Dear investors, analysts, good evening. I'm Wang Liancheng, General Manager of Corporate Strategy and Investor Relations Department. First of all, welcome you to this Q3 earnings call of 2022. This meeting is held by global conference call. At the meeting are Dr. Guan Xueqing, Board Secretary of ICBC, Departments of Corporate Strategy and Investor Relations, Board's Office, Departments of Corporate Banking, Personal Banking, Inclusive Finance, Credit, Finance and Accounting, Risk Management, Asset and Liability, and International Banking. They will carry out exchanges with you and our board members, such as Lu Yongzhen, Feng Weidong, Cao Liqun, are all online to attend this meeting. Before Q&A, I'd like to brief you on 2022 Q3 operations. In the first three quarters, ICBC maintained progress and quality while maintaining stability. We achieved balanced, coordinated, sustainable development.
We maintain economic fundamentals, serve the real economy, and maintain economic resilience with our contribution and delivered a high quality balance sheet. Our operation features in the following aspects. First, our core indicators achieved progress while maintaining stability. Our net profit recorded RMB 260.5 billion, up by 5.2%. ROA was 0.95%, ROE 11.29%. Revenue around RMB 600 billion, up by over 1%. NIM was 1.98%, down by 5 basis points. Similar to other comparable banks, provision coverage ratio 206.8%, down by 0-3 percentage points, showing high risk resilience. NPL ratio 1.4%, down by 1 basis point. Overdue ratio was down 0.1 percentage point. Serious delinquency was negative for 10 consecutive quarters. Our asset quality continues to improve.
We continue to serve the real economy. We extended RMB 5 trillion new investment and finance to the real economy. Our domestic RMB loans balance exceeded RMB 21 trillion. The increment ranks first and achieved year-on-year growth for nine consecutive months. In key regions, the loan growth was higher than other categories. The manufacturing loans was over RMB 880 billion from the beginning of this year. The balance and increments both ranked first. In terms of green finance, the balance was RMB 3.76 trillion, up 34%. The financial investment totaled over RMB 10 trillion, up 9.7%. Also, MSCI ESG rating of ICBC increased from BBB to A. Third, our customer ecosystem continues to pick up with higher market competitiveness. Our customer deposits was over RMB 3.65 trillion. Personal customers totaled 700 million.
The increment ranks first, and mobile banking customer exceeded 500 million MAU. In both totality and increments, both lead their peers. Our corporate customers also ranked first. In the future, the international and domestic economic situations are more complex. China's economy remains positive trend. ICBC will continue to play a leading role to stabilize the economic fundamentals, and we will coordinate the cooperation and management and promote our high quality development. Now we enter the Q&A session. We have simultaneous interpretation. Please feel free to raise questions. Please identify yourself before raising questions. Thank you.
First question. Please press star one to raise questions. The first question comes from Lin Yingqi of CICC.
Thank you for the opportunity to raise questions. My question is about credit extension. Could you introduce to us your Q3 credit extension and outlook for Q4? Recently, is the pace picking up? Also, we have seen the policy on financial instruments with innovation. What about ICBC's utilization of these instruments? Thank you for your question.
I'd like to invite the Corporate Banking Department to answer your question. Mr. Hu, please.
Thank you for your question. From corporate credit perspective for Q3, our corporate extension exceeded RMB 1.4 trillion, up by more than RMB 200 billion. For September, the balance was RMB 250 billion. In transportation and other infrastructure sectors, we have seen remarkable growth. By regions, the key regions like Yangtze River Delta, Greater Bay Area, corporate loans increased by RMB 1.1 trillion. For infrastructure sector, we have seen stable growth. The project loans in the first three quarters has increased by nearly RMB 700 billion. RMB 600 billion is also for the infrastructure sector, which is an impressive growth. With the national policy instruments, ICBC's projects and financing have seen large growth. Gradually, we are increasing the credit expansion.
In terms of equipment renewal, we will implement the policies during the National Day holiday. Throughout the group, we have worked overtime to extend the loans in these terms. We have done a lot. The demand total RMB 200 billion, and we have passed RMB 50 billion.
Thank you for your question. Dr. Guan is making some supplements.
In terms of corporate loans, manufacturing is a key region, and then it'll be infrastructure, construction, including energy, the facilities, also green finance, which we have also seen remarkable growth, and also inclusive finance for small and micro-enterprises. Hi-tech innovation is also a key area. The structural and contribution is remarkable. Also, you also mentioned the growth in the next phase. Well, of course, we will accelerate the extension. The infrastructure loans in the next phase will pick up.
We will continue to make up for the weaknesses so as to support the recovery of the Chinese economy. For the PBOC's structural policy instruments, there are several tens of more than 10 sectors. ICBC will play our leading position and strengthen our marketing and supporting financing policies. For the sci-tech innovation, we will continue to support the national strategy and improve our sci-tech tools so as to effectively promote China's sci-tech innovation as well as key technologies.
Thank you for your question. Next question, please.
[Gao Wei] from CITIC Securities.
Thanks for the opportunity. I want to raise two questions. First is about NIM. The LPR quotation change and the other conditions, I want to know the NIM trend of ICBC and the WM products. Because of the fluctuation in the capital markets, we have seen that customers have low risk appetite. I want to know your WM product service and is there any changes on your business?
Thank you for your question because you raised two questions, so I will invite two of my colleagues to take your question. The first, Mr. Zhou will take your question, and second, our Director of Personal F inance will take your question. Thank you.
On your NIM trend and outlook on the NIM trend, I will make some opinions. Investors are paying attention to the NIM trend of first three quarters because of our general economy trends and because we are cutting fees to benefit the companies. There are forced LPR quotation change, and it's a large change. First, it's introducing lower interest to go downward. Second, there will be other influences on the NIM.
On the asset side, we are lowering our pricing, but from ICBC's view on the asset and principle that we are upholding is we will manage our risk pricing. In a choice of customer and product, we remain committed to the balanced approach. We will not abandon our risk management because of high pricing. On the other hand, we do not allow our low pricing that is not consistent with our risk appetite. Seeing from the first three quarters, we remain in the same trend with other peers. In the first three quarters, we have pressure in the first quarter because the credit extension is very strong for ICBC and the competition is high. We can see in the first quarter, the NIM goes up in the first quarter.
In the third quarter, we focus on the cost of liability, and we take other measures. On the other side, we have linkage with other major banks to adjust the pricing. There are changes. We change our listing of interest rate in September, but at the end of third quarter, our compound interest rates were down by 1 basis point compared to the last quarter. This is a remarkable change in the trends. Seeing from the trend of NIM, we can see a narrowing trend because the second quarter have seen a downward pressure that's 7 basi s points than the first, there are forced contraction. On outlook, Dr. Guan has that some of the future trends while answering the first question.
In the future, we will stabilize our economy, the entity and real estate economy. We have policies roll out in the fourth quarter. This quarter is the most important quarter because we believe with these policies paying off, the credit extension of ICBC and the structure will adjust. Because, for instance, the loan to infrastructure will be fully implemented and with the policy rolled out, and our loan will also follow up. We will make a reasonable distribution of our loan extension, and this will further the balance of pricing. There will be further balance in our NIM trends. Seeing from the deposits side, because of the listing interest rates change in September, there will be follow-up influence. Since it's changing the listing interest rates, the three-year LPR is down by 15 basis points, and this can encourage the deposit market structural change.
Because the first three quarters, we have a lot of liquidity and because of interaction with capital markets, and we've seen the risk appetite going up in customers, and they have more appetite for the long-term deposit. To forecast, the structure are changing. It's fair to conclude that the NIM narrowing trend will change. On the deposits, and there is 1 basis point going down comparing to the last quarter. The term structure will be more balanced. Thank you for your question.
Second question will be taken by Mr. Jing on Personal Finance.
Thank you for your question. Seeing from the whole market. This year, there are fluctuation in the markets, and the market players have been influenced. We have seen withdrawal of capital, and because of the COVID-19 and internal and external environment, we've seen our investors are hedging risks.
The sales of our WM products have been hit. Because of our large scale effect, we still have room to maneuver. In the report of 20th National Congress, we have to continue to expand our internal demand and in the WM industry, because we have to serve the common welfare of all the people. We believe the future trends remain unchanged, and we focus our high quality companies customers, and we will provide WM products to those customers. To the fluctuation in a short term, we have the following measures. The first, we will optimize our choice of products and customers, and we will increase the marketing effort to the low-risk WM products. We will encourage the customer to buy more prudent WM products.
Second, on the presentation, we use online, offline channels to showcase our products. We use a five-dimensional plan to get support to select our products. Third, in terms of the investment company, we have various products to help our customers and to give them products in transactions, investments, funds, and other categories. We will provide the confidence and answer any questions from a tax advisor. Through our long-term companionship, we will help to raise confidence in the customers and encourage them to invest in the long term. I want to make some supplements. In terms of the wealth management of our strategy as the first personal finance banking, we will remain committed to our strategy. We will build a more complete WM system to our customers.
In the report of 20th National Congress, it has stated that we should help our citizens to diversify their WM choices, so we will help them to make money and secure their money. Second, our investment and our WM platform is diverse and provide a lot of different choices to our customers. Third, in terms of the product system change, we will provide customized product in terms of different risk appetite. Because we will still pursue sustainable growth, and despite an increase in the personal deposits and other WM products have seen structural changes, this is household WM trends manifest in this natural way. The residents WM product in China will see a more diverse structure. In the direct finance, we will provide multiple routes to the bank.
Thank you. Next question, please.
The next question is from Yijian from Guangfa Securities.
Thank you for the opportunity to raise questions. My question is about asset quality. For Q3's asset quality, could you please introduce to us the situation and also the impact? What's your take on the impact on the land fiscal situation, and also what's your outlook for the asset quality and the credit cost? Thank you.
Thank you for your question. The Department of Credit and Investment Management will answer your question.
Thank you for your question. For the first three quarters, the domestic situations such as COVID-19 sporadic outbreak and international situations are complex and changing. We strengthened our risk management from project onboarding, management, and disposal. We have strengthened our work to maintain the stability of the asset quality. You have seen the core indicators such as NPL ratio, overdue ratio, and fee loss difference are all stable and making progress. You have-
You have asked questions about real estate industry. In the past year, we have seen the sale of the commercial housing and the development have both decreased. Against such background, our NPL balance and ratio in real estate industry have shown upward trend. According to the actual situation of the loans, we reflect the actual situations in the asset quality. We have seen the property loans proportion of the total is quite low, around 5%. For the current property loans, we have fully provisioned. From the past disposal situation, the collateral for property loans is of high quality. Our loss ratio has been low. Therefore, its impact of property loans to our general asset quality and profitability will be controllable. For our recent extension of credit to property industry, we are implementing the national policies of macroeconomic adjustment and the regulatory requirements.
We are strengthening our investments and financing in terms of risk management. We maintain a stable extension of credit to property industry. When risks are controllable, we carried out close loop management of capital, and we support the high quality project and support their financing needs. Mostly, we support the guaranteed housing, commercial housing, and leasing housing. Secondly, according to market-based principles and rule of law and rule-based principles, we are also implementing the M&A loan projects, certainly according to market-based principles and commercial sustainability principles. We work with the local governments to provide financial supports to ensure timely delivery of the pre-sold homes, such as extension of our recent situation. For the medium- and long-term perspective, you have seen the recent policies from either local governments or central governments. We are supporting the property developers. The market recovery still takes time.
During the process, our property loans may see rising NPL ratio. From the mid and long-term perspective, China is still undergoing urbanization. The property industry will still see growth. The speed may be lower. China's economy still has positive growth in the future, so we believe the property industry will recover, and we have full confidence in our asset quality. You have also raised questions about the local government financing vehicles impacted by COVID-19 sporadic outbreaks and the domestic and international complex situations. We can see that the fiscal income has declined nationwide. The land income has also decreased. The fiscal operation reached a tight balance. In some regions, the fiscal balance may see mounting issues. However, from ICBC's perspective, for the regions with high debts for the LGFV, their asset quality may face pressure.
From the whole sector of ICBC, the asset quality is good and stable, with controllable risks. For local government's debts, we will continue to implement the measures of risk resolution by the central government. We will not increase the implicit debts for the local governments. Based on market-based principles, we will work with the local government to resolve the risks of the outstanding risks. At the same time, we will continue to improve our credit policy, rationally make the onboarding policies, and choose the regions of strong capability and the projects with ample cash flow. First of all, you raised questions about the industries of Q3 credit. If you refer to our Q3 reports, it's the same as the interim results. The infrastructure loans performed well in terms of infrastructure and manufacturing. For personal loans, NPL ratio increased slightly by 7 basis points.
It's reasonable because of the impact of COVID-19. It's temporary, but the general NPL ratio is low, which was 0.32%. By regions, the Yangtze River Delta, Pearl River Delta, and the developed regions, the asset quality has been good. This is the main drivers of the growth of the Chinese economy. For individual regions impacted by the debts of the local government, we have seen the asset quality deteriorating. But ICBC's loans are for the LGFV on the municipal level or the provincial capital level, so the asset quality can be guaranteed. For the outlook, the general asset quality is good. Our NPL ratio was only 1.4%, and we have large capability to resolve the risks. The risks exposure and reflection are accurate. Our provision coverage ratio was over 206%.
In the future, for ICBC's asset quality, we believe it will be stable. We are fully confident in the future about the cost of the credit. For the first three quarters, our credit loss costs have decreased to 0.8% from over 1%, which demonstrates our strength and control of new loans and our identification of risks, and also our selection of high-quality customers. In new loans, we continued our risk neutral policy. In the future, this paves the way for the asset quality in the future. In the future, our credit costs will remain stable.
Thank you. Next question, please.
Li Jiali from Haitong Securities.
Good evening. I'm from Haitong Securities. I have two questions. First is about Basel III. Basel III has raised the requirements. I want to know more about. How about our capital adequacy ratio? Is it going to go up or down? What's our measures we are going to take? This is my first question. Second question is that we've noticed that the operating income, there's one item is relatively low, that is our other business income. I'd like to ask why is that? There is a obvious drop in terms of the other business income, and why is that? Because it seems that our net interest income and other income are both fine, and why is that?
Thank you for your questions. Actually they are very big questions and important questions. The first question, I'll give it to Mr. Zhou Wei from Asset and Liability Management Department, and the influence of Basel III's implementation. Second question is about. I'll ask Mr. [Xu] from our Finance Accounting Department to answer your question.
Yeah. So the first question about capital adequacy ratio. I'm afraid that Madame Li from Risk Management Department is more authoritative because they calculated the risk weight. From our understanding, that is, from the implementation of Basel III, in terms of accounting the risk-weighted assets. The valuation models, there will be more. Yeah, there will be more pertinent calculation. The introduction of Basel III into China. We could say that the Chinese regulators are quite prudent. Previously, we have the internal-based method, and we are really meticulously and carefully implemented these new rules. Government regulatory policy is not released yet, and we cannot say anything on behalf of the regulators. The general direction, it seems to me that it is favorable to us.
After the implementation, because seeing from the previous rules, we could see that the rules are more strict. After the implementation of Basel III, we think that after the recalibration, it is favorable for us to relatively improve our capital adequacy ratio. This is just our simulation. First, I ask risk management to say something. Secondly, it also depends on the structure, on the policy of the regulators. Madame Li from risk management department. I think Mr. Zhou answered the question very well. I'd like to supplement that we are fully prepared for Basel III implementation. No matter in terms of the market risk or operational risk, we are doing our job.
From the trend of the regulators, we do pay attention to CBRC's new capital management measures. Till now, we haven't received a more exact news. The relative calculation, we are carrying out our work according to the regulatory requirement.
Second question was answered by Mr. Liu from the Finance Accounting Department. Thank you.
Thank you for question. Other business income, the following. First, due to the capital market influence, we know that the commercial markets, the commercial banks, we have some of our equity investment in instruments. For example, we have a subsidiary holds a debt swap, which was accounting according to our evaluation last year. When we put it into our account is that we have a floating profit of RMB 8 billion.
This year, due to the fluctuations of the capital market, the evaluation is -RMB 4 billion. This is just a floating loss, and we hope that in the future, it will float back. Besides, there's also a foreign exchange loss. We all know that this year, especially recently, the US dollars appreciate. For the same period of last year, US dollars depreciate. The trend is different. We have a foreign exchange loss at about RMB 5 billion. The third is about the structured deposit. Our transaction income, this is quite fine. On that part, we have the growth of RMB 3.8 billion.
As a result, considering the several factors, we have net growth of other business income. Saying this one, let me supplement about Qinghai Salt Lake. It's not loss. It is a reduction of floating profit. Because last year we have too many floating profit, but this year the floating profit, it decreased. This share is a very good share. It is related to low carbon and related to energy. The company generates a lot of profit this year. I think that the valuation of the market, it does not influence our quality of ICBC.
Thank you for your question. Next question, please.
Xu Yan from Morgan Stanley.
I have two questions. I have seen the reports. The regulator is encouraging big banks in terms of property industry and the infrastructure, encouraging the big banks to support more. These loans have such risks. How do you balance the growth of loans and risk control? Second, in risk pricing, the COVID-19 has been sustaining for years, and the loans for the small and medium enterprises, if you see the non-performing loans ratio, what's the impact on the risk pricing?
Thank you for your question. I will answer your first question, and your second question will be answered by the Department of Inclusive Finance. Mr. Xu, you are a Senior Analyst. You are seeing a big question through a small issue. Manufacturing has been a key region of our service.
Our support for manufacturing has been in our DNA. China's manufacturing has advantage with complete sectors and chains. We are a strong country of manufacturing. We are in the process of building such a country. It is the fundamentals of a country and the real economy. You have seen that the key of the economy is in the real economy in the 20th National Congress reports. We are a major pillar. We are positive about China's manufacturing, and we will continue to strengthen our support for manufacturing. Our first half year have seen remarkable growth in manufacturing loans. The effective growth and risk neutral principles are balanced. We select the high quality customers with proper products, and we've strengthened the financial services through whole procedures so that these manufacturing companies can have good financial environment.
Yesterday, I saw news on CCTV. China's manufacturing has gained recovered growth and the productivity has been picked up. I don't think that the market should ever doubt our risk control of manufacturing. For property industry, our developer loans and the rejuvenation loans total RMB 900 billion. The growth is positive in the first half year. We believe China's property industry is still a sector which needs healthy development. We will continue to select high quality customers and implement the relative standards. In a proper way, we implement the policies and conduct differentiated policies to support the stable development of the property industries this year. A big challenge is the personal mortgage growth is lower than last year. This is from the temporary adjustment of the industry. In some cities, the personal mortgage have seen changing market environments. The change is normal.
I believe the relevant risks are concerned by the market. ICBC will continue the principle of houses are for inhabitation instead of speculation, and we will continue to implement the spirit of the 20th National Congress, and we will continue to provide our financial services. Your second question will be answered by the Inclusive Finance Department.
Thank you for your question. First of all, I want to share with you the Q3 developments in terms of your question. By the end of Q3, our inclusive loans totaled 1.5%, achieving year-on-year growth, up by 37.6%, leading the peers. Our developments in this regard is quite good.
In terms of asset quality, the NPL ratio in this regard was 0.74%, continuing to decrease, down by 10 basis points compared with the beginning of this year and lower than the group-wide NPL ratio. We fully developed the operation income and risks. We adjust the structures of customers, upgrade operation of business, empowered by technology and digital transformation, our inclusive loans. We not only provide financing, but we also provide intelligence services to generate returns for us. For example, the coordination between different enterprises.
Also has our confidence. We will continue to maintain balanced development of quantity pricing and quantity and quality, and accelerate the high quality development of inclusive finance. Thank you.
Next question, please.
The next question from [Shuning Chen].
Thank you for this opportunity. I'm [Shuning Chen]. ICBC has a good performance in the third quarter. I have two questions. First is about the NIM. Despite the LPR quotation change in the first three quarters, from the whole industry, the NIM still remain stable. The situation is very hard to change. I want to know the NIM trend, how to improve the cost of liability. Second is the asset quality. You have said a lot, but I want to know the collection and disposal limit NPL. In general, we will see the NPL increase. In the first nine months, we've seen decrease of NPL. I wanna know your outlook on that in the future. Okay.
The first question will be taken by Mr. Zhou.
Because of the time limits, the LPR change in September, there is less narrative in the third quarter report. When I was answering the previous question, I have mentioned that. I've seen from our compound interest rate, interest rate was down by 1 basis point. Another forward indicator I can share with you is that we have been monitoring the fixed deposit interest rates change. Since the change in the listing interest rate in the third quarter. The new interest payments of our deposit in the third quarter have changed. We have some change in that area. It was down by 19 basis points. This is a remarkable change. Looking to the fourth quarter, this time of change, especially 15 basis points in the three-year deposit, and we have also dynamically monitoring the three-year deposit growth.
There have been structural changes, and the current deposit and fixed deposit structure is also changing. With all those compounded factors, we will see positive trend in the future. That's my answer.
Second question. Ms. Liao Lin will take your question.
Under the macroeconomic challenges question, at the end of the third quarter, the NPL balance increased. Because of the downward pressure, we have some risk exposure. We also increased the effort on the disposal. In the first nine months, we have increased our effort in the disposal and NPL balance is on the rise. Another reason for declining NPL is that the growth rate is larger than last year. The growth by group caliber is RMB 2 trillion. Because of the two factors, our NPL ratio was down by 2 basis points from the start of the year. Looking into the fourth quarter and next year, in terms of asset quality, seeing from the current situation, the downward pressure and the internal and external environment issues will influence to the asset quality.
We will increase our effort in risk control and strengthen our debt disposal NPL. Going forward, we will have a stable NPL situation.
I have a few things to add. 3% GDP in the third quarter.
The revenue growth, margin growth was 5%. The NPL was going down. The main reason is that first NPL ratio going down is caused by a few factors. First is the deposit increment is on the rise, so the base has been widened. That's why the NPL is going down. Second, the NPL balance has increased than last year. This actually caused the increment in NPL, but we have made allowance for NPL. We have strong ability to write off bad assets. Through restructuring and write-off, and the batch transfer, we have dealt with the bad asset. Third, the leverage ratio of NPL has gone from 1.8% to 1.9% this year.
Six, we collect more than RMB 2 billion of write-off bad asset, and as such the provision coverage decreased by 1 basis point. This has make room for the disposal of NPL amounting to a few billion. That's why the NPL seems to be going down. The trend is actually similar to the market. Second, you want to know about outlook on the fourth quarter and next year. We can see the recovery trend of our economy, seen from this data from September, is relatively good, and we believe the fourth quarter will doing better than the third. Second, then we have diversified momentum for economic growth. The high-quality growth will sustained. We have confidence for next quarter and next year, and we believe in the growth in our economy.
The capital markets have some over-concern to our economy and have less confidence in our economy.
Thank you for your question.
Alex from UBS.
Good evening. My question is about our operational cost. We see that for the past several years our operational cost is quite rapidly growing. As compared to the pre-pandemic years we see a very obvious increase. In terms of technology we must have more input. Is there any other factors contributing to the increase of the operational cost? Looking to the next year how is our prediction for the next year's growth for the operational cost?
Thank you for the question. Indeed, in general, you know that the cost-to-income ratio is relatively low among our Chinese peers, our contemporary peers, ICBC's cost-to-income ratio. Of course, as a major bank, we also need to invest in the future, especially we are in a technological revolution trend. We need to increase our IT cooperation and scenario cooperation, and we also need to support our G-B-C coordination. You could see that this year we enhanced our strategic investment in this area. However, for the controllable cost, for example, our business fees, we have this mentality that we need to be economical. ICBC obviously sticks to the philosophy of being economical, but for some strategic investment, that is necessary.
In general, the increase of the cost for ICBC is rational, and it is sustainable. Thank you.
Let me supplement. I've been talking with investors for six to seven years. It is generally investors' idea that our cost-to-income ratio is too low, and it might undermine our future development. In line with investors' expectations, we increase our input into our future. This is quite necessary for us to maintain our sustainable growth, and especially for the IT investment. It is very conducive to our future. e-ICBC is also a very important strategy of the bank. We also use the technology to enable our business development and enable our risk management.
We have growth in deposits. It is not simply that people tend to put more money into ICBC. It is rather a very good case to show that ICBC has built a very good G-B-C Plus scenario, and we extend our market and increase our customer base. It's also thanks to the enablement from our IT system. Thank you.
Next question.
Miao Jianmin from China Merchants Securities.
Thank you, senior management for this opportunity. I'm analyst from China Merchants Securities. I have two questions. First, just now, the senior management has mentioned the Yanhu company . I would like to ask why ICBC didn't sell the shares of Yanhu Company when the stock price is high? Second, considering the downward pressure of interest rates of LPR, what's the outlook for 2023? The mortgage loans interest rate is linked with the five-year LPR, and so is the infrastructure loans. What's your outlook for income, operating income for the next year? Besides, there is a lot of policies put forward by the government. How much equipment upgrading loans have ICBC extended?
It is said that the regulators has guided large state-owned banks to extend RMB 100 million loans to rejuvenate the economy. Is there any guidance received by ICBC? What's your feelings for the trend of economy?
Thank you for your long questions. For your first question, why didn't ICBC sell Yanhu Company share when the stock price is RMB 34? I think the stock price is fluctuating. When we making decisions for investment, we have established relevant strategies. The second question will be answered by Mr. Liu from Finance and Accounting Department.
I would like to make some supplements. I have asked the same or similar question to the subsidiary of ICBC. We believe that the Salt Lake company has its competitiveness. Because we have confidence in the company, and we believe it has core competitiveness, so we decided to hold the stock. For its core competitiveness, as Mr. Guan has mentioned, we believe the market will finally show its value by giving the appropriate price of the stock. Second question about operating income outlook of ICBC. China now is undergoing the downward interest rate cycle. When the interest rate is going downward, it's harder for our banks to achieve quicker increase in operating income. From the 200-300 history for banking industry, you can see there is some cycle in the operating income of banks.
We are developing transaction banking business and a wealth management business. Currently, the deposit and loan business has account for 80% of our business. If we can adjust our business structure and to decrease the loan and deposit business to 50%, the impact of interest rate cycles will decrease as well. ICBC is pulling ahead its strategy transformation in this regard.
For your third question, Mr. Guan will answer.
The speed of extending equipment upgrading loans is appropriate. There is a lot of conditions for this kind of loan and a lot of procedures. On one hand, we will enhance our financial service, and on the other hand, we will follow some procedures and step up our loan extension in this regard to implement national strategies and policies. Fourth question is about regulatory guidance by overseas news. There is always this kind of report, including the guidance for mortgage loans as well as for bonds. ICBC will consider different conditions of the real estate companies. Adhere to our financing and the loan standards when extending relevant loans. We believe that by conducting and carrying forward a series of policies, there will be changes and pickup in the real estate industry.
Thank you for your question. Next question, please. Xu Jen from Jefferies.
Thank you for this opportunity. I'm Xu Jen from Jefferies. I want to ask question about the asset allocation. ICBC is enlarging scale.
The credit structure is also very impressive. Because of the dollar pressure, I wanna know, in the next one to three years, what's your plan of your asset allocation and your outlook? Because there are still a lot of uncertainties going on, and I want to know your plan. Another question is, ICBC is leading in serving the real economy. In the real economy area and under the circumstances of the large cycle, I wanna know your strategic position.
Mr. Zhou will take your first question on the asset allocation.
Thanks for your question. I notice that you also notice our scale. Under the situation of global pressure and uncertainties, I remember that a description of ICBC by a former leader. Our strategic plan and position is stability that go over cycles and cycles. ICBC will remain prudent. We are neither progressive or passive.
Because we are large in scale, we also have a quite broad, a broad customer base. As a major bank, we also have some leading role in implementing the macro policies. There is RMB 2 trillion increment in our loan in the first three quarters. Against this backdrop, we are playing the role of stabilizing the economy, just as mentioned by the Communist Secretary, and these are the choices made upon prudent consideration and manifest a balanced, coordinated, and a sustainable approach. You mentioned our outlook of next one to three years asset allocation and our strategic planning. In our three-year strategic planning in terms of asset growth, we want to maintain the stable growth. This year, we have seen a fast growth, but we will not be as fast as this year in the following year.
Just as the monetary policy, it won't be the same every year. There will be a process of adjustments. In the following one to three years, you can see that ICBC will remain prudent in its asset allocation and then also in this credit and investment and the layout of credit and deposits. This will manifest in the coming years. We will, on the one hand, maintain our stable growth and also our business growth. Your second question is on serving the real economy and the related arrangement.
Mr. Hu will take your question.
Thank you for your question. No matter seeing from the nature of ICBC or the policies of the Central Committee of our central government, serving the economy is a main task of our bank. The CPC Central Committee has stated that we have to prioritize serving the real economy. In these years, we stressed the importance of serving the real economy. In recent years, the credit extension, as you can see, we have put more credits in the manufacturing and also we extend more credit to the science and technology, manufacturing infrastructure, green credits and the inclusive finance, low carbon and energy. These areas are the key area for the credit extension, and that's my answer.
You have asked question about strategy, so Mr. Zhou will answer further about your questions.
I want to add a few things. Banks are intermediaries. Banks use the funds from customers to... Invest in the industries that can bring returns. An agency, banks will serve the economy, and this is a very fundamental requirement for banks. This is the first point to make. Second, you talk about in the larger cyclical environment, you wanna know about our strategic position. Now, Global-wise, MMT are making some pondering. The no-limits expansion has bring global challenge. Inflation is high. This can be fully explained in the monetary theories. Another thing is this, the dilemma of controlling inflation and developing economy. If you want to develop economy, you cannot add the interest rate. Serving the real economy in this regard is what the banks should do. This should be prioritized in the strategic planning in the banks and the same for ICBC.
Seeing from another point of serving the real economy is a requirement for China's economic growth. To add on Manager Hu's point, ICBC's choice to serve the real economy is based on the requirements of cyclical environment. I want to elaborate more on that. October sixteenth, ICBC has made announcements to serve the real economy and just to give full play to our leading role as a major bank. ICBC have prioritized serving the real economy in our strategy. We serve the real economy in three different ways. First, is to increase the investment and the finance to the real economy. Second, increase the precision of finance to the real economy. We put special attention to the key areas, weak points of real economy. Third, effectively support the market entities.
To support the real economy, we will use the supply ways to support us. Fourth, we put great importance to the coexistence of our banks and the real economy so as to facilitate the high-quality development.
Thank you for your question.
Next question comes from Jacob, from Kunlun Capital.
Thank you. I have three questions I would like to put to the management of ICBC. In Q3, our loans, when they are to come to term, and how many of them are extended? Is there a comparison between this quarter overall to the previous two quarters? My second question on the asset side, we know that we have a lack of proper assets. We are glad to see that ICBC in Q3, we have a lot of asset growth. In terms of asset growth, with our differentiated policies, so that, as compared to our peers, we can maintain a sustainable growth with our core competitiveness.
My third question is about net profit. Due to the uncertainties of the macroeconomy, we know that the macroeconomy of the world is having a downward pressure. In China, we have the impact of the pandemic as well. We are afraid that the economy may go downward in the future. What's our outlook for the next three years, what's the growth speed of our net profit and our dividend payout ratio. Under what kind of scenario is it possible for ICBC to adjust our dividend payouts?
I'll ask three of my colleagues to answer your three questions. First, I ask Madame Lin from Credit and Investment Management. Second, I give to Mr. Hu from the Corporate Finance Department.
The third question will be answered by Mr. Wang of the Strategy and Investor Relations Management Department.
The ratio for extension of loans for this third quarter is, generally speaking, similar to the previous two quarters. There's no major fluctuation. Second question. Second question is about from the lack of proper assets. From Q3, I think that there's we have some improvement. The growth of our loans for Q3 is quite high. However, some of our policies could be summarized as the following. That is to closely follow the government policy and the policy to expand the domestic demand and in the new markets.
We also follow the policies and the areas that are supported by the regulators, especially for example in the re-lending of loans. Our core is the real economy. That is to say that we invest our assets around the growth points of the real economy growth.
Mr. Wang, let me supplement. You mentioned the lack of assets for commercial banks. We understand it is that we do not have very robust, effective loan demand. For ICBC, we could maintain credit extension. We have more loans issued, and we are leading our peers, and we also have some support for the ICBC's quality. ICBC takes the initiative.
We make an early arrangement to adjust the policies and arrangement for our financing and investment. Second, ICBC's marketing team and our tier two departments, that is our credit approval teams, they are very capable in terms of selecting our clients. We have a lot of effective reserves. Now, we still have quite a large amount of reserve. Because for some key customers, for some very high quality customers, they are willing to have this cooperation with ICBC. This is my supplement.
The third question will be answered by Mr. Wang. I think even Mr. Wang cannot correctly predict the net profit. I think he'll not answer that question, and he'll answer the question about the dividend.
We could see that our profit always maintain very good growth. We've been through several economic cycles and faced the challenges. I think ICBC's major feature is that we have the stability across different economic cycles. We have to face that in the next three years, we'll maintain a stable net profit. Second, the dividend payout ratio. Our dividend is related to the price of the shares. Since our listing, ICBC has always been the listed company with the largest amount of dividend. Our payout ratio is 30% in the last year. According to the current our A share return is 6.74%.
While we maintain our net profit, we will also provide a very good return for our shareholders. Our ratio for dividend payout, I think this is very rational. We take into consideration of the profit growth and as capital supplement and the return for shareholders, and we try to maintain this stable ratio. In the next phase, you can continue to pay attention to ICBC's the price and to make proper arrangements.
Okay. Mr. Liu could make a prediction for the next three years. If you can, you can predict, you can speak.
This is Mr. Liu speaking. Generally speaking, for commercial banks, the profit and income is under pressure indeed. You must have reached the same conclusion from history, but for ICBC as a major bank, even the elephant could also dance. We will keep adjusting and optimizing our structure. For example, this year, our net profits grow better than our operating income because we increase our tax-free assets. For example, we have more investment into local government bonds, sovereign bonds, and local government bonds. It shows our income. It may not be very high income, however, but if you calculate it from the perspective of after-tax profit, the performance is very good because they are tax-free. We also optimize the structure.
In this interest rate reduction environment, you will also know that the commercial banks are under certain pressure, especially about the dividend. You can also look at the cases from history. Commercial banks is a very special industry. It is subjected to regulation about the CAR. ICBC has the best CAR level. CAR is at about 18.8%. This is really high. However, for Western banks, their CAR is also under pressure. The regulators will have relevant requirement for the dividend. This is for your reference.
The next question, please.
The next question is from Deng Meijun of Zhongtai Securities.
Thank you for the opportunity to raise questions. My question concerns your view on the development of LGFV. The forward-looking requirements for this sector is also very high. How do you adjust according to the transformation of this sector? What's the contribution in this regard? For this group of customers, how about their competition?
Mr. Hu from Corporate Financing Department will answer your question about light asset transformation and diversification in this regard. Mr. Liu from Finance and Accounting Department answers your question.
Property industry's financing vehicle actually are heavy assets business. How can we transfer the heavy to light asset industries? How can we take a road of saving capital? This is a common issue for all banks. For the Chinese banks at present, when we want to serve the real economy, the heavy asset industries will be here to stay. Through asset securitization and also supporting policies, and banks invest in the industries in this regard, we believe our balance sheet will be lighter. At present, it still takes time. We still need regulatory supports. At present, the regulatory requirements in terms of the ABS are not friendly to the bank's transformation.
For banks, they also need to adjust their strategies, and it's related to the environment of the economy. Just for your reference. First, for our customers, we have certain strategies. We also see some property industry financing vehicles are transforming themselves. According to their transformation, we will adjust our strategies of selecting customers in a forward-looking approach. We also see some transformation of the LGFV. In the past, the focus was property industry, but now it's industry fund. In this process, we will play our role to provide financial services in a comprehensive way and also provide investments and financing. With the comprehensive banking licenses, we will select customers to provide investments and financing supports, and also the financial services that covers all chains and procedures. Especially, we also see the central city's platforms. Some have high valid assets and liability rates.
Secondly, you also mentioned the Chinese economic development structure, which is changing. It is also mentioned by the 20th National Congress reports, which paves the development trend in the future. Fintech is a key focus. It's the driving force of the high-quality development and also green and low-carbon development is also the key region. In this regard, our investment and financing will change drastically. We will focus on the green development enterprises. Thirdly, for the category assets allocation, our assets category structures will change. For example, transportation, energy, facilities, and other industries will be adjusted dynamically according to the customer's changing trend. In the structural changes, we will try to acquire more high-quality customers and serve the strategic and high-quality customers to promote their transformation so as to we can acquire more opportunities to provide financial services. Thank you.
For the interest of time, two more questions.
Next question from Nomura.
Thank you for this opportunity. Currently, there are policies of guaranteed delivery of properties in some localities, and some local governments are appealing for loosening of loan extension policies. What's the policy of ICBC? Is there any change?
Thank you for your q uestion. Against the current background, either for new property loans or the delivery of properties, we adhere to market-based principles. This is also the requirements of regulators. Just now, I have mentioned, we are conducting a stable business operation. We are adhering to the financial regulatory requirements as well as the policies of macroeconomic adjustment. We will support reasonable loan demands of quality property developers. For some risky projects, relevant departments and authorities as well as local governments have put forward some measures and policies. Some policy banks will extend special loans for some projects, especially for the sold projects that cannot be delivered in time due to the overdue of loans. Some suspended projects have been restored gradually.
For commercial banks like us, we adhere to principles of market-based principles, and we will cooperate with local governments to offer some supplementary financing. This kind of financing has pre-conditions. We will provide financing for projects with sufficient value and collateral. Overall, we have stuck to market-based principles as always, and there's no major changes in this regard.
Last question, please.
[Liang Peizhi] from UBS.
Thanks for an opportunity. I'm from UBS. I also wanna ask a question about the real estate economy, which caught a lot of attention. You have mentioned that policy banks have packaged loans through the real estate economy, but to real estate developers. Those unfinished housing projects have made further collateral, but some of the projects cannot be sold. Where do you gain your money back? The money to the project is in shortage. How are you going to manage that problem? Another question is also about the default on the debt of developers. I wanna know the project-related number. I wanna know the exact number and the amount in those unfinished housing projects. Thank you. This is the first question, and second I wanna know about the NIM. The NIM is going down, now is 1.88%.
Suggest no more rate falling. When will it reach the bottom? When will it bottom out? Will the falling narrowing? Will it get better in next year? Third is the fee and commission income. We noticed a lot of banks are experiencing difficulties in the fee and commission income, but we also see ICBC have stable growth in this area. I wanna know more about the retail sales, including the insurance, credit card. I want to know the following trend on that.
Your questions are very good. You have raised three questions. First, Ms. Lin will take your question. Second question will be taken by Mr. Zhou, and third will be taken by Mr. Liu.
Ms. Lin speaking. Thank you for your question. The unfinished projects, each of them have their own condition. They're different in the condition.
The problems and the legal problems are complicated. Some of the projects, as you said, are already sold out, and money has been embezzled by the developers, and now the house remain incomplete. Some of the projects haven't sold out their houses because the fund of developer is in shortage. There might be problems with upstream and downstream. To release the project, they fall into the description of remaining collateral. We adhere to that principle so we can collect collaterals. There are something to be as collaterals. In terms of these projects, their risk can be fully separated from their group. We will only give credit to these projects. You talk about the default in debt of the developers, and you wanna know the exact number of the unfinished projects.
I can't give you an exact number, but we have very clear quality classification of the assets. For others NPL, we have made allowance for it. Thank you. That's all I have to say.
To your second question, where will the NIM hit the bottom? It's a very hard question. This year, as we can see in the second quarter and in third quarter, we can see the NIM is going down quarter by quarter. We can see there's one basis point going down in the compound interest. On the other hand, the loan yield is also falling. As to the influence to the next year, the NIM, the trend of NIM is flexible. You're an expert and you know better. This influences will carry out to next year. One point that needs to be noticed is a personal housing mortgage.
We have balanced the pricing of deposit. We have repriced in terms of the pricing date. The model of repricing and the LPR quotation change. The risk brought by those factors has been balanced. Instead, there will be a drop coming next year. Judging from the situation, there are a lot of articles saying that the LPR will going down further, we do not know what will really happen, and it still have to be based on the policies of the regulators. If they roll out further policies, we will implement those policies. Mr. Liu also mentioned, and Mr. Liu also would like to share with me that western banks NIM trend in under this consensus, and their NIM are going backward, are growing.
The NIM of some of the American banks going down suddenly when they are hit, but now they're going up again. I believe with the macro policies being implemented, in the next year we will have a moderately good economic situation. We will make structural plans, and the NIM will recover, and we don't know the exact time. Thank you.
Mr. Liu, please.
The total income in the first three quarters, we have showcased our advantage of scale in terms of the FCI. We can see some other banks, agency fees are going down. Our sales of our insurance are doing good, doing well because we have a large customer base. We have a lot of channels, both online and offline, to reach out to our customers in terms of credit card. After adjustment, our credit sales are also going up.
ICBC trying to build itself as a transaction bank. We also focus on the settlements, and we have also seen growth in that area. As a major bank. We have more stability, and we have a balanced approach. But of course, we are faced with challenges. We are adjusting our income structure, including the fee and commission income. One thing to add, Mr. Zhou said we discuss a lot. If LPR and the NIM hit the bottom, this have to be, same with the turn of our monetary policies. The turn of monetary policy has decisive role in our NIM trend. We have some decision to make, but the monetary policy have the major say in this. Thank you.
For the interest of time, this is the end of the QA. Thank you for your strategic and insightful questions. In the future strategic planning and operation, we will absorb your valuable suggestions and promote our high quality development. Dr. Guan candidly responded to your concerns and questions. We believe this can strengthen your expectations and conducive to your value judgments. Thank you for your long-term trust and support for ICBC, and thank you for your long-term value investment in our stocks. If you have any questions, please contact IR team. We will continue to hold any form of IR communication. It's the end of the meeting. Thank you very much.