Dear investors, analysts, ladies and gentlemen, good morning. I'm Du Chunye, board secretary of Postal Savings Bank of China, and I will be the host of today's conference call. First, we'd like to express our warm welcome and sincere gratitude to all of you for joining us for the third quarterly results conference call of Postal Savings Bank of China. PSBC has always attached great importance to communications with the capital market. Although the information disclosed in the quarterly result announcement is limited, we always take the opportunity to give you a more comprehensive introduction through a conference call with more than an hour of Q&A, hoping to have honest communications with you. On the call today are the bank's Executive Director and President, Mr. Lyu Jiajin, Executive Director and Vice President, Mr. Zhang Xuewen, and Vice President, Mr. Xu Xueming.
Also, department heads from the board office, personal banking, external finance, consumer credit cards, international finance, corporate banking, strategic customers, small enterprise finance, financial market, asset management, risk management, credit management, asset and liability, information technology, and financial management department. All together 16 departments. In today's conference call, we will first invite our President, Mr. Lyu Jiajin, to introduce the bank's business development in the third quarter and its future outlook, which will be covered by simultaneous interpreting. Welcome, President Lyu.
Ladies and gentlemen, dear analysts, good morning. I'm Lyu Jiajin, President of Postal Savings Bank of China. Thank you for your constant attention to PSBC. In the first three quarters, the global economy as a whole continued to recover, but trade friction, geopolitics, and the normalization of monetary policies in major economies have increased uncertainty in global economic and financial markets.
China's microeconomy has generally maintained stable growth, yet changes emerged, and the growth rate slowed down, bringing about downward pressure. In the financial sector, a prudent and neutral monetary policy has been pursued. Liquidity was kept at a sufficient and proper level. Macro leverage began to stabilize. Structural de-leveraging showed solid progress. Financial risk and provisions were improved. Systematic financial risk was fully controllable. In the first three quarters, PSBC has been seeking development, promoting reform, and pursuing innovation. We resolutely implemented the three tasks of serving the real economy, preventing and controlling financial risk, and deepening financial reform, and continued our efforts in building the bank into a first-tier large retail commercial bank. The total assets of the bank reached CNY 9.35 trillion , up by 3.8%. The total liabilities were CNY 8.88 trillion , up by 3.5%. The operating income was CNY 196.5 billion , up by 21.8% year-on-year.
Profit before provision was CNY 86.4 billion , up by 39.7% year-on-year. Net profit was CNY 46.7 billion , up by 15.4% year-on-year. Basic earnings per share was CNY 0.55 , up by 10% year-on-year. All indicators maintained sound growth momentum. Net interest margin and net interest spread were 2.67% and 2.66% respectively, up 30 basis points and 21 basis points year-on-year. The cost-to-income ratio was 55.33%, down by 5.6 percentage points year-on-year. Thanks to improved profitability and proper cost control, when there is no external capital supplementation, the bank's capital adequacy ratio increased by 1.2 percentage points to 13.71%. All the core indicators performed well and continued the trend of high-quality development. Such good results cannot be achieved without the long-term efforts in the following aspects.
Firstly, we insisted on taking deposits as the foundation of the bank and maintaining the leading position in liabilities. The ability to absorb low-cost and stable funds is one of the core competitiveness of commercial banks. At the beginning of the year, we predicted that the year's competition over deposits will be extremely fierce. With tight regulation and deleveraging policies, the off-balance-sheet assets and derivative deposits have been shrinking in scale, which makes the growth of general deposits more and more difficult. At the same time, business such as wealth management are also biting into the deposit market share. The whole banking industry faces massive pressure. In response, we have made full use of the synergy between China Post Group and the bank, and relied on the unique model of directly operated outlets and agency outlets to strengthen our advantages in network and customer base.
Keep consolidating the core liability advantage. By the end of the third quarter, the total deposits of the bank reached CNY 8.35 trillion , an increase of CNY 287.3 billion or 3.6%. Of which the balance of personal deposits was CNY 7.16 trillion , up by 4.4%. In terms of structure, the bank's deposits accounted for more than 94% of total liabilities. Personal deposits accounted for nearly 86% of total deposits. Both indicators are the best level in the banking industry. While the scale of total liabilities increased, the structure still remained sound. Thanks to our extensive network and broad customer base. In the first three quarters, the bank's cost of interest-bearing liabilities was 1.4%, a decrease of 3 basis points year-on-year, maintaining a relatively low level in the banking industry.
Excluding the factor of structural deposits, the bank took up 10.88% of savings deposit market share, maintaining its leading position. Secondly, we developed the bank through the growth of asset business and enhanced our ability to serve the real economy. The real economy is the foundation of PCBC development. We have actively implemented the national development strategies and gave full play to the advantages of large amount of funds and low loan-to-deposit ratio at PSBC, so as to improve the effect and efficiency in serving the economy. We increased credit supply by optimizing the allocation of credit resources, which formed support to the development of agricultural areas and farmers, as well as small and micro-enterprises, and stronger support to major national strategic projects. By the end of the third quarter, the balance of the bank's total loans was CNY 4.16 trillion , up by 14.5%.
The loan-to-deposit ratio continued to rise to a record high of 49.8%. We continued to deepen the reform of the ALR financial services and contributed to the poverty reduction campaign. The balance of agriculture-related loans reached CNY 1.19 trillion , with a net increase of CNY 139.5 billion this year. In addition, we actively supported the development of small and micro-enterprises and focused on solving the financial difficulties of small and micro-enterprises. The balance of small and micro-enterprise loans was CNY 546.3 billion , up by 17.5%, with a net increase of CNY 81.4 billion . Moreover, the recently opened Hong Kong-Zhuhai-Macau bridge used financial services provided by our bank. PSBC, as the second largest loan provider, offered a credit line of about CNY 3.6 billion , which strongly supported this national infrastructure project. We implemented regulatory requirements by actively optimizing asset structure.
We increased investments in rate bonds such as government bonds and local government bonds, while further reducing the scale of interbank investments. By the end of the third quarter, the balance of interbank investments dropped to CNY 318.8 billion, falling by more than half from the beginning of the year. Thirdly, we built a solid foundation of risk control to ensure robust development and led the industry in terms of asset quality. A clean balance sheet is one of the biggest highlights of the bank, and also represents our responsibility to investors. In the third quarter, we continued to stick to the bottom-line thinking, strictly controlled new risk, and defused existing risk, conducted forward-looking research, and continued to optimize the structure of risk assets.
In terms of retail business, we tightened customer access, strengthened portfolio risk monitoring and early warning, and continued to activate some relationships with high-risk small and micro-enterprises and personal loan customers. In terms of corporate business, we focused on risk early warning and mitigation in key areas so as to increase efficiency. The NPL ratio of the bank was 0.88%, and the balance of NPL was CNY 36.6 billion. Both figures declined compared with the first half of the year. The loan coverage ratio reached 311%, up by 40 percentage points over the first half of the year. The ratio of NPL to loans overdue for more than 90 days reached 1.36%. The NPL plus special mention loan ratio was 1.58%. All above indicators are significantly better than the industry average.
Since the beginning of the year, based on consistent prudent business principle and comprehensive review of risks in the previous stage, the asset quality has been further consolidated. All loans overdue for more than six days have been included in the NPL. At the same time, we adopted more prudent risk policies to further consolidate asset quality. We are working to include all loans overdue for more than 30 days in NPL. We remain cautious and adhere to prudent provision management policy. We further strengthened the prejudgment and anticipation of overall risk and adopted a dynamic provisioning concept, fully considering future trend and risk exposure of industry and making forward-looking supplementary provisions for loan impairment in high-risk areas to enhance future risk compensation and offsetting capabilities.
Concerns over asset quality of the bank can be dismissed, as we always regard asset quality as our lifeline, and we have confidence to maintain our industry-leading asset quality. Firstly, we adhere to the direction of transformation and continued to enhance customer experience, where so many innovation are motive to development. Over the past 10 years, the bank developed from a deposit-taking and remittance bureau to a full functional commercial bank, from a bank with a single shareholder, to a bank with diversified shareholding structure. All of this cannot be achieved without reform and innovation, and we must rely on innovation to grow further. Facing tremendous changes, in the third quarter, we focused on promoting transformation and asset management business, and the development of financial technology.
Since the beginning of the year, regulators, on the basis of new rules on asset management, issued new rules on wealth management and wealth management subsidiaries for commercial banks, with an aim to promote the return of bank's wealth management to its original purpose of asset management. We implemented relevant policies, promoted business transformation, and accelerated product innovation. At the end of the third quarter, the share of asset management was CNY 820 billion as bank enjoys high proportion of retail customers. Notable results have been attempt with the transformation to net value products. At the end of the third quarter, both the size and proportion of net value wealth management products multiplied. In the complex and ever-changing internal, external environment, we managed to realize the stable development of the wealth management business.
Improving the coverage of financial services is one of the key measures to make people have a sense of gain. Financial technology represented by mobile banking is an important means for banks to improve their coverage of financial services. In the third quarter, the bank's mobile banking users exceeded 200 million. At the same time, we launched Mobile Banking 4.0 version, a personalized, smart, scenario-based, and open version to enable customers enjoy professional financial services whenever and wherever they want. The replacement rate of e-banking transactions further rose to 90%, and customer experience continued to improve. Ladies and gentlemen, the year 2018 is approaching an end. We will continue to push forward various work according to the plan made at the beginning of the year. However, we are fully aware that the last part of endeavor is the hardest to finish.
In the first quarter, we will ensure sound development during the peak season and continue to prevent risk so as to end the year 2018 with high-quality development and lay a solid foundation for a good start in 2019. First, we will do a good job in the development of deposits and optimize the structure of credit assets. Savings deposits account for nearly 86% of the bank's total deposits and are an important source of liabilities for the bank. The first quarter and the fourth quarter of each year are the peak seasons for our savings deposits business, during which the increase of savings deposits account for more than 70% of the total amount for the whole year. So they are of great significance to the development of our deposit business throughout the year. In the future, the fierce competition in the deposit market will continue.
In the short term, the price war will still bring pressure of rising costs. However, in the long run, centering around the customers, meeting their diversified needs, and comprehensive improving customer experience are the key to win the deposit competition. To this end, we have launched the nationwide peak season marketing campaign and arranged for the cross-year development. Give a full play to our broad network and strong customer base, and on the basis of stabilizing costs, we will consolidate our position in the savings market and achieve deposit growth in both scale and quality. In terms of credits, the bank will strictly implement the state's macrocontrol policies by reasonably controlling the total amount and pace of loan extension.
We aim to achieve year-on-year growth and optimize further loan structure in the fourth quarter, maintaining the good development trend in the first three quarters of the year and making a successful conclusion for 2018. At the same time, we will actively develop new loan projects and clients to ensure that at the beginning of next year, the credit business can enjoy a healthy development. Next year, the bank will actively implement the central government and national macroeconomic and financial policies. Further increase the proportion of credit business, focus on controlling well the total amount and pace of lending, and continue to optimize credit structure so as to ensure reasonable amount of credit business with controllable risk and balanced growth. Second, we will continue to develop intermediary business. Improving the middle income is an important driving force for achieving high quality development.
It is also an urgent expectation of the capital market for PSBC. We will make great effort in various fields to boost the sustainable development of intermediary business. In terms of asset management, we will continue to explore the maximum model for the net value product-based wealth management, so as to promote the successful transformation of wealth management business. In terms of credit cards, we will keep integrating online and offline channels and enrich product lines. In terms of electronic payments, we will accelerate the cooperation with China Post Group. In the investment banking, we will focus on serving strategic customers and enhance our comprehensive service capabilities. Third, we will comprehensively improve the level of risk management.
We will continue to focus on preventing and defusing financial risks, adhere to prudent risk principles, hold fast the risk bottom line by controlling the risk of customers with large credit lines, formulating reasonable credit policies, accelerating the disposal of risk assets. We accelerate the transformation of treasury and asset management business, enhance our ability to resist economic fluctuations and risk management ability. We will prove through concrete actions that PSBC will continue to maintain industry-leading asset quality. We have confidence in ourselves and please rest assured. Looking forward into the next year, we will continue to pursue the goal of building ourselves into a first-tier large retail commercial bank, adhere to the general principle of making progress while maintaining stability, and actively implement central macroeconomic and financial policies.
Facing uncertainties in the external economic financial environment, we will stick to the differentiated strategic positioning, firmly push forward transformation, attach great importance to the opinions of shareholders, and deliver our IPO promises with high-quality development to reward support from investors and analysts. Thank you.
Thank you, President Lyu Jiajin. Next, we will move into Q&A session. Please dial star key plus one to ask questions. Questions are invited and please identify your name and your institution before asking questions. This part will be covered by consecutive interpreting.
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I'm Yan Jiahui from CICC. My question is about the interest margin. I see that in the third quarter, we have a quarter-on-quarter increase of the interest margin. May I ask the reason behind it? Can you also give an outlook for the fourth quarter and also next year? Thank you.
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Mr. Liu Yucheng from Finance Management Department will answer your question.
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Thank you for your question. Actually, we also have made a prediction on the trend of the NIM at the interim reports announcements. We predicted that the NIM will slightly go down. Look at the performance of the third quarter, we see that our NIM is the same as the second quarter. There is no decline. I think there are mainly two reasons behind this. First is the asset restructuring. Because of the cuts of required reserve ratio by the PBOC, the released capital is used in better use credit assets.
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The second reason is that because of the tight regulatory requirements, when our interbank investment expires, we stopped most of them and we turned to the bond investment and also interbank financing, which increased our yields. Because of the asset restructuring, we were able to maintain our NIM at the same level. Second question, thank you.
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For the outlook of the NIM, I think first of all because it is quite difficult to change the downward trend of the yield in the market. Second, the cost of liability side is also increasing. So I think in the future the NIM will become narrower and narrower. But because PSBC has an operating model of a direct operation plus agency operation, we still have our advantages on the liability side. So I believe our NIM will continue to be better than our peers. Thank you.
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Next question please.
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Xu Yan from Morgan Stanley. My question is mainly about investments because we think it is also a major part of PSBC's assets. We see that PSBC suffered a loss for the third quarter while other banks have seen better returns. May I ask the reasons behind this. Also may I ask for your investment strategy for 2019. Will it cover up the losses. Thank you.
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I will invite Mr. Liu Yucheng from Finance Management Department and also Mr. Han Feng from Asset Management Department to address your question.
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Thank you for your question. Actually, we did see a great decrease of our net banks on the investment. For the third quarter, it is just above CNY 3 billion, which is a decrease of more than CNY 9 billion year-on-year, or a decrease of 74%. There are several reasons behind this. First of all, because of the introduction of the new rule on asset management, there is no implicit guarantee for the investment products. We have shrunk our non-guaranteed products because we adopted a prudent measure. When those products expire, we do not issue any new product on that.
That is why the very large decrease of the size of those wealth management products. By the end of June this year, the size of those products actually is only one tenth of the size at the end of September 2017, a decrease of more than 80%. The decrease of the returns is the same as the decrease of the size.
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The other reason is that the balance of our security investment has also decreased a lot. The third reason is that the market investment rates have been decreasing, so the yield is also decreasing.
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The third reason is that as we are seeing more and more defaults on the bond market, the stock market is also going down, so PSBC has become more prudent in the valuation of our interbank investments.
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Because of the above reasons, we see a big decrease of net gains of security investment. Thank you.
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I am Mr. Tang Guofeng from the Financial Market Department. Our strategy for next year is that we will continue to follow the regulatory requirements and also study closely, follow and study the market trends. We will focus mainly on the public security investment products, combined with the online operation. We will ensure the liquidity while maximize our return. Thank you.
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Mr. Xu Xueming is Vice President of PSBC, and I will make some additional notes.
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PSBC has a very differentiated balance sheet. Within our assets of more than CNY 9.35 trillion assets, there are more than CNY 3 trillion assets deployed in the financial market.
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Within this year, the PBOC has reduced its required reserve ratio for two times, which caused a big fluctuation in the product price in the capital market. It also affects our operation.
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I think it has created a favorable environment for PSBC.
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Next we will optimize our asset allocation and improve our interbank financing. For the current more than 4,000 financial institutions, we will make a refined marketing and also servicing to our interbank clients to improve our returns.
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We will also be prudent and develop our interbank investment strategy. At the peak time, our interbank investment once reached CNY 1.28 trillion. Currently, its balance is less than CNY 400 billion, so it is a very big decrease.
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For this part, its yield is usually 60 basis points-70 basis points above interbank financing, so we think its risk is controllable.
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We will also increase our investment in bonds, for example, local government bonds, because of its tax effect, we believe the return is quite reliable.
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We will also increase investment in high-grade credit bonds.
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Next, the operation in the financial market will create more value for PSBC as a whole.
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Thank you. That is all.
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[Non-English content] Thank you for Mr. Xu's additional notes. Now let us welcome the next question.
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Gary Lam from HSBC. I have two questions. First is about the net interest income. We see that at the quarter end, it increased by 6.4%, but the position of the NIM is the same as second quarter. Does it mean that we have some increase in the balance of interest-bearing assets? Total assets only increased by 0.3%, so it is much less than the increase of our net interest income. Is it because any financial redefinition? Can you explain that? The second question is about the Tier 1 total asset ratio. We see it has increased to 9.7%. Look at the balance sheet, we see a lot of increase in assets loan, and while we see the RWA, it has decreased by 3.9%. Can you explain the reason behind that? Thank you.
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The first question regarding the NIM and net interest income. Actually, some of the answer has already been answered in the first question, but I will still invite Mr. Liu Yucheng to address that. The second question will be addressed by Mr. Bu Yanhong from our Asset Management Department.
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Thank you for your question. As you said, for the third quarter, our NIM is 2.73%, equal to the NIM at the second quarter, which has a neutral impact on our net interest income. You also mentioned the net interest income increased by 6.4% compared to the second quarter, while total assets increased only by 0.27%, which seems contradictory to each other. But actually our interest-bearing assets have enjoyed a big increase in the third quarter because we reduced our interbank investment by great extent. So most of that money has been deployed to those interest-bearing assets, which is a much larger growth compared to the growth of the total assets. Hence the increase of the net interest income and there is no decrease of total assets because we also deploy those non-interest generating assets to interest generating assets. Thank you.
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I'm Ms. Bu Yanhong from the Asset Management Department, and I will answer your question from three aspects. First of all, we've used the retained profits to increase our capital.
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Second is an asset restructuring. First of all, we reduced those high-risk category assets, while increased the lower risk assets. So that's why the decrease of the RWA.
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As the other colleagues mentioned that we reduced many interbank investments. So the take up of those risk-weighted assets has been reduced. For this part, the total reduced size is about CNY 20 billion .
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While those bond investments and also financial assets purchased under agreement to resell have been increased. Those have taken a less percentage in the risk-weighted assets.
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For those credit assets, our strategy is always to develop our retail business and the growth of our retail lending is higher than the corporate lending for this year.
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The increase of the personal mortgage loans, bills and the forfaiting has been close to 50% of all the growth of RWA.
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For the in balance sheet RWA, the growth is only 38.6%, which is lower than the beginning of this year.
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The third reason is that we have adopted refined management and have upgraded our capital calculation system to more refined classification calculation of those RWA, which shows a safe or a saving or decrease of the RWA.
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Those are the reasons for the level of our third quarter capital adequacy ratio. Thank you.
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I want to add one thing. At the beginning of this year, we have adopted the IFRS 9 and have completed the reclassification of our assets. More details have been disclosed in our first quarter report. You can refer to that. Thank you.
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Next question, please.
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Chen Shujin from Huatai Securities. My question is about asset quality. We see that in the third quarter our NPL ratio has decreased by 9 basis points. May I ask about more details for the new generation of non-performing loans, the disclosure and also the write-off situation? May I also ask where are the major points? What are the breakdown of the industry and the items? May I also ask if PSBC is confident to ensure the good quality of retail loans? The last question is the outlook for the fourth quarter and also next year. Thank you.
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I will still invite Ms. Chen Huimeng from Risk Management Department to answer. Thank you.
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Thank you for your question. First about the NPL ratio decrease. Actually in the third quarter, we have adopted one company one policy to address the risks of our large amount risk clients so as to increase the disclosure of those risks and increase the efficiency of the.
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We will take targeted measures to address those specific clients.
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For the write-off and clearing of our bad debts, PSBC has always been quite steady on that. Actually, the write-off for the third quarter is around CNY 1 billion, and the clearing of those bad debts around CNY 3 billion. From January to September, the total write-off of bad loans is around CNY 4 billion.
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The pace is quite steady.
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Regarding the quality of our retail loans, our retail loans is mainly from the wholesale retail business and also manufacturing industry. One is because of the impact of the macroeconomy environment and also the features of its own industry. Because those industries are quite competitive and while the clients are of quite a small field, so sometimes they face a difficulty in financing and they may have difficulty in their cash flow, cash change. That's why they are like that.
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In the future, we believe the exposure of risk may be on the rise, but PSBC is confident to maintain a superior asset quality compared with our peers.
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Look at the external economic environment as the just concluded Political Bureau meeting pointed out. Faced with the steadily changing environment, some long accumulated risks will continue to expose, so we need to put attention on that.
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We think PSBC is quite resilient against the external price pressure, and we are confident in maintaining our superior asset quality. We will share some data with you. Our overdue ratio is only 0.96%, and the attention loan rate is only 0.58%, which is one fifth of the peer's level. The attention and the overdue combined percentage is only 1.58% of the total non-performing loans. We believe look at the trend, the migration trend, we are confident in maintaining the asset quality. Thank you.
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Next question please.
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Li Shanshan from BOCI. Two questions. First is PSBC is a pioneer and has a very large footprint in the all-inclusive finance business. What measures does PSBC take to improve your small and micro businesses and also the agro-rural relationship? The second question is about is there an increase of the wealth management size in the third quarter and also about the asset management business? Thank you.
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The first question will be addressed by Mr. Chen from the Three Rural Finance Department and also our managers from the SME Finance Department. The second question will be addressed by Mr. Bu from our Asset Management Department.
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For the first question, we have taken the following three measures. The first is that we have closely followed the national study of the rural revitalization. We see the plan has been released by the government at the end of September. So we have made close study and also made comprehensive drives on our team building, the product and also service system. We have also cooperated with the Ministry of Agriculture and Rural Affairs to issue guidelines on the work. The second is that we have been actively building the external cooperation platform with government companies, guarantee companies, and also associations to increase our risk sharing. We have also cooperated with many companies and ministries to share some data for those SMEs so as to also increase our business risk quality.
The third is that we have also introduced the online loan processes to ensure a higher efficiency and also lower costs and higher customer satisfaction for the online loan businesses. Thank you.
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Mr. Li Yuntao from the SME Finance Department, and I will make additional notes to this question. First is that we all know that recently the government has issued many favorable policies, and PSBC will leverage our largest network and also the current foundation to improve our SME financing. We will leverage our platform established by our head office with other headquarters of those ministries and companies to improve our work effects.
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We will also take our advantages in channel and paid visits to more than 430,000 clients in those national key development zones so as to prepare our client resources for fourth quarter and also next year.
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Next, we will continue to follow the regulatory guidance and the service of our micro-companies and businesses. We will focus on our marketing efforts to increase the number of micro-clients, the quality of those clients, and also the efficiency of our services. Thank you.
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I am Bu Yanhong, the General Manager of the Asset Management Department. Thank you for your attention to PSBC's asset management business. As we see by the end of third quarter, there is a slight decrease of the asset management size compared with the second quarter. It is because of the introduction of the new rules. We have constrained our guarantees of wealth management products, while pushed forward the transformation to the network products.
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Since the introduction of the new rules, we have reduced the supply of the expected return product.
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The decrease of the expected return product is around CNY 200 billion, our growth of the net value product is among the highest compared with peers. Next, we will continue to focus on those non-guaranteed floating wealth management products off the balance sheet.
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We will return to the nature of the business to serve our retail clients.
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By the end of September, the percentage of our retail customer is 93%.
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As the President and Managing Director said, we will continue to focus our customers' needs, meet their diversified financing demands, and improve their customer experience.
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While serving the real economy, we will continue to play our role as a direct financing agent in the finance market. That's all. Thank you.
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Next question please.
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Yang Shuo from Goldman Sachs. My question is about the growth of deposits. We see that this year our growth of deposits is affected, though we have a very large balance of the deposits. Do you have any plan for the growth of deposits and how to control the cost at the same time? Thank you.
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I will invite Mr. Liu Honghai from Asset and Liability Department to address the question.
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Thank you for your question. I am Liu Honghai from Asset and Liability Department. As you see, by the end of the third quarter, our deposits have increased by CNY 287.3 billion. We have continued our growing trend, though the percentage of year-over-year growth is not as big as last year.
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There are several reasons behind this. First is that the slowing down of the M2. We see that the growth rate of M2 has been decreasing from 13% to 8%. There is a data of a retraction, and it is about 99% between the M2 and the deposit growth.
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Secondly is that our clients are known for diversifying high-yielding assets, so it may divert our deposits. As you can see, our wealth management investments have increased by CNY 2 trillion, so it is a major factor in the diversion of our deposits.
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The third is that the increase of the personal leverage ratio has limited the growth of the deposits. We can see that from 2009 to 2017, the personal leverage ratio has increased from 20% to around 50%, so the percentage between deposits and the repayment to loans has been changing.
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For PSBC, we have continued enjoying the advantage in the operating model with direct operation and digital operation. With around 40,000 outlets and around 570 million customers, we are confident in maintaining the growth of deposits.
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In terms of cost control, we will take the following measures. First, we will continue to build the financial ecosystems for clients to increase its stickiness, and also increase the percentage of settlements and also the time deposit.
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Second is we will be prudent in the growth of those deposits. For example, the structured deposits.
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In the future, we will continue to follow the market trend, and also improve our quality in the customer service while controlling the cost of deposits.
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Next question, please.
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Xu Hang from Guotai Junan. My question is about the general asset deployment. We are seeing that in the third quarter, the loan supply is decreasing while our capital activity ratio is increasing. In the future, will the loan supply? Thank you.
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I will invite Mr. Liu Honghai from Asset and Liability Department to address the question.
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Thank you for your question. Regarding the asset growth, given the slowing down of the M2 supply, the age of the bank growing by accidental increase and also increased high yield is no longer exist. In the future, the bank will continue to increase its efficiency by enhance its management. If the M2 maintains at 8%, I believe for the whole banking industry, the growth rate won't be higher than 15%. PSBC will also be quite prudent in our growth of assets.
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PSBC will gradually grow our asset size. We will also optimize its structure. If you have paid attention to our asset structure, you will see from the first to the third quarter, there are two increase and two decrease in our asset structure. First is the percentage of loans. It has increased by 4.2 percentage points compared to the year beginning. Also the percentage of our bond investment, it has increased by 3.4 percentage points.
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Because of the cut of required reserve ratio, our deposits in the PBOC has decreased by 2.3 percentage points. Also because with the tight regulatory requirements, our interbank investment percentage has been decreased by 4.5 percentage points.
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Regarding our loan supply, as part of the early supply, early return, and also to continue to serve the real economy. The loan supply is more than last year. By the end of the third quarter, our new loans is CNY 520 billion , which is CNY 20 billion year-on-year.
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Look at our past history, we will see that PSBC will issue new loans at around CNY 600 billion-CNY 680 billion . If we grow our assets by reasonable pace, then our high yield loan percentage and also the loan to deposit ratio will be continued on the right.
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Regarding our deployment in financial market, just as Vice President Xu mentioned that we will continue to increase our assets which will save our capital, control our costs, and also improve our yields. Thank you.
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I will make one additional note. Given our growth of profit and also more refined capital requirements, we have recently done an internal test, and we believe we have enough capital to support the growth of our assets and liabilities.
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In the interest of time. The last question, please.
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OK.
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Thank you all for your questions. You can feel the enthusiasm and candidness of our management team. It is already close to the end of 2018. We have made excellent results for the third quarter, which lays a solid foundation for full year. We have maintained our high-quality development trend, highlighted our investment value. I believe in the next quarter and the future, PSBC will continue to reward capital markets with asset development. Here I would like to give you a notice. On November 27th, we will host our investor day in Zhengzhou Branch. Because it can embody our PSBC business feature and also it is quite outstanding in those new business generation. So I hope I will meet you there, and you will continue to support our growth. This is the end of the third quarter results announcement. Thank you.