to $24 billion. For the second half, we believe the core office market will bottom out. For non-core regions, the vacancy rate remains relatively high, while the retail market remains sluggish.

Speaker #2: So, it is still under pressure. Generally speaking, we believe that, in the second half, the investment property valuations remained stable. But we should closely follow the market fluctuations, as well as changing policies, for the impact assessments of our property.

Speaker #2: Thank you. This is Liu. We have more than 80 investors as well as analysts online. So, coming up next, we will give the opportunity to online investors and analysts.

Speaker #2: Number one, for the first half of 2026, the cost for the bank has grown faster compared to our income. So, how about the second half?

Speaker #2: How about the outlook for CIR? And second question is in relation to wealth management. This is a focus for interbank competition, so could you please share the trends and your strategy for wealth management?

Speaker #3: Thank you for the first question. This is the CFO. I will answer the question. Thank you for this online question. Concerning cost, we have a principle for managing our cost, and this is about our long-term investments.

Speaker #3: So, we would want to, on the one hand, increase our revenue, and at the same time, for cost, we want there to be a virtual relationship.

Speaker #3: And for the first half, it was about 9 billion in terms of our operating expenditure. And the it was a 6% point in terms of rise from the year on year.

Speaker #3: So this is the operating expenses reaching 9 billion and up 6.7% year on year. And also for the cost to income ratio, it stood steadily at 22.5% remaining at a better level compared with local peers.

Speaker #3: We have increased headcount, and higher salary levels drove HR expenses up by 7.1%. Increased investment in IT and network layout optimization led to a 14% rise in premises.

Speaker #3: And equipment expenses. Highest spending on advertising, business promotion, and professional consultancy contributed 13.3%, while depreciation and amortization rose 1%. So, and we also, with business opportunities for Chinese enterprises going global, there is accelerated inflow of foreign customers into the Hong Kong market. And we will continue to pursue our digital transformation and IT investments.

Speaker #3: For the second half, we continue to implement digital efficiency by enhancing strategy, focusing on process streamlining and an asset-light development approach to support expense growth and income growth.

Speaker #3: Key initiatives would include AI-based automation and cost reduction drivers, increasing Gen AI investment, expanding the scope of automation to replace manual tasks, and advancing branch transformation and business model innovation.

Speaker #3: And we continue to expect steady growth in 2026 operating expenses, while the CIR remains relatively steady at a level better than our peers. So, for wealth management, according to BCG, Hong Kong's cross-border wealth management AUM had reached $2.95 trillion.

Speaker #3: US dollars in '25, making the world's largest cross-border wealth management center. For the first time, beginning of '26, amid complex and changing geopolitical dynamics and significant volatility in the global capital markets, risk-averse capital had sought safe harbor.

Speaker #3: And leveraging on this, Hong Kong continued to attract capital inflows, sustaining strong momentum in wealth management. And our bank actively sees the opportunities to promote our business in wealth management in three key areas.

Speaker #3: First, our wealth management income grew strongly, supported by our Wealth Plus strategy. Capitalizing on favorable investment market sentiment and strong demand for IPOs, we strengthened our ability to acquire and engage customers for security services, enriched fund product choices, and provided exclusive offers and promotions for key customers.

Speaker #3: We also upgraded online and offline service channels and improved customer experience. Securities customer numbers continued to grow, and fund sales transaction volume increased by 31%.

Speaker #3: Personal wealth management income rose 14% year-on-year. Investment distribution income was up 50%. Our private banking fee income rose by 15%. Fee and commission income from funds distribution, fund management, and securities brokerage rose 55%, 78%, and 2% respectively.

Speaker #3: Second, we enhanced wealth management service capability, supporting the government's family office policy, strengthening intra-group collaboration to enhance our influence in the family office sector. BOC Private Bank in January grew private banking AUM by 20% in the first half.

Speaker #3: ...and comprehensively meeting high-end customers’ needs for wealth succession and appreciation. We have increased the number of private wealth centers to 11. The flagship center in Tsim Sha Tsui officially opened in July.

Speaker #3: Our private wealth customer base and TRB increased by 11% and 15% year-on-year, respectively, and our securities investment AUM rose 15% year-on-year.

Speaker #3: Our premium family brand, Family Max, offered holistic Wealth and Wealth Plus services to meet the demands of high-end families. Family Max customer numbers and TRB grew steadily, with securities investment AUM rising 16% in the first half.

Speaker #3: Thirdly, we achieved notable results in integrated service development. We enhanced the professionalism of our customer and custody services and expanded coverage of our global custody network.

Speaker #3: Several key client portfolios were successfully onboarded, with total custom custody assets rising 35% from the previous year-end. BOC Life standard new premiums rose 28% in the first half, ranking second in the market in the first quarter.

Speaker #3: Our asset management continued to drive product innovation, launched the All Weather Global Investment Grade Bond Fund, and established a new venture capital fund to support promising Hong Kong innovative science and tech enterprises.

Speaker #3: Investment and advisory AUM rose by 14% in the first half. For the second half, with the nation's 15th Five-Year Plan supporting Hong Kong as a wealth management center, and the Hong Kong government stepping up efforts in various areas, including tax and market reforms, to attract global capital for Hong Kong.

Speaker #3: BOC Hong Kong will seize and strengthen intra-group synergy, focus on the wealth management needs of high-end cross-border and family customers, and enrich diversified product solutions.

Speaker #3: On top of acquiring new customers, we will deepen relationships with existing customers, target niche customer segments, and drive product innovation and channel synergies. Through data empowerment and analytics, we aim to enhance service efficiency, custody services, private banking centers, and promote high-quality, sustainable growth in our wealth management business.

Speaker #3: Due to time constraints, we will have to end the session here. If you have further questions, please approach our investor relations team. Thank you. We'll see you again next time.

Speaker #3: much.

Speaker #1: K定定先。

Speaker #2: 开始。

Speaker #1: OK。

Speaker #3: 各位媒体朋友，下午好，欢迎各位参加。

Speaker #4: Friends of the media.

Speaker #3: 欢迎。

Speaker #4: Welcome to the 2026 Interim Results Briefing for BOC Hong Kong (Holdings) Ltd. We are about to begin. First of all, let me introduce the senior management with us today: Mr. Sen Yu, Chief Executive; Mr. Xing Weiwei, Deputy Chief Executive; Mr. Huang Huabin, Deputy Chief Executive; Mr. Chen Man, Deputy Chief Executive; Madam Li Tong, Deputy Chief Executive; Madam Wang Chunfei, Chief Risk Officer; and Madam Liu Chang, CFO.

Speaker #4: There will be a few parts to this briefing. First of all, the Chief Executive, Mr. Sen, will provide a briefing on the implementation of the group strategy for the first half of the year, and then our CFO, Madam Liu, will present the financial results.

Speaker #4: And finally, Mr. Sen will share with us the outlook for the second half and the new five-year plan, before a Q&A session. Mr. Sen, please.

Speaker #4: Good afternoon, ladies and gentlemen. First of all, allow me to introduce our newly appointed senior management: Madam Wang Chunfei, CRO, and Madam Liu Chang, CFO.

Speaker #4: They are new to this media briefing. Both of them have long served us at Bank of China Group and possess professional knowledge, extensive work experience, and keen insight.

Speaker #4: I represent the management team to express our warm welcome to them. Since the beginning of the year, the global geopolitical landscape has undergone profound changes, and major central banks have tended to tighten monetary policies.

Speaker #4: Chinese mainland and Hong Kong achieved resilient economic growth, misdrive to promote high-quality development and make a smooth start to the new five-year plan. During the period, profit attributable to equity holders rose by 7.1% to HKD 23.7 billion, and ROE increased by 32 basis points to 13.18%.

Speaker #4: The Board has declared a second interim dividend of HKD 0.29 per share, taking the total regular DPS for the first half to HKD 0.58 per share.

Speaker #4: In addition, the Board has approved the implementation of a three-year shareholder return program for 2026 to 2028, including a quarterly increase of the dividend payout ratio within the established range.

Speaker #4: Extra returns of no less than HK$10.5 billion to our shareholders during these three years, of which a special dividend of HK$0.2388 per share was declared for 2026.

Speaker #4: We strengthened our integrated service capabilities in the Hong Kong market, maintaining leadership in new residential mortgages, syndicated loans in the Hong Kong and Macau markets, cash pooling, and IPO receiving bank service.

Speaker #4: For the first half, we grew the number of cash pools by 14% and accumulated deposits of over HKD 150 billion through our IPO receiving bank service.

Speaker #4: And we completed our first Islamic syndicated loan. Capitalizing on market demand, we achieved double-digit growth in our private wealth customer base, increased the number of private wealth centers to 11, and gained market share in retail banking fund sales. We also grew our personal payroll amount and assets under customer custody by 13% and 35%, respectively.

Speaker #4: The value of bonds underwritten grew by 29%, and we maintained our leading position in offshore RMB bond and underwriting business. We further reinforced our integrated service capabilities. BOC Life and BOC iPrudential led the market in terms of standard new premiums and MPF business.

Speaker #4: BOC HK Asset Management grew AUM by over 10%, and we were appointed as a settlement institution for the Hong Kong Central Clearing and Settlement System for gold and designated vault, supporting Hong Kong's development as an international gold trading hub.

Speaker #4: We contributed positively to the cross-border financial development in the GBA and maintained our leading position in mutual market access businesses. We supported the cross-border disbursement of portable cash assistance and rolled out global account services in tandem with BOC, and launched an integrated retirement financial service solution facilitating the integration of cross-border finance and livelihood.

Speaker #4: We joined the Financial Advisory Task Force of the Northern Metropolis, backing its development with our financial expertise. Our innovative tech customer base grew by 2.6%, and we launched the BOC Guangdong Enterprise Treasury Center service solution, fully supporting Chinese, growing global enterprises to access international markets via Hong Kong.

Speaker #4: We continue to leverage synergies with our Southeast Asian entities, and related deposits and loans grew by 4% and 10%, respectively, exceeding the average growth rates of the group.

Speaker #4: The NPL ratio of our SEA entities decreased by 3 basis points to 2.08%. We proactively participated in offshore RMB market development, further enriching our RMB product spectrum to enhance our role in promoting the international use of RMB, achieving promising results.

Speaker #4: We cemented our leading advantage as Hong Kong’s RMB clearing bank. Three of our SEA entities recorded a combined growth rate of 24% in RMB clearing volumes, while the Jakarta branch was appointed as the RMB clearing bank for Indonesia.

Speaker #4: And we remained the industry leader in market coverage in terms of the number of indirect SIPs participant banks, and became the world's first offshore e-CNY custodian bank.

Speaker #4: We maintained our market-leading position in RMB loans and deposits, as well as RMB standard new premiums. Public bond underwriting and fund distribution achieved business volume growth of 1.4 times and 47%, respectively.

Speaker #4: We boasted our RMB business innovation capabilities and participated in the Hong Kong MA's RMB business facility, covering nine regions and countries, across Hong Kong, ASEAN, and Europe.

Speaker #4: We became one of the first clearing members of the London Clearing House to support clients to deposit offshore RMB-denominated Chinese government bank bonds as collateral.

Speaker #4: We also served as a designated liquidity provider for the Hong Kong EX's newly launched CGB Futures. In addition, we again assisted the Indonesian government in issuing dim sum bonds.

Speaker #4: And as a firm supporter of Hong Kong's financial infrastructure development, we refined the top-level design of our digitalization to enhance services, risk management, and intelligent operations.

Speaker #4: We were among the first participants to connect with the cross-border e-CNY transfer services platform, and we explored ways to use the e-Hong Kong dollar in the wholesale CBDC pilot for advanced margin payments in the derivatives market.

Speaker #4: And we led our peers in mBridge transaction volumes and actively explored business opportunities in tokenization. We deepened digitalization to empower business development, and for personal banking, nearly 90% of transaction volumes were online.

Speaker #4: In corporate banking, IGTB transaction volumes rose by 17%, while the number of BOC Connect registered users increased by 33%. We also recorded 8% growth in the BOC PayPlus customer base, and an 18% increase in BOC Bill Settlement volumes.

Speaker #4: We strengthened tech governance and formulated a five-year plan for financial digitalization. We built an integrated Gen AI platform and further improved our digitalization KBI system and data governance mechanism.

Speaker #4: We enhanced our intelligent operations and anti-fraud management capabilities, promoted the use of intelligent office assistants, and continuously supported a culture of technological innovation.

Speaker #1: We strived to fulfill sustainable development ambitions and enhanced service capabilities in green finance. In the first half, we achieved a growth rate of 7% in green sustainability-related loans, 36% in personal new green deposits, 42% in ESG bonds underwritten, and 15% in banking book ESG bond investment.

Speaker #1: We supported the implementation of the Hong Kong taxonomy for sustainable finance, and successfully hosted the BOC HK Sustainable Supplier Forums to promote green and low-carbon transformations along the supply chain.

Speaker #1: We continue to develop our CSR commitment and engaged in more than 20 charitable initiatives and over 90 volunteer events during the period. We once again received the highest AAA rating from MSCI ESG and a low-risk ESG rating from Sustainalytics, putting us in a leading position among our peers.

Speaker #1: This concludes the strategy reviews for the first half. Next, our CFO, Madam Liu, will walk you through our financial performance. Thank you. CEO Sun.

Speaker #1: In the first half of the year, amid a volatile market environment and intensified market competition, we grasped business opportunity, strengthened asset-liability management, and expanded revenue sources, realizing continued net interest income growth.

Speaker #1: Net interest income decreased year on year, reflecting a high base in the same period last year. Meanwhile, we improved asset quality through enhanced risk management as a result.

Speaker #1: We achieved a post-tax profit of HK$24.4 billion, up 6.8% year on year. We expanded our high-quality deposit base by providing diversified products and services to meet the needs of large corporates, financial institutions, and government and public entities, including settlement, custody, treasury, cash management, and IBO receiving banks.

Speaker #1: With a focus on key personal banking customer segments, we expanded payroll and wealth management services to attract sticky deposits. Our customer deposits increased by 3.2% to HKD 3.04 trillion, with GASA deposits increasing by 4% and the GASA ratio up 0.5 percentage points to 53.8%.

Speaker #1: We continue to serve the real economy and capture business opportunities from the development of new quality productive force, business supply chain shift. Leveraging our advantage in RMB business, syndicated loans, residential mortgages, and customer resources, we focus on the Hong Kong cross-border, Southeast Asian, and other key overseas markets.

Speaker #1: We deepened intergroup collaborations and pushed forward solid development of leading businesses. As of the end of June, we grew our customer loans by 5.9% to HKD 1.82 trillion, maintaining the largest market share.

Speaker #1: All loan types showed sound growth momentum, with loans for use in Hong Kong up 5.1%, loans for use outside Hong Kong up 7%, and trade financing up 21%.

Speaker #1: In the first half, faced with a year-on-year decline in market interest rates, we flexibly managed deposit pricing and tenure, and optimized the deposit mix at the same time.

Speaker #1: We took advantage of the recovery in financing demand and expanded our loan book, and controlled the pace of bond investments to stabilize investment returns. Adjusted for swap impact, our net interest income increased by 3.3% year on year to HKD 29.9 billion, while NIM widened by 3 basis points to 1.57% during the first half.

Speaker #1: Amidst a backdrop of a volatile Hong Kong capital market and recovering consumer confidence, we enriched our fund product shelf to meet diversified customer needs in asset allocation and risk management.

Speaker #1: We stepped up product promotion and enhanced the convenience of our offline and online payment channels. Fee income from fund distribution, credit card business, and bill commissions grew by 55%, 12%, and 15%, respectively, while securities brokerage fee income remained stable at a high level.

Speaker #1: Overall, net fee income fell slightly from the high base in the same period of last year, but rebounded by 19% half-on-half. We further strengthened the development of our wealth management business: wealth management income and personal banking rose by 14%, including an increase of 50% in investment product distributions and 18% in insurance distribution income.

Speaker #1: Solid growth was achieved in high-end customer TRB and the private wealth customer base. In our insurance business, the group CSM balance increased by 23.6% year to date, while BOC Life standard new premiums and the value of new business grew by 28% and 56% year on year, respectively.

Speaker #1: We prioritized resource allocations for key development areas in line with the Group's strategic focus. We refined our branch network layout, accelerated the application of AI and technological transformation, pursued low-carbon operations, and deepened the integration of our regional operating platform.

Speaker #1: So to optimize resources utilization in the first half, operating expenses increased by 6.7% year on year. The cost to income ratio stood at 22.5%, continuing to outperform the market average.

Speaker #1: We closely monitor market development and customer dynamics, strictly supervise high-risk credit portfolios, carry out timely reviews of customers’ internal credit ratings, and strengthen credit risk management.

Speaker #1: Asset quality remained solid. As of the end of June, our impaired loan ratio was 0.89%, down 25 bps from the previous year-end, mainly due to write-offs and loan repayments by certain non-performing customers.

Speaker #1: Our annualized credit cost was 0.27%, down 12 basis points year on year, while the total loan provisions coverage ratio edged up by 3 basis points to 1.12%, maintaining robust capabilities to withstand potential risk.

Speaker #1: Capital position remained solid, with total capital ratio and CET1 ratio standing at 25.7% and 23.8%, respectively. Liquidity positions remained sound. Average LCR and NSFR reached 174% and 144%, respectively, in the first half.

Speaker #1: CE Sun will walk you through the outlook for the second half.

Speaker #2: Thank you, CFO Liu. Looking ahead to the second half, the global landscape will rapidly evolve while financial markets still face great uncertainty. The deepening adaptation of AI and technological upgrades present new development requirements for banks.

Speaker #2: At the same time, the nation's 15th Five-Year Plan will support Hong Kong to better integrate into and serve the overall national strategy. Hong Kong will have its first Five-Year Plan, which will further consolidate and leverage its status as an international financial, shipping, and trade center, as well as a global hub for innovation and technology, and a core engine for the GBA.

Speaker #2: Positioned within the nation's new dual circulation development paradigm, Hong Kong will perform its role as both a participant and facilitator, thereby injecting strong momentum into the local economy.

Speaker #2: In addition, Chinese enterprises will accelerate expansions and pursue high-quality development. International use of RMB will continue to grow. Hong Kong's emergence as a critical, pivotal role in major strategic initiatives will create sustainable development opportunities.

Speaker #2: Faced with new situations, new positionings, and new challenges, we will proactively serve the national strategies and Hong Kong's developments, aligned with group strategy and core strategic objectives.

Speaker #2: We'll enhance our role as a regional center to further optimize operations and management of our Southeast Asia entities. We'll solidify our role as a business center for our group's offshore operations.

Speaker #2: Focusing on key businesses such as key custody, syndicated loans, cash management, and private banks as a management and financial market. We will continue to improve our capabilities in regional business management, integrated operations, and digitalization, with the goal of being market leaders in Hong Kong, pioneers in the GBA, deep participants in Southeast Asia markets, strategic participants in banner row market, and striving to become regional leaders in the RMB business.

Speaker #2: We strengthen our talent pool, cultivate corporate culture, enhance smart operations, refine comprehensive risk management, secure robust financial resources, and we will endeavor to set ourselves as a benchmark for regional headquarters.

Speaker #2: This concludes our presentations. Now you are welcome to ask questions. You are limited to two questions. Please identify your name and your institution before asking a question.

Speaker #2: Thank you.

Speaker #3: Tracy in the middle, please. Greetings. 01 Tracy. Concerning your plan for shareholder returns, is there a part on share buyback, or will you be relying on increasing dividends to reward your shareholders?

Speaker #3: The second question is about the mainland in terms of controlling capital outflow. In terms of opening accounts for you, or for wealth management or insurance business, has there been any impact, please?

Speaker #3: And also, for the US interest rate, what is your expectation and outlook, please? And also, for the Hong Kong property market—in July, we saw that residential property prices had fallen slightly.

Speaker #3: And for your mortgage business, some of your peers have exited from the fixed-rate plans. So what is your expectation, and has the property market bottomed out?

Speaker #3: You have asked a minimum of four questions, I have to say. Now, first of all, on shareholders' return, Ms. Liu Chang will answer that question—the CFO. And for wealth management, Mr. Chan will answer the question.

Speaker #3: Regarding the mortgage market, I will answer "yes" and "our," and my colleague will answer the question. You also asked too many questions. What was your last one?

Speaker #3: Yes, property market. Yes, our CRO will answer that question. Thank you. First of all, concerning capital overall, let me just introduce the situation. For the first half of the year 2026, faced with a complicated external environment and leveraging our central role in the group's global development, BOC Hong Kong actively served as a key hub for offshore and onshore collaboration, captured market opportunities, and prudently coped with risks and challenges.

Speaker #3: And for the first half, profit attributable to shareholders rose by 7.1%. ROE reached 13.18%, up 0.32% year-on-year. We place high regard on providing long-term, stable shareholder returns, to continuously focus on opportunities and to create value for our shareholders.

Speaker #3: Firstly, we effectively deployed capital and made business development our top priority. This year, while Hong Kong's loan market demand showed signs of recovery, our loan growth increased at a faster pace of 5.9%.

Speaker #3: Our Southeast Asian-related loans grew by high single digits, while at the same time, we are better meeting the financial service needs of growing global Chinese enterprises.

Speaker #3: BOC recently initiated the Growing Global Universal Cooperation Alliance. In this regard, our bank, based in Hong Kong, markets and, through enhancing cooperation with our parent and other offshore institutions, we played an important role.

Speaker #3: In helping Chinese enterprises go overseas. Secondly, on regular dividend payouts, we implemented a quarterly arrangement. The Board had announced the second interim dividend of HKD 0.29 per share, taking the total regular dividend for the first half to HKD 0.58 per share.

Speaker #3: And we also distribute our third interim dividend as planned. For the full year payout ratio, we consider factors across the board and determine our final dividend payout within the 40% to 60% regular payout range, striving to orderly increase the payout ratio.

Speaker #3: On top of that, the Board has already approved the 2026 to 2028 shareholder return program, including an orderly increase in the regular dividend payout ratio within the established range, and plans to provide extra returns of no less than HK$10.5 billion in the three-year period.

Speaker #3: For 2026, a special dividend under this plan is HKD 0.2388 per share. In the future, we'll effectively balance between business development needs, operating safety, and prudent operations. Based on the business environment, profit performance, risk situation, capital level, and regulatory policies, as well as shareholder expectations, we'll timely review our return programs, striving to deliver long-term sustainable returns. For 2027 and 2028, the specific arrangements will have to be approved by the Board and also comply with the Listing Rules before we make any public announcements.

Speaker #3: Now, as for some of the recent developments in terms of mainland promulgations and including cross-boundary measures in capital, and also with the deepening of financial opening and also the completing of wealth management and also development of market operations and Hong Kong as an international financial center and also an international wealth management center, we have the competitive edges including the open market to support this development.

Speaker #3: And also the Hong Kong SAR government had also come up with supportive policies to continue to support the global asset management and wealth management hub positions of Hong Kong.

Speaker #3: Just now, Tracy talked about some new measures' promulgation and whether that had impacted wealth management. First of all, let us look at it from the customer point of view.

Speaker #3: Now, in recent years, as the linkage and connectivity between the mainland and Hong Kong financial markets deepens, client demand for cross-boundary wealth management services and assets is increasing.

Speaker #3: And the mainland has recently introduced these measures, aiming at guiding capital back into legitimate channels, which is conducive to healthier and more orderly development of the market in the long run.

Speaker #3: Our overall account opening process is currently operating smoothly in the first half. The number of cross-boundary, or border, personal customers—TRB—of cross-border customers, and personal cross-border business income continue to grow steadily.

Speaker #3: As mentioned, there is a 14% growth year-on-year. We continue to monitor the housing market, which is something the media is concerned about for the first half of the year. As the economy in Hong Kong continues to improve, there are favorable factors supporting this trend.

Speaker #3: For the first half, including the residential market increasing, the volume of transactions and the price have both risen, and there is a 7.9% price increase.

Speaker #3: There had been a 41% increase in transaction volume, and rentals increased by 6%. We continue to grow our business in line with market developments.

Speaker #3: And we continue to enhance and improve our cooperation with the developers and also the intermediaries and we have increased 29.1% year on year for our cumulative number of new mortgages which was up 13,333, maintaining our leadership with a market share of 30.7%.

Speaker #3: As of the end of June, our mortgage loans amounted to HKD 487 billion, up 3.3% compared to the end of 2025, outperforming the market's growth rate of 2.5%.

Speaker #3: Asset quality remains sound. NPL ratio 0.12%, while the ratio overdue 0.06%, better than market average. For the second half, although the economies of Hong Kong and mainland continue to be steady, uncertainty remains in the market interest rate movements.

Speaker #3: The residential property market is expected, therefore, to maintain an upward trend, but at a relatively moderate pace. Residential mortgage is core to us and we will continue to uphold our commitment. We leverage our largest branch network in Hong Kong and will strengthen our integrated online and offline services, striving to meet the home ownership needs of both local residents and new arrivals.

Speaker #3: We'll actively sustain a high-quality growth in our mortgage business. Now, for the property market for the local market, there is a residential market improvement, but on the other hand, office buildings and also retail have under the latter have come under pressure, whereas offices had been stable.

Speaker #3: Now, for offices, in terms of the rentals index, it has been bouncing back from a five-year low and is now at 1%. Also, for the quarter, it is at 2 percentage points and a 0.3 percentage point rebound.

Speaker #3: But on the other hand, retail is still dropping in terms of sale price and also rentals. So we see also that for the past five years, there has been stabilization and mortgage rates have been around 0.2%. We see that retail is indeed weak, and the liquidity for enterprises and smaller property developers is tense.

Speaker #3: As for the second half, as we continue to see the talent import scheme from the Hong Kong government, we see that the residential property market will continue to improve. But at the same time, there are uncertainties in terms of interest rates and also geopolitics.

Speaker #3: And therefore, there may be certain changes in the indices and there may be some slackening or slowing down of the growth. And also for the commercial property, we see that for the core regions there is a stabilizing, but for the non-core areas, there is still an oversupply.

Speaker #3: And we see that there is going to be a continuation in this commercial area, and we will closely monitor the situation. We will be leveraging the cash flow changes and effectively conduct risk-earning warnings based on the premise of safeguarding our interests.

Speaker #3: We will continue to manage our risk well in this area. So, the next question—I am from Phoenix. I'm concerned about the R&B situation, and that is offshore R&B.

Speaker #3: We know that there is a wider use, in terms of the international market, of RMB for settlement. Hong Kong is the biggest offshore RMB hub, and it links up the international market with the mainland market in terms of RMB.

Speaker #3: So how do you understand that particular unique role, and also, in terms of innovation and development for your bank, in promoting the R&B business?

Speaker #3: What are some of the developments, please?

Speaker #2: Thank you very much. I'll answer the questions. Indeed, as you mentioned, since the beginning of the year, RMB has continued to strengthen its function as an international currency, while Hong Kong continues to serve as the largest offshore RMB business hub in the world.

Speaker #2: At the end of June, RMB deposits in Hong Kong reached RMB 1.09 trillion, up by about 14% from the end of 2025. RMB loans grew by 13.7%, reaching RMB 1.06 trillion.

Speaker #2: The issuance of volumes of offshore RMB bonds was 582.7 billion RMB, up by 1,661.7% year on year. We remain customer-centric and led in business and service innovations to support the steady development of the offshore RMB market.

Speaker #2: We have several tasks where we leverage our clearing bank advantage. As you know, we are the first offshore RMB clearing bank and also the biggest.

Speaker #2: And the total clearing volumes processed through Hong Kong RTGS reached RMB 287 trillion, accounting for over 70% of the global offshore total. We remained the largest player in market coverage in terms of the number of SIPs participants.

Speaker #2: The combined RMB clearing volume of BOC Malaysia, Manila Brent, and Non-PEM Brent grew steadily, up by 24% year on year. Our Jakarta branch was also appointed by the PBOC as the RMB clearing bank for Indonesia.

Speaker #2: Indonesia is a market with high potential. BOCHK also became the world's first offshore e-CNY funds custodian bank. We can provide e-CNY liquidity transfer services for the settlement wallet of offshore direct participants.

Speaker #2: Meanwhile, we leverage our role as SEE regional headquarters. We have cooperated and coordinated with the Thailand branch, BOC Malaysia, and VNGN branch to jointly participate as direct participants in CBETS platforms under PBOC, and completed the first production verifications.

Speaker #2: We've further built our core competitiveness. We enriched RMB products and application scenarios and deeply participated in HKMA's RMB business facility arrangement. Also, our market leadership in RMB insurance has been maintained in terms of standard new premiums for 14 consecutive years.

Speaker #2: In addition, this non-PEM Brent officially launched R&B merchant acquiring services, becoming the first commercial bank globally to receive regulatory approval for R&B POS merchant acquiring services.

Speaker #2: We fully support the innovative development of ECNY 2.0 and the continued building of the ECNY ecosystem. We actively promoted financial market connectivity, remaining the leader in Stock Connect, Bond Connect, Swap Connect, Wealth Management Connect, and Cross-border Payment Connect businesses.

Speaker #2: We gave full support to the optimization of Bond Connect Northbound arrangement by extending settlement hours to increase operational efficiencies. We supported enhancements to Swap Connect by adding the interbank seven-day repo fixing rate as a reference rate.

Speaker #2: We supported offshore investors using onshore treasury and policy bank bonds held via Bond Connect. Since the beginning of the year, PBOC, SAFE, and HKMA have issued a series of policies to deepen financial cooperation and market connectivity between the Chinese mainland and Hong Kong, aiming to build a more diversified asset ecosystem and consolidate Hong Kong's role as a leading offshore RMB hub.

Speaker #2: And to further advance international use of RMB, BOCHK will seize opportunities arising from policies aimed at improving the offshore RMB market development, enhancing payment and settlement convenience, and optimizing financial market connectivity.

Speaker #2: We'll also strengthen regulatory communications and market research, accelerate RMB use in trade and investment accounts, and actively participate in the development of a multi-tier cross-border payment and clearing system, striving to consolidate our market position in financial market connectivity, the international use of RMB, and more.

Speaker #2: The next question, please. Please identify yourself and your institution before asking questions. My name is Heiji. I'm from Ming Pao. My question is that, according to the presentations, it is mentioned that the capital ratio and the CET1 ratio had a slight decrease of 0.21%.

Speaker #2: And also, the impairment provisions have decreased by $2.6 billion, which is a big drop of 52.1%. Could you please talk about any categories which have improved?

Speaker #2: And also, will it continue to improve? Will you have any recharge provisions? And the second question, HSBC has increased their mortgage interest rate. The market has seen it as an indication, or the start, of hiking the rate for mortgages.

Speaker #2: How about the pathway for BOCHK? Thank you very much, Heiji. The first question will be answered by the CFO, and the second question will be answered by the DCE.

Speaker #2: And also, actually, you asked about the capital ratio and adequacy ratio.

Speaker #3: So you're asking about the reasons for the change? Yes. I see that there has been a decrease in terms of capital ratio, and there had been certain provisions and impairment, and those have also decreased, so the specifics of that.

Speaker #3: Now, for the financials, I think we can communicate on the details, but regarding the capital adequacy ratio and why it has fallen, I can give you the reason.

Speaker #3: Now, it has slightly fallen because capital accumulation and capital outlay are more or less the same for this period. You can also see that our loans have been growing significantly, and therefore, there has been a 6.3% growth overall.

Speaker #3: And for the first half, in terms of dividend payment, we see that the first half is relatively higher than the second half. And also, for valuation, there have been certain changes as well.

Speaker #3: So, overall speaking, the capital adequacy ratio can come under pressure and fall slightly because of credit expansion. Now, as for the mortgage market, we know that Hong Kong is a highly competitive market for residential property and property market, and the banks will decide on the pricing of their products according to their own portfolio. We are no exception.

Speaker #3: Just now you asked about the mortgage market in the second half of the year. I think the Hong Kong residential market will continue to be stable.

Speaker #3: And for the demand, it is real demand, and our bank will continue to serve the community and provide comprehensive products for residential mortgages.

Speaker #3: And of course, we will continue to look at the balance of risks and also look at the operating environment in our fixing of the prices.

Speaker #3: Any other questions from the media, please? Yes, greetings. So, the South China Morning Post, EC. I know that you have just completed the forging of your first five-year plan.

Speaker #3: So, what is the starting point, and what are the next phases of your strategies, please?

Speaker #2: Thank you, Daisy. I'll answer the questions as you correctly observe, indeed. This is the first year for our new five-year plan and it's in the middle of the year.

Speaker #2: The board has approved the BOCHK 2026–2030 strategic plan. I actually have some brief summary in my PPT. We have one principle: we will align with the core strategic objectives of China's 15th Five-Year Plan, as well as our group's overall strategy and global development.

Speaker #2: And also, we have two centers. The two centers mean that we have business centers, and as well as our strategic focus will enhance our capabilities in regional management, integrated operations, and digital intelligent empowerment, striving to become market leaders in Hong Kong.

Speaker #2: And also, we are actually building our GBA deep participant base in Southeast Asia and among strategic players in the Belt and Road market. We'll also improve different perspectives. We have three strategic competitive strengths as well as four strategic markets.

Speaker #2: The four strategic markets, as I said, are: first, we become the market leader in Hong Kong; pioneer in the GBA; deep participant in Southeast Asia; and strategic player in the Belt and Road market—aiming to become a leader in the offshore RMB business.

Speaker #2: And through strengthening talent teams, corporate culture, intelligence operations, comprehensive risk management, and robust financial resources, we will ensure adequate resources to support and drive strategic execution. Moving forward, we will closely follow the Hong Kong SAR government's formulation of its first five-year plan, and actively push forward the refinement and implementation of our five-year plan. We have four benchmarks: we are committed to becoming the best regional bank, fully supporting Hong Kong in consolidating and enhancing its status as an international financial center, better integrating with and serving the overall national development strategy, and creating value for shareholders and stakeholders. Next question from Michael, please. Hi management, I'm from Economic Daily. My name is Michael. In the first half, as I can see from the presentation, the deposits and loans have been growing quite robustly. My question is: How do you see the pathway for the second half as well as next year in terms of deposits? CFO will answer the question on deposits, and loans will be answered by DCE1.

Speaker #3: Thank you for your questions. For 2026 we continue to grasp market opportunities as of end of June customer deposits exceeded 3 trillion Hong Kong dollars up 93 billion Hong Kong dollars or 3.2% compared to end of last year maintaining our position as the second largest player in the local market of 14.74% Casa rose by 4% and Casa deposit ratio was up by 0.5 percentage points to 53.8% and providing strong support for our liquidity management and also our NIM stability.

Speaker #3: We drive deposit growth through diversified products and services, consolidating and expanding our high-quality customer base, and deepening our relationship with financial institutions, corporates, government, and tapping into demand for settlement, custody, treasury services, etc.

Speaker #3: And we widened our source of business. Our number of cash pools increased by 14%, and total assets under custody rose by 35%. IPO receiving bank business maintained its market-leading position.

Speaker #3: R&B deposits rose by over 20%, and through dynamic deposit-taking strategies, including products and the total solution bundling of diversified products, we attracted payroll customers in bulk. We leveraged smart tech to build an efficient wealth management platform, driving solid deposit growth in personal payroll services and wealth management.

Speaker #3: For the second half, with ample liquidity and a balance between volume and pricing, we continue to deepen customer relationships and leverage our advantages in integrated products and services, aiming to maintain solid growth in deposits with CASA ratio leading the market. Specifically, in terms of currency mix, we continue to leverage our strength in RMB business and expand diversified sources of RMB funding. In terms of maturity structure, we flexibly manage term deposit maturities in response to market changes.

Speaker #3: For business development, we capitalize on the favorable policy of the Hong Kong SAR government to support enterprises going global, promoting Hong Kong as a regional headquarters and treasury center, and creating a better policy environment for capital connectivity.

Speaker #3: In the cross-border segment, we collaborate and continue with our product planning to expand business opportunities in payroll, wealth management, IPO receiving bank, and cash management services. We are exploring demand in settlement, customer treasury services, and accumulating more customer deposits with us.

Speaker #3: For loans, in the first half the Chinese mainland and Hong Kong economies sustained solid recovery, with GDP growing by 4.7% and 5.1% respectively. The local residential property market and retail sales showed positive momentum. Imports and exports grew rapidly, driving overall loan demand up by over 6%. We see these opportunities. At the end of June, customer loans reached HK$1.82 trillion, up 5.9% from last year end, maintaining our leadership with a local market share of 16.18%.

Speaker #3: Specifically, corporate loans used in Hong Kong increased by 6.3%, mainly driven by loan growth from SOEs in Hong Kong and local leading enterprises.

Speaker #3: We also sustained the top position in the Hong Kong-Macau syndicated loan market as a mandated arranger for 21 years. We grew Hong Kong residential market mortgage loans by 3.3%, as mentioned by Ms. Chen, and maintained our leading position in terms of new mortgage loans.

Speaker #3: And for the second half, as global economic growth may remain low due to uncertainties because of U.S. tariffs and geopolitical risks, the banking sector will continue to face certain challenges.

Speaker #3: However, in the key markets where we operate, for Chinese mainland we are strengthening the counter-cyclical policy adjustments. So, this is an opportunity, and also accelerating fiscal expenditure to boost domestic demand and investment confidence, promoting development of new quality productive forces.

Speaker #3: And also, supported by strong demand for advanced electronics and AI-related products, Hong Kong's goods products will continue to develop rapidly. Additionally, with favorable factors continuing, we expect steady loan growth for the Hong Kong mortgage market.

Speaker #3: This is another opportunity. Also, the signing of the China-ASEAN FTA 3.0 further enhances trade efficiency in the region. Facing these challenges and opportunities, we'll continue to focus on Hong Kong cross-border, Southeast Asia, and other overseas markets to fully serve the real economy and leverage our distinctive strengths in RMB business, residential mortgages, and green loans to seize opportunities in various areas, while maintaining strict risk controls.

Speaker #3: We'll balance returns and scale to achieve solid loan growth, striving to outperform the market for the full year. Are there any other questions from the media, please?

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