Annual 2013 Bank of China Ltd Analyst Briefing (Mandarin and English)

601988.SS - Bank of China Ltd
Annual 2013 Bank of China Ltd Analyst Briefing (Mandarin and English)
Mar 26, 2014 / 09:30AM GMT 

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Corporate Participants
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   *  Fan Yaosheng
      Bank of China Ltd. - Secretary of the Board
   *  Chen Siqing
      Bank of China Ltd. - President
   *  Zhu Shumin
      Bank of China Ltd. - EVP
   *  Yue Yi
      Bank of China Ltd. - EVP

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Conference Call Participants
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   *  Tracy Yu
      Deutsche Bank - Analyst

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Presentation
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 Fan Yaosheng,  Bank of China Ltd. - Secretary of the Board   [1]
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 Good afternoon, ladies and gentlemen. My name is Fan Yaosheng, Board Secretary of Bank of China Limited. Welcome all of you to Bank of China's 2013 annual results presentation. The presentation is mainly in Hong Kong, and audio and video linked to our Beijing venue to ensure the Beijing analysts have equal access to our public disclosures. Before we proceed further, please take note of the disclaimer on this slide. The 2013 annual reports of the Bank of China and the presentation are now available on our website for your reference.

 First of all, I like to introduce to you the executive team here today; President, Mr. Chen Siqing; Executive Vice President, Mr. Zhu Shumin; Executive Vice President, Mr. Yue Yi. All the financial data in our presentation here are prepared according to IFRS unless otherwise stated. There will be a Q&A session at the end of the presentation during which we will allocate time reasonably between Hong Kong and Beijing.

 Now, I like to invite President Chen Siqing to make a speech.

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 Chen Siqing,  Bank of China Ltd. - President   [2]
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 Ladies and gentlemen, good afternoon. Welcome all of you to attend today's results announcement. This is my first time to meet you all as the President of the Bank of China. We treasure this opportunity very much. We like to establish and maintain a very good communication with all of you. The development of the Bank of China has received from you all friends longtime support and help. Now, please allow me on behalf of my colleagues and myself to express my sincere gratitude to you all and hope you can continue to care and to support the Bank of China in the future.

 In last year, our Chairman, Tian Guoli, proposed that the Bank of China should take social responsibilities in a bid to be an excellent bank; this is our strategic goal. We need to shoulder significant responsibility for the nation's revival, possesses competitive edges in the globalization process, and also leads lifestyle changes in technological innovations, earns customer loyalty in market competition; and also meet the expectations of shareholders, employees, and society in all in the course of the sustained development. To realize this strategic goal, the Bank will focus on business development and continuously tighten risk management with very good results.

 In 2013, led by Chairman Tian Guoli and former President Li Lihui, the Bank shouldered social responsibility, integrated its development with national strategy, and delivered excellent results in a complicated operational environment. The Bank recorded a profit after tax of RMB163.7 billion and probably attributable to equityholders of RMB156.9 billion increased by 12.35% and 12.36% year-on-year respectively.

 The Bank's net interest margin continuously expanded. Non-interest income ratio continued to lead peers in its proportion. Profit before provision grew 13.9% year-on-year. Asset quality remained stable, with sufficient provision. NPL ratio stood at 0.96%, with an NPL coverage ratio at 229%. The ratio of provision to total loans of domestic institutions kept flat at 2.62% compared to the prior year-end. The Bank further improved management mechanism and performance appraisal method efficiently stimulated institutions of different levels to realize self-development, push forward growth in core deposits and optimize asset and liability structure.

 The Bank's customer deposits grew by RMB923.18 billion or 10.1% compared with the prior year-end and the proportion to total liabilities increased by 0.58 percentage point. Domestic RMB-denominated customer deposits grew by RMB703.6 billion or 10% from the end of last year. Deposit structure was further optimized. Daily average balance of domestic RMB-denominated demand deposits grew by 9.9%; and the proportion to daily average balance of domestic RMB-denominated customer deposits increased by 2.4 percentage point from last year, by proactively and continuously reducing high-cost liabilities. Average cost of domestic RMB and foreign exchange denominated customer deposits dropped by 18 basis points and 35 basis points respectively compared with last year.

 The Bank continued to optimize its asset structure, increased a proportion of high-yield assets. The Bank accelerated the transformation of its financial services to large enterprises and strengthened credit support to the SMEs and individual customers, so as to meet the demand of the real economy. Stable growth of its loan portfolio was maintained. The Bank's loans and advances to customers grew by RMB743.1 billion, an increase of 10.8% compared with the prior year-end proportion to total assets further increased. Domestic RMB-denominated loans grew by RMB484.5 billion, an increase of 9.6% compared with the prior year-end.

 Personal loans grew faster than corporate loans. Domestic RMB-denominated personal loans increased 15.3% from the end of last year, and the proportion to domestic RMB-denominated loans has been increased to 33.6%. Small medium-sized enterprise loans achieved fast growth, small enterprise loan by BOC Credit Factory grew by 32%, domestic medium-sized enterprise loans grew by 18.2% vis-a-vis the previous year. The proportion to domestic corporate loans up by 1.49 percentage points and 2.35 percentage points respectively.

 The Bank made proactive efforts to optimize its asset liability structure and improve the net interest margin in 2013. Net interest margin of domestic RMB business and overseas business expanded by 10 basis points and 15 basis points respectively vis-a-vis the previous year, which drove the Bank's net interest margin up by 9 basis points from last year to 2.24%.

 Adapting to customer demand, the Bank made greater efforts in product innovation and promotion, enhanced the development of its traditional and differentiated businesses, steadily developing wealth management and financial advisory businesses, and improving our ability to deliver differentiated services. The structure of its fee-based businesses was optimized, with increased proportion of non-interest income. In 2013, non-interest income increased by 13.5%, while net fee and commission income reached by 17.4% year-on-year. Net non-interest income represented 30.4% of the total operating income, an increase of 0.6 percentage point from last year. Agency commissions, bank card fees, settlement and clearing fees, custodian and other fiduciary service fees recorded rapid growth of 24%, 16%, 8%, and 21% respectively.

 The Bank accelerated the pace to build a multinational banking group and fully leverage its advantages in internationalization to realize significant achievements.

 As of the end of 2013, the Bank's overseas assets totaled $630.8 billion, an increase of 26.5% compared to the prior year-end, and accounted for 25.8% of the total assets.

 Overseas profit before tax was $6.66 billion, increase of 20.5% year-on-year, accounting for 19.4% of the Bank's total profit over tax. Overseas deposit and loans achieved rapid growth rate at 13.5% and 21.1% respectively.

 Business growth of overseas operation excluding Bank of China Hong Kong was faster than average overseas business growth and its core profitability enhanced assets and profit before tax increased by 39.1% and 28.3% respectively.

 The Bank steadily expanded its overseas network to offer a wider range of services and coverage around the entire globe. In 2013, the Bank established 11 overseas institutions in nine countries in North America, Europe, and Asia. The Bank has a total of 620 overseas institutions covering Hong Kong, Taiwan, Macao, as well as 37 countries. Traditional hedges, including international settlement, clearing businesses, syndicated loan grew robustly with market position further strengthened.

 As the most internationalized commercial bank in Chinese Mainland, the Bank has led the RMB offshore market development, became the primary channel of RMB cross-broader circulation, main driver of RMB internationalization, and also the main leader in RMB internationalization products and service innovation. In 2013, the Bank's cross-border RMB settlement volume was over RMB3.98 trillion, achieving a year-on-year growth of 60.2% and continued to maintain leading market share.

 Since China launched our RMB cross-border settlement scheme, the Bank had completed cross-border RMB settlements of volume over RMB8.6 trillion. The Bank's RMB global clearing network has taken shape. Apart from Hong Kong, Macao, and Taiwan, the Bank is also the RMB clearing bank in Malaysia, Luxembourg, Cambodia, Philippines, and became the main RMB clearing channel in countries such as UK, Germany, France, Japan, South Korea, Indonesia, and South Africa.

 In the second half of 2013, the Bank published The Bank of China Cross-Border RMB Business White Cover Paper and BOC Cross-Border RMB Index worldwide. In March 2014, we published BOC-Offshore RMB Index, being the first Chinese financial institution to compile and release RMB internationalization-related white cover and indices.

 Meanwhile, the Bank carried out a full range of product innovation, simplified the cross-border RMB settlement procedure to facilitate enterprises' cross-border trade and settlement and investment. The Bank also actively participated in pilot businesses in Shanghai free-trade zone, provided cross-border RMB financing solution for Hong Kong-Zuhai-Macao coverage, successfully issued the first series of RMB Formosa bond. And our bond issuance of RMB2.5 billion of our London branch was successfully listed on the London Stock Exchange, breaking the record amount for single debt issuance in London, and also became the first RMB bond of Chinese banks to be listed on the LSE.

 The Bank accelerated the development of non-banking businesses, including investment banking, fund management, insurance, direct investments, and investment management and aircraft leasing business. We promote cross-selling and product innovation to enhance the synergy across the Group and provide comprehensive and quality financial services to the clients.

 In 2013, the contribution from our non-banking business further increased. The Bank's comprehensive business income stood at RMB52.7 billion, an year-on-year increase of 24.8% and accounting for 12.9% of the Bank's total operating income, up by 1.4 percentage points. We have fully leveraged our advantages of integrated domestic and overseas businesses, and also our diversified business platforms. We enhanced our business negotiation ability and successfully organized multiple large cross-border products through strengthening our domestic and overseas business coordination. Our comprehensive global service capability was further improved.

 As the lead Bank, in the year of 2013, we have played key roles in WH Group's $7.1 billion acquisition of Smithfield in the US, including our key roles, including M&A consultant, commitment letter issuer and the syndicated loan lender. It is the largest Chinese M&A case in the US and also broken the record of overseas M&A deal by Chinese privates enterprises. The WH Group's acquisition significantly enhanced our Bank's influence in domestic and overseas market, and attracted more customers coming to our Bank for financial service.

 We also sponsored China Molybdenum's acquisition of Australia copper and gold project of Rio Tinto and we supported CNOOC to take over NEXEN Energy, and we assisted China International Marine Container and China Shipping to issue commercial paper in the US. We also supported CITIC Securities China Huaneng and China National Offshore Oil, [Baogum] and Baosteel to issue bonds in Hong Kong, supported overseas enterprises to issue a panda bond in China, providing strong financial support to Chinese going-global clients and overseas coming to China clients.

 The Bank was also devoted to strengthening infrastructure construction, achieving new progresses. The Bank's e-banking services grew very rapidly. In 2013, the e-banking transaction volume reached RMB110.4 trillion, an increase of 20.8% year-on-year. The substitution ratio of e-banking channels for tradition outlets reached 77.5%. Number of e-banking customers increased steadily, with optimized product functions and service processes and improved customer service experiences.

 The Bank optimized distribution of its outlets and pushed forward outlet transformation as nearly 2,000 middle to large-sized, fully-function outlets and maintain a rapid delivery of self-service facilities. The Bank also steadily advanced the integration and transformation of overseas information systems. 12 branches in Asia-Pacific region launched a new system during the year, further enhancing its global integrated IT services capabilities.

 The Bank accelerated construction of global unified payment and customer service platforms with the operational and service capability further improved. Conforming to the technology trend of the Internet economy and mobile Internet, by integrating the traditional financial business with modern information technologies, represented by mobile Internet and big data. Our Bank fully leveraged the competitive advantages and oversees our diversified business and build new business models via its open technology and business platforms to promote the development of the e-finance bank.

 In 2013, the Bank successfully launched its open platform and other innovative products such as Micro Bank, Easy Pay, and BOC E-Community. The Bank also provided service solutions to SMEs via BOC Online Tongbao and put its first Future Bank flagship branch into trial operation. The bank proactively improved risk management to effectively control the cause of risk. The Bank strengthened credit asset quality management and stressed assets mitigation.

 At the end of 2013, the non-performing loans ratio was 0.96%, maintaining stable. Special-mention loan ratio was 2.49%, down by 0.53 percentage point from the prior year-end. Overdue loan ratio slightly increased with overall risk under control, consistent with the economic operation and industrial development trend. The Bank strictly controlled the credit exposure to local government financing vehicles and strengthened the risk management of overcapacity industries.

 Real estate, wealth management businesses, innovative inter-bank business, et cetera, et cetera. We adhere to the balance of safety, liquidity, and profitability. The Bank formulated rigorous policies and procedures for liquidity risk, improving the accuracy of the [illiquidity] management and our ability to cope with market changes. The Bank has successfully addressed the challenging situation that has arisen in the funding market since the middle of last year, playing a bank boom role of large commercial banks in safeguarding the security and stability of financial market.

 Looking into 2014, we feel that this year, the macroeconomic situation has these several characteristics. The first one, the overall momentum of global economy is expected to recover, China's economy is expected to perform simply and going for better in this year. We expect that GDP growth will be around 7.6%. CPR rise of about 3%. Total financing volume will grow steadily and M2 growth rate for the entire year will be around 13.5%.

 At the same time, we have also noted the Chinese domestic financial environment has some challenges for us. The global economic recovery has some uncertainties. The Chinese economy is facing a 3-in-1 situation, because we have to deal with the deceleration of growth, structural adjustment, and [plus] stimulus period of side effects digestion. So there is a pressure of economy coming down. Faced with this complex domestic-international operational environment, will send out here to the structured goal of serving society and be the best bank. We will make full use of the differentiated competitive edges of RMB globalization, interest rate liberalization, and mobile Internet in a complex international-domestic economic situation.

 So will shoulder the historical responsibility for the nation's survival makes deliberate business development plan, consistent with the national strategy; make big progress into institution reform, mechanist improvement and business innovation make breakthrough in customers structure, optimization, liability mix optimization and business structure adjustment. We will make great efforts to deliver excellent results and bring long-term sustainable value to our shareholders, employees as well as for the society. Thank you very much.

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Questions and Answers
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Operator   [1]
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 Thank you, President Chen. Now, we will enter into the Q&A session. (Operator Instructions) Given the limit of time, so each analyst who find a place limit your number of question to one. So, we will start from the analyst friends in Hong Kong. So the lady in black clothes, please.

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 Tracy Yu,  Deutsche Bank - Analyst   [2]
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 Thank you very much, management, for giving me the opportunity to raise the question. I am Tracy Yu from Deutsche Bank. My question is -- so first of all, I'd like to congratulate Bank of China for achieving this outstanding performance. My question is to President Chen. So, after you take the office as the -- take the position office as the -- take the position as Bank of China President. So what is your view of Bank of China's strategy and also management's method and mechanism, and how is Bank of China proceeding with your institutional reform?

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 Chen Siqing,  Bank of China Ltd. - President   [3]
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 Thank you very much, Miss Yu. Actually is lot of questions, so I will try to answer all of them. So, serving society and delivering excellence is the strategic goal set by our Chairman. After I take office as the President, I will implement and follow the strategy, according to our strategic blueprint. So, actually our management's approach and the management method has not been changed. Our key target is that we needed to implement our strategic goal and make every method towards this goal; and besides, the operating environment in 2014 is also facing with new changes and new phenomena. So, that is my initial view.

 And the world economy outlook could be viewed in three main parts; US, we believe the economy will achieve a strong recovery; and Europe. Previously, it was weak recovery, but we believe it will proceed to a neutral or medium recovery. However, the Ukraine event recently will not have much influence on the US, but it will impact the Western Europe. But the impact is not sure, it's not definite yet. We will follow and close watch the development, as to emerging economies that diversed different situations in different countries. So in such situation, as Bank of China, a very internationalized bank in China, we will increase our business development efforts in the overseas market, especially in the US and the European market. For example, in the US, we believe it will be very stable recovery and we believe the risk will decrease and we should invest more resources to develop our business in the US.

 And as for the domestic market, we believe, as I mentioned, the economic situation is faced with overlay of three complex factors; the deceleration of growth, structural adjustment, and the posted stimulus period side effect digestion. So with the overlay of those three complex factors, it will all be reflected into Bank's assets, that will be translated into the risk -- increasing risk of asset quality. Besides, we also faced with RMB globalization and the interest rate liberalization of more and more activities in the online financing. So we believe the overall situation is overlay of three complex factors and also three key market trend developments. So in face of this situation, we will firmly deliver our key strategic goal, that is to deliver excellence and strive to serve society.

 We can summarize it into three sentences. The first is, four driving forces or four wheels, what are those four wheels? The business development, the first -- as the first key point, because no matter when the business development should also be the focus target for commercial banks, especially for our non-interest income or fee-based businesses, and those low risk and less capital-intensive businesses. And the second key wheel or the second key driving force is risk management, which is the foundation for our business development. Banks is an industry that rely on risk management.

 So on the current situation, we will increase our risk management. We have one balance sheet, actually we have three main balance sheet. The first is those assets and the liabilities on our balance sheet. Besides, we have some off-balance sheet commitments; for example, letter of credit and the contingent liabilities, et cetera. So we will also efficiently manage those off-balance sheet products. Besides, we also have some other products, they are not on-balance sheet and are not reflected in the offshore balance sheet, such as, for example, some wealth management products, you call it actually the shadow banking. So we will also efficiently manage those products and we will keep high liquidity on our assets, on our balance sheet and that we will keep good risk situation and we will maintain all those products in good situation.

 The third point is or the third key driving force is, in the current faster-developing technological trend, we will keep reform and innovation to keep us in the leading position in those technology changes. Bank's capital could be divided into two types. The one is [reasonable] capital; that is those capital found could be included and managed under the Basel III Accord. So we will effectively manage our capital, but in the meantime, to achieve the goals, we also need to have team building. So those key focuses are key to achieve our strategic goal to serve society and deliver excellence.

 Besides, we also have three key working on management mechanisms. The first is to bring about the Bank's internal growth impetus. We will stimulate our all institutions to achieve business growth. So, the first is impetus, pressure, capability, and also potential. So we will make all measures to how our institutions to work with all those pressure, impetus and capability and the pressure. And the second mechanism is about our network efficiency improvements. For our Bank domestically, we have 11,800 outlets. Apart from those outlets with business departments, we have about over 9,000 outlets. So, we will have them to put it straightforward, put them on the [horse] that is to achieve fastest speed development and our third mechanism is to compare ourselves with the peers periodically and make achievements, make improvements. So I'll elaborate on this.

 First, we will compare ourselves with peers and to improve our market competitiveness. The second is compare ourselves, within ourselves between different outlets, between different institutions and find what is each institution's position in terms of contribution to the whole group. We will rank all our institutions by order of contribution. And the third is compare with self. For example, all our outlets and institutions will compare with themselves previous performances to see if they have achieved improvement.

 And the second is on what basis, we will prepare? We will prepare the speed of development growth rate and also growth quality. And the thirdly, we'll continue to make more marketing efforts and we will find how Bank of China as a bank with 100-year history, we should be able to achieve sustained developments that is we will view long-term development as our key targets.

 You also mentioned the second question related to the institutional reform. Currently, through the end of March, we will be able to complete our institutional integration reform. Put it simple, from making the plans to implement those plans, we have been add some elements and reduce some elements. For adding some elements, those are our forces to online financing and the channel management. So we have increased our efforts relating to the Internet financing and channel management efforts and increased our resources allocated to those departments. And so that our outlets, we'll have better efficiency. And secondly, we also minus -- we did some minus and reduce some, for example, we have removed the previously five main business units. We canceled those five units and we have reduced the layer of management levels and we've been able to integrate between different levels of institution at the Bank. And second minus is we've reduced 13 departments at the Head Office. We have reduced 13 Tier 1 departments; and currently, the number of departments at the Head Office is 38. So we believe we have less number of departments at Head Office and we have increased matrix management approach so that we can integrate between different lines and different levels.

 And thirdly, we also have changed our team, our headcount allocation at Head Office. And yes, we've also made more efforts to encourage our outlets to be more active in their business development in coordinating with the Head Office, and to work closely between the client's team and also product team, so that we can increase the corporate banking for example, overall competitor for this. And we also have did some dividing. So we have combined those adding, minus, multiplying, and dividing. So we have making this comprehensive approach to implement our institutional reform.

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Unidentified Participant   [4]
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 Thank you very much for giving me this opportunity. My name is Lucy. I have a specific operational issue. If you look at last year, the deposit growth trend is very good, especially vis-a-vis the previous years. At the same time, the NIM is also up. So I like to ask how do you do this? How do you balance these two things, because the deposit growth will bring -- a bigger cause of paying the interest, but our NIM also increases? Please explain this to us, how do you weight manage to do this growth in two sides? This trend in this year, will this trend be continued, can you say us above this expectation, about the trend now, the deposit and NIM especially Governor, till you are trying to talk about the liberalization, does Bank of China feel the pressure?

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 Chen Siqing,  Bank of China Ltd. - President   [5]
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 Thank you very much for your question. Let me just ask President Yue Yi to answer this question.

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 Yue Yi,  Bank of China Ltd. - EVP   [6]
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 Last year, Bank of China continued to optimize our asset structure, especially in reducing their high-liability deposit; we have made great efforts. So all in all, last year, vis-a-vis the previous year, the NIM increased by 9 basis points. The entire Bank Group's growth in NIM is the result of combination of the improved NIM of RMB domestic foreign currency and overseas foreign currency facility.

 We did three major measures. The first one, one the deposit and low interest rate, both came down, we optimized our asset liability structure, bringing about the improvement of NIM by about 10 basis points. We reduced a high-cost liability; for example, the RMB on balance Wealth Management average balance compared with 2012, you show that 80% reduction. We also increased the leaning of credit provision to SMEs and individual customers, the individual loans. The SME loans as Mr. Chen said, their proportion to growth rate is higher than those of big companies or big customers. This is the first one.

 Secondly, actually domestic in the past few years or last year, the foreign currency, the spread of deposits and loans is narrowing, playing a negative role, affecting us by 2 basis points of NIM of Bank of China Group. The third reason, Basic Bank is a very marketized, internationalized Bank. Our overseas assets are huge. So our overseas institutions show some market financing form, leveraging overseas asset, cheap funding, and loose economic environment. So some kind of a market financing. Also reduce some of the liability cost, improving some of the skill of the credit, adjusting the credit structure, improving the efficiency and the earning or return. Last year, at NIM overseas vis-a-vis 2012 showed a 15 basis points, basically contributing to three basis point to the entire Bank of China group's NIM. This year's NIM forecast, basically the global economy is expected to show a weak recovery posture. We think, overseas institutions' NIM will be stabilized and come up a bit; domestically speaking, Chinese economy will maintain stable and going for better and the financial disintermediation and market interest rate marketization accelerating.

 We expect RMB deposit interest rate floating band or rent will be expanded. So we feel domestic RMB NIM will be under a greater pressure. Bank of China, because of marketization decreased high. Our overseas assets proportion of the total asset is 25.8%; foreign currency asset close to 24% of the total and our fee-based business is also high among all the peers. So Bank of China, I should say, is in a more favorable position vis-a-vis other banks will be less heat by the interest rate marketization trend. So we have a more solid foundation in the marketization. In the future, our own NIM, we are confident we can do better in this respect.

 Just now, the lady also talk about [to convince] the challenge of the interest rate marketization. Indeed, this is a very severe topic for us. Longer term or mid-term speaking, for Bank of China to cope with interest rate marketization, first of all, we need to accelerate business transformation and structural adjustment, especially to improve the proportion of our loans towards SMEs and personal customers. Also improve our risk pricing capability to establish a more effective interest rate risk management system to be more proactive in conducting interest risk control and mitigation to enhance product innovation and differentiated service capabilities. We also need to pay attention to the management cost, pricing, the pricing for risks as well as internal asset trends for pricing. So we need to improve our capabilities in all these areas.

 Finally, we also need to bring to full play the international [asset] diversification advantages of Bank of China to be in a better position to deal with the interest market marketization to adjust our income structure not relying too much on interest rate -- interest income to be in a more balanced position. This is my answer.

 Thank you very much. Now, we like to return to Beijing. The moderator there, please ask for questions from the analyst at the Beijing venue.

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Unidentified Company Representative   [7]
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 My name is [Hua Ying], overseeing the management of the Bank of China; you pay a lot of attention to the Internet banking. Now, we have seen some of the Internet companies are entering into the financial area. So, maybe you can say something about what in your mind how do you think the impact of Internet companies on your business in the future, one year or in the next one or two years, how are you going to cope with this kind of an impact?

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 Chen Siqing,  Bank of China Ltd. - President   [8]
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 Thank you very much. I heard it looked like [Mar Ying], it's very close to [Mao Yin], the President of [Ali Baba]. So Mr. Zhu will answer your question. Thank you very much.

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 Zhu Shumin,  Bank of China Ltd. - EVP   [9]
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 This is a hot topic. You analysts may have a better understanding than we do with a more thorough analysis on this issue. So, I think but we have some kind of a basic consensus on this issue. Lately, there is some controversy in the middle, which is very good.

 First of all, I believe the Internet finance is an integration of financial industry and Internet business, which did not occur only in this year or last year, it already happened years ago among all the industries using computer to serve the customers, financial industries leading the wave, and in a very widespread way to combine Internet and finance together. I think there are several characteristics for the Bank. It's not a challenge for the Bank, it's a major development opportunity for banks, like our industry transforming using new technologies to improve -- increases our technological scientific content. This opportunity for us [in terms of] financial industry are manifested itself in four areas. Number one, it makes some breakthrough of the geographical and timing restrictions. Anytime, anyplace, the banks is possible, can serve. In the past, only seven hours a day, eight hours working hours. And after that, there is no way can do any transaction. But now, this is not a problem anymore. So, this is a big opportunity for the Bank's development.

 Secondly, it reduces the information asymmetry and also the high transaction cost as a result of the information asymmetry. If we apply this well for the back office operational cost, it will also be greatly reduced. I give you a simple example. The credit rate (audio gap) credit statement. So you will no longer receive a paper statement. So this statement will save 40% of our cost last year alone, which is a very good example. On the one hand, we make money. On the other hand, we need to pay more attention to how the Bank should access to control better the cost to improve our efficiency.

 Thirdly, this new phenomenon improves the efficiency of serving the customers and the quality of their service. Number four, improving the financial system, resource allocation efficiency as well. So I think for me, if we apply this well for the entire financial industry, is a very important good opportunity for us to further develop them. If we innovate competition and challenges, whether we can do it faster or slower, there are some differences. If you develop faster, if you apply well, innovation can serve the requirement of customers, you are more competitive. So we cannot just take these Internet companies and put them in a [closet], but actually they are integrating each other, they are penetrating into each other. In this area, we also want to bring into full play our unique characteristics or advantages.

 Just now, our President already made some comprehensive introduction in his presentation about the Internet banking. So maybe, we [want it] briefly. We did some work last year in three areas. The first one, we established an open business technology platform to realize cross-border integration, focusing our mobile payment to establish an on-demand service model. Secondly, we will bring into full play the Bank's globalization diversification advantages and trade financing our unique business, strong points to establish our online industry chains and cross-border service system. Number three, we rely our reach physical outlets or networks of outlets. We have global very widespread outlets and to consolidate the diversity in online and offline a transaction to use the analytics of Big Data to develop these kind of services. You can [briefly reserve] about the PowerPoint we just showed you. Thank you very much.

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Operator   [10]
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 Thank you, President Zhu. So, given the limit of time, so that will be the end of the Q&A session. If the analyst friends have any more further questions, please contact with our IR team at our Bank. So, now, this is the end of our 2013 results release. Thank you very much for participating. Thank you.




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