Investors and analysts, good morning. I'm Du Chunye, Board Secretary of the Postal Savings Bank of China. I'll be the host of today's conference call. First, I'd like to express our warm welcome and sincere gratitude to all of you for joining us for the first quarterly results conference call. PSBC has always attached great importance to communications with the capital market. As those information disclosed in quarterly results report is limited, we always take the opportunity to give you a more comprehensive introduction through a conference call with more than an hour, hoping to have honest communications with you. On the call today are the bank's Executive Director and Vice President, Mr. Zhang Xuewen.
Also department heads from the board office, personal banking, general finance, consumer credit card, internet finance, corporate banking, small enterprise finance, financial market, asset management, risk management, credit management, asset and liability, information technology, and financial management department, altogether 15 departments. Today's conference call will be covered by simultaneous interpreting. We will first invite our Vice President, Mr. Zhang Xu ewen , to introduce the bank's first quarter performance. Then we'll move into the Q&A session. Please dial star key plus one to ask questions. Now, welcome, Mr. Zhang Xu ewen .
Ladies and gentlemen, good morning. Thank you for your attention to PSBC. I believe you have read our first quarterly report. Let me briefly introduce several main indicators. In the first quarter, the bank's assets exceeded CNY 10 trillion for the first time, reaching CNY 10.14 trillion , up by 6.6% over the prior year.
Pre-provision profit and net profits increased substantially, reaching CNY 32 billion and CNY 18.5 billion respectively, up by 14.4% and 12.3% year- on-y ear, with the growth rate of net profits returning to a double-digit level. Operating income was CNY 68.5 billion , up by 8.3% year- on- year. Of which the net fee and commission income was CNY 4.9 billion , up by 5.3% year- on- year, accounting for 7.7% of the operating income. The NPL ratio was 0.83%, down by three basis points compared with the end of last year. The cost-to-income ratio was further reduced by 2.6 percentage points to 52.6% compared with the same period of last year. On March 29th, we released 2018 performance. Since then, in less than a month, we have held annual result announcement in Hong Kong and Shenzhen respectively.
In Hong Kong, Singapore, the Middle East, and Europe, we have conducted roadshows, communicating with over 200 investors and analysts. Your insights are invaluable to PSBC. For each key work you are concerned about, we have formulated specific implementation plans, and we believe that we can respond to market concerns gradually. To address your concerns, I'd like to report to you on the latest development. First, a major focus of attention, the net profit growth. We do understand that behind your attention to the net profit growth of PSBC is the expectation of our distinctive development model. In 2018, our net profit grew by 9.8%, despite the average level of the banking sector. But there are still concerns among investors and market about our growth after we've been incorporated into the category of large state-owned commercial banks as a regulator.
In the first quarter, our net profit grew by 12.3%, and pre-provision profit grew by 14.4%, both achieving double-digit growth and continuing to lead the industry. Here, I'd like to emphasize once again that PSBC is still a growing bank. We are confident of maintaining a good momentum of growth rate. Second, concerns about the narrowing of the NIM. With the deepening of the interest rate liberalization, frankly speaking, the whole banking industry is facing the pressure of narrowing interest margins. PSBC will strive to give full play to its advantages of extensive networks, large customer base, and stable liability side, and carefully arrange the asset structure to reduce the impact and maintain an industry leading edge in NIM. In the first quarter, our NIM was 2.58%, up by 1 basis point year-on-year. On the one hand, the cost of liabilities was under effective control.
In the first quarter, the competition over deposits was fierce. We organized the peak season marketing campaign, and in the first quarter, the bank's market share of new deposits was 8.61%, with the balance of deposits increasing by CNY 515.2 billion compared with the prior year-end. The cost of deposits maintained at a rather good level of 1.48%. On the other hand, the asset structure continued to be optimized with stronger credit expansion. The balance of loans reached CNY 4.53 trillion, up by 6% compared with the prior year-end, and the loan to deposit ratio was 49.79%. Third, the asset quality. I have always stressed that a clean balance sheet is the highlight of PSBC, and shows our accountability to investors. In the first quarter, the NPL ratio was only 0.83%, down by 3 basis points compared with the prior year-end.
The loans coverage ratio was 363.17%, up by 15 percentage points compared with the prior year-end. The annualized cost of credit was 0.88%, down by 21 basis points compared with the prior year-end. The NPL generation ratio was only 0.12%. All indicators continued to improve. We will continue to adhere to the principle of prudence, and with adequate provision and low NPL generation ratio, we have confidence in the asset quality in the future. Fourth, about the capital adequacy ratio. In the first quarter, our core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio, and capital adequacy ratio were 9.61%, 10.66%, and 13.44% respectively. All of which were over two percentage points higher than the regulatory requirements, and also in line with the bank's capital plan.
At the same time, we are actively promoting the A-share IPO, and hope to become a state-owned bank listed in both Chinese mainland and Hong Kong markets as soon as possible. At the annual performance conference, General Manager, Mr. Zhang Jinliang , introduced that PSBC will speed up transformation in five aspects, which are to make the bank unique, comprehensive, light, intelligent, and intensive. To this end, we should strengthen the four pillars of headquarters leadership, risk management, information technology, and talent team. Our work is now on progress. About strengthening the head office. First, various methods such as internal recruitment, open recruitment, and recommendation from intermediaries should be adopted to increase the introduction of high-end talents in key fields urgently needed for the transformation development of the head office. Second, we'll develop the bank with talent.
We'll increase the number of staff at the head office via various channels, improve their quality and competence so as to better manage and serve lower level institutions. About strengthening risk management and control. First, chief risk officer, chief information officer, and the head of audit bureau at headquarters and other risk management personnel should be selected in time to improve the comprehensive risk management. Second, we will optimize the capital management via a rolling plan. We will make a forward-looking three-year rolling capital plan to ensure sustainable development. Third, we will keep a clear mind. Strictly control the asset quality and comprehensively strengthen the asset quality control system. About strengthening IT support, first, we'll strengthen the building of cloud platform. 42 systems, such as mobile banking and online banking, were incorporated into the cloud platform.
The daily transactions on cloud platform exceeded 171 million, accounting for 62.4% of the total transactions. Second, we will promote the building of data mart. Through the building of RWA and risk data mart, we can realize the dual engine measurement of regulatory capital and economic capital. Third, we will strengthen the building of data products. We will complete the R&D of 35 products, incorporate and discipline the analysis model will result in the system, and provide fast support for business management and precision marketing. Fourth, we'll strengthen the application of AI technology. Deep learning-based intelligent customer service systems, remote authorization robots, and voice intelligence projects have been launched. At the same time, we have closely communicated with Tencent, An t Financial and other fintech partners to accelerate the implementation of relevant work. About strengthening talent support.
With an open mind, we'll recruit talent from the whole society, and start social recruitment and internal recruitment for key posts as appropriate. At present, we have organized and carried out foreign recruitment and social recruitment in the line of IT. You can see the advertisement of PSBC on the media. We want to build an independent IT team with financial knowledge, technology expertise, and excellent R&D capability. At the same time, benchmarking ourselves against advanced peers and in line with the laws of the industry, market, and value, we will improve our incentive mechanisms. That's all for the introduction of first quarter performance and business development. We are looking forward to your valuable comments and suggestions. We will always pay attention to feedback from the market, respond to market concerns, adhere to the high-quality development to fulfill our IPO commitment, and generate returns to investors. Thank you.
Thank you, Mr. Zhang. Next, we will move into the Q&A session. Those who need to ask questions, please dial star key plus one to wait in the line to ask questions. Questions are invited. Welcome the first question. First one, CICC, Richard Wang. One moment, please.
Thank you. Thank you for the opportunity to support the question first, and I also like to congratulate your bank on your performance, like your net profit and also revenue for the two double-digit growth. Thank you, management, and thank you for your concern and the line of communication with the capital market. I have two questions. The first one is about NIM. I know that NIM for your bank roughly is growing. However, in the quarter-on-quarter sense, it is still facing pressure. In terms of the coming quarters, as the asset side grows, it will grow stronger. So what's your outlook? In your picture in Q1, based on the Q1 performance, will you grow further? Or you will stay at a current level or you will face pressure? That's the first question.
Now, second question, it's a roughly, let's say, relatively long-term question. For your bank, let's look at the features of your business, and we may look at the things like the network of your outlets, that's of your customer base. However, for the non-interest income as a share of the total income is lower compared with your peers. So going forward, in the next period, not only for next quarters, especially for the medium term, how do you look at your ways to improve the fee and the commission income and what measures you have to achieve the goal? Thank you.
Thank you. Thank you for your question. The first question is about NIM. I'll direct the question to our asset and liability department, Mr. Liu. He will be in a bit better position to take that question.
Thank you. Thank you for the question. As you see here, this year for Q1, across the market, NIM is facing pressure. Across the market, our NIM, PSBC, is stable. As you have indicated in your question, in the briefing just now, as we have heard, across the industry, in the future, especially in the liberalization of interest rate, NIM is facing more pressure in the next few quarters.
The pressure will be primarily in the cost of liability. This is pretty rigid. This is faced by all banks across the industry. We have our highlights and features. Our LDR is low. We have still room for growth for LDR, secondly. The retail strategy will enable us to make sure that in the future, in asset pricing, we will have more strength or have more accuracy in asset pricing. Therefore, we have the confidence to make sure that as long as we are given the same conditions, we will have the advantage in them. As for further to increase our fee and commission income, we will direct question to Mr. Liu from our finance department, please.
Now something about fee and commission income, how it is generating profit. In Q1, fee and commission income for the bank is about CNY 4.908 billion. Growth is 5.28% across the industry.
It is a pretty advantageous level. About the credit card and e-business is growing very rapidly in Q1, and commission fee income grew by 7.01%. For e-payment and the credit card business growing very rapidly. This is a great spur for our settlement, as well as the bank card business, which is about 18%. You also can see it's about 648%. This is a bank insurance business. Due to the new regulations on asset management, this fee commission of the wealth management is also declining, about 3.87%. For intermediary business income, it is relatively leading compared with our peers. Going forward, we will take measures to make sure that we will elevate the contribution of the intermediary business. We have the three major measures. First, we will coordinate and also strengthen the input. We have established the intermediary business task force. We consolidate our departments.
We will try to figure out our way forward for intermediary business in KPI, in the cost, and also R&D for product development. We will come up with measures so that our sales and IT and so forth will be strengthened. Secondly, we will also be more intensive. The traditional market, I mean. For the highlight market, we received great news. For the traditional business on a debit card settlement and also agency, we will be more intensive so that we will improve the quality. Market share will also be increased. In the credit card business, this year, we try to increase more new credit cards to reach 10 million cards compared with last year. Both online and offline will be integrated. A more active user will be seen, and will add to per-user contribution.
Also, try to increase the repayment and to increase the transaction so that we have more income. Next is coordination, connectivity. We try to acquire more value of the customers. We will coordinate different contributors, e-commerce and insurance and postal savings. They will combine to expand our scope of business. In the issuance of new credit card and e-payment, sales, IB, and custodian, and also sales of WMP, we will try to strengthen the diversion of customers from agency sales. Our IB, also asset management, and also other business will be more coordinated so that our intermediary business will be strengthened and better. Then give me some additional comments on transfer. For Q1, for intermediary business, as for the growth, it is only 5.3%. As a share, it increases. The growth rate is somewhat declining. You may wonder, is that true? There is a year-on-year term.
In Q1 last year, one transition according to accounting principles, it's different from the methodology of this year. If we exclude the difference in accounting principles, the Q1 growth is still normal. That's an explanation. Throughout the year, according to our estimate, compared with 2018, we will not decline. What's the reason for that? There they are, according to our colleague from finance department. First, our income from credit card business. Last year, it's about 7 million new cards. This year will exceed last year's new cards issued, credit cards. As for the income of credit cards, we also see an increase. We are making slow efforts. Second reason, in the payment business, we see breakthrough. With third-party cooperation, it is in full swing. Third reason, asset management. For WMP since last year, our efforts were focused on things like new regulations on asset management business.
For example, restructuring and going towards the net value WMP. Going forward, we will focus on the size and for the income, we will come up with measures. With those measures for intermediary business, the income from intermediary business this year will pick up. At least we will be flat. We will also see sustainable growth.
Okay. Thank you. Thank you for your response.
Next question, please. Hi. Morning. Next, please. From Morgan Stanley, Richard Xu . Please, question please.
Thank you. Thank you for the opportunity today. I am with Morgan Stanley. My question goes like this. What are the growth targets for the total assets? Some assets are growing excessively high, so what is the reason.
Thank you. Finance department, go ahead, please.
Thank you for the question. If you have a look at the growth of assets in Q1, according to our annual results in Hong Kong, our Vice President, Zhang Jinliang, told us already for 2019, the estimated asset growth will be flat. You were talking about total asset in Q1. It was growing excessively high in Q1. I can give you 36% as numbers for the reasons. Total asset grew by 6.5%, loans grew by 6%, deposits grew by 5.97%, almost 6%.
Three figures. First, the growth of total asset in Q1 was very high. What is the reason? We have about 40,000 outlets taking more deposits compared with the previous Q1s. It is about CNY 710 billion. This is in the previous year. Historically speaking, our abilities, especially for deposits, is seasonally shaped. Primarily, we see more growth in deposits in Q1, Q4, which are peak seasons. In Q2 and Q3, we will see stable growth.
For some reasons, like market reasons, we may see some volatility or decline. For those two perspectives, throughout the year, total assets will see stable growth. Secondly, looking to the future. In the total assets, we see stable growth. We also try to optimize the structure of assets in the future, in the next three quarters. The strength and our extension of credit as a share of total assets will increase. It is conducive to our stabilizing of the NIM, as well as our profitability. Thirdly, given low market rate in controlling maturity and duration, we are trying to make sure that incentive market will see more investment business so that their risk and return will be stable. Investors assured. Given some growth, we will also give high-quality growth for investors. It is also conducive for our growth as well as your investment income. Thank you.
Next question.
Next question from Huatai Securities. Chen Shujin, please.
Thank you. Thank you for the opportunity. I have two questions. First is about small and micro enterprise loan interest rate. CBIRC as other regulators are also having some new comments on the interest rates. For the inclusive SME loans as a share of the total loans, what is the rate? What is the ratio? What about the interest rates for new loans across the year? What will be the next trend for the interest rates for these loans? Next question, about your A-share IPO. Do you have a schedule for IPO process? When will you complete the process of IPO? Without IPO, what about the quarter one CAR and CAR compared with last year? Thank you.
Thank you. Thank you for the question. As for SME, small and micro enterprise loans, we have dedicated unit. Mr. Liu will take the floor.
Thank you for the question. Yes, two ways. We also took part. We also get informed about the latest meetings. We also learned some information which was an update. Your question is about inclusive finance for SME, its interest rate, and its share. State Council regulators are very concerned about the scenario for SMEs this year. Regulated CBIRC is also having certain metrics for our business. For example, the growth rate of the loans and increase interest rates, they are all being monitored by the regulator. We started early. We are an early mover. We have a large size. We have a special structure of customer base, so therefore we have under a special regulation, according to our estimate. So far in Q1, our extended credit is about 6.36 to SMEs. Compared with the big five, we are a bit higher.
For some historical reasons, as well as the structure customer base, we are facing such a result. In share, in the mix, we are higher than the big five, as well as other peers, about 12%-13%. Q1, we had a large size. That was the reason. Other banks is a bit lower. As for the share of interest rates throughout the year, we will see a reasonable rate of interest. Window guidance is also provided by the regulator. As a large SOE commercial bank, we have to contribute our due share to the real economy. The overall interest rate will be, compared with last year, will be still reasonable, I mean, in growth. That is it. Thank you.
As for A-share IPO, Zhang Xuewen will take over.
From board secretary office in 2017, we announced our plan for the A-share IPO. So far, efforts are underway. For example, our application of the documents to the regulator. As for the progress, we will make disclosures according to rules. As for the capital replenishments, I will give you further information. Our bank is committed to high efficiency in savings as well as the balance. Capital adequacy ratio is stable together with our business growth in 2018 without any external capital injection. CAR increased a lot in 2019 and at the end of Q1 this year. And of course, Tier 1 CAR is about 9.61%, and for Tier 1 is 10.66%. CAR is 13.44%. According to our pressure test of capital in the next few years, the capital of our bank will be able to fulfill the needs of development. Our pressure is under control. Thank you.
Next question, please.
Question? Bank of America. Winnie Wu, please.
A question still deals with capital. In Q1, your core Tier 1 saw a decline of 16 basis points. We see rapid growth in size, your risk weighted then also increased by 6.1%. We do see some capital return in plan for IPO. So over the longer term, how do you look at the PSBC, your ROE is roughly about 12%-13%. After adjustment of 30% of dividend payout, so your internal capital retention rate is resulting in this growth of core capital of about 8%-9% given such ROE sensibility. As for the risk weighted asset was about 18%, the loan growth in past few years is also approaching 15%-20% or even higher level. Here is my question. For the 20% on the credit growth for the next two to three years, it will be sustainable in your plan?
Or in other words, in the next two to three years, how do you look at the possibility of matching your internal capital with the growth in risk-weighted assets? People were talking about big six rather than big five with your participation in capital. Other requirements in addition to capital, we considered as a Systemically Important Financial Institution. So you will see more requirement in core Tier 1 CAR on 7.5%- 8.7%, or even become a globally SIFI. Do you have such plans with the pressure in capital against that context?
Thank you, Winnie. Thank you for the question. Let me give you a response. First, PSBC, as you know, is committed to high efficiency use of capital and that of exposure.
Given our history, we will still adopt the current ratio about 1.5- 2 percentage points as a new buffer, additional buffer over the 10 years of business that growing rapidly in that context. In the past few years, our LDR as well as our credit growth rates are evidently higher than the industry average. In Q1, the absolute value of CAR compared with the earlier of the year is a bit lower. It's depending on each. However, the net value of common capital due to profitability is seeing 3% growth compared with the end of last year. In the future, we'll see further efforts where we'll look at ways to both denominators. We will make sure that we will see sustainable and long-term growth. We'll also try to get more injection from internal capital. You can see the growth in credit and RWA.
We are seeing intensive prevention in assets. As a large SOE commercial bank, we will try to highlight our features. Our risk-weighted assets as a share of total assets is still the lowest among the peers. RWA as a share of total assets is about 45% roughly. This is advantage. We will retain that advantage in the future through our efforts in optimizing asset structure. We give equal weight to both equity and also fixing cost as well as internal, external resources. Our priority now is with our H-share IPO. We will make sure that SOE Commercial Bank will be dual listed both in Mainland and Hong Kong. We also try to integrate the financing platforms domestically, so that in the future, our bank will see more diverse sources of financing from both capital markets.
That will come up with a multi-tiered capital structure so that the overall cost of financing will be minimized. As for SIB, the progress for SIB so far requires the risk ratio. As you can see for the global banks level, we see what that is. We don't have additional requirements against the benchmark. As for the guidelines for such banks, regulators are also coming up in consultations with the government. PSBC has a distinctive model, which has separate operations for agency sales. They're also working with CBIRC, PBOC. After consultation, in our preparation for SIB, we will be given more differentiated regulation rules.
Next question.
Morning. Next. From HSBC, David Wong. Please.
Morning. I have two questions. First, about our effective tax rate. Your tax rate is lower than your peers. However, every quarter, we see some volatility. In Q1, it's about 10.4%, which is effective rate. What is your comment compared with the previous two years? Going forward, will you see a more consistent rate with your peers, which will be a growing trend? Interesting, according to the market, it is about macro liquidity. According to the market, loose liquidity, for example, so far, we see size cuts in RRR. Will you see slowdown of debt cuts? According to the liquidity environment so far, marginally, it is not as loose as earlier in the year. Thank you.
Thank you. As for the tax rate, I think Mr. Liu will take the floor.
Thank you. Thank you for the question. As for tax rate, for SME and also inclusive finance, China has some tax cuts as well as the favorable policies so far in recent years. Across the banks, we are seeing favorable tax rates as well future. As our boss said, the share of SME compared with our peers is higher. Our interest rate, historically speaking, according to our customer structure, we are higher than other banks. Our share is higher than theirs. Therefore, our tax rates going forward, at least compared with our peers, will be more favorable. That is for the first question. The second question is about the market liquidity. Mr. Liu will take the floor.
Thank you. Thank you for the question. Yesterday, PBOC dealt with that in a very wonderful way. We were never so strict or tightened in liquidity, and we would also not be so that loose. We will have to see the batch on the repo interest rate. It is stable so far. PSBC in the market is a major provider of liquidity in the market.
For some time in the past, we did not see a major change in the market. It is pretty evident. Yesterday, PBOC said whether we will cut RRR, whether we will see an MLF, or whether we will continue that after maturity, we were tighten up or we will offer loose policy. We do not see major more availability and liquidity in Q1. However, in the past year, half a year, we are seeing cuts in RRR, and whether we are seeing more multiples. We are seeing stable history in the recent past. In the future, after the countercyclical adjustment, it will continue according to PBOC. We will see a moderate policy in monetary policy. We will not see major change in the policy market. Thank you.
Next question. Thank you.
Please address asterisk P and one. Next question. From Industrial Securities.
Thank you. Thank you very much. On the one hand, it is about the financial supply-side reform. This year, regulators were talking about financial industry risk. What measures will come up? The ideas also differ across different sectors. What is your opinion about financial reform? What will be the measures, be it for the bank or for the industry-wide? What challenges and opportunities there are? Next question. About market policies, about fine-tuning, about policies. What about the credit extension in the next three quarters? Any policy change?
Let me confirm with your question, because the connection was poor just now. Would you please repeat your question? First is about on financial supply-side reform, right? Second question was dealing with what? Would you please explain the context?
It is a follow-up question in addition to the liquidity question. For your bank, the next few quarters, what about the credit extension policy, like the intensity and its structure and orientation, the customers? Because we are seeing fine-tuning in the macro policy side. You will continue your previous policy, or you will adjust your policy?
Thank you. Thank you. Thank you for the question. I see. Mr. Liu will take the question.
Thank you. On the financial supply-side reform, what proposed by President Xi Jinping this year has a new philosophy. It is follow to the economic supply-side reform. Total size, structure of the supply to optimize the financial structure to minimize the cost of financing, to make better efficient the arrangement of resources as well as the feeding effect, knock-on effect to make financial sector a better pillar for the real economy as well our bank.
If the central government or the regulator, they have been making repeated comments that financial sector should support the real economy, where small and micro enterprises can increase the financial to receive more vigor and support. PSBC is going to, and has been, and it will be intensive in the inclusive finance as our core business. Financial supply-side reform is a blessing for our bank. Secondly, for the liquidity, according to my interpretation, your question was asking about given the changes in the liquidity policy, will there be any new change in our support for the real economy? That was my understanding of your question. Given such a stable liquidity in the market, or let's say a slightly tight liquidity, it's a blessing for us. There are several reasons. For the credit availability, it is subject to capital as well as cost of funding.
So far in Q1, deposits grew by CNY 510 billion. Loans increased by only CNY 260 billion. Therefore, we see the deposits. It is enough to support the incoming growth in credit. Second reason. As a major supplier of funds in the market, if the liquidity in the market is seeing changes, first of all, we will assume our share of liability or responsibility as a major, as a bank. Secondly, we will make business arrangements. These are two perspectives we will take to give full support to real economy as a response to this financial supply-side reform. In a credit extension, we can look at the existing and the growth of the credit. The retail loans are deploying. It's about 50%. It's about 50% as a share in retail.
Therefore, in the future, in order to increase our profit and income and as a better support to real economy, it will be very instrumental. Thank you for the question.
Thank you. Next question.
Next question. From BOCI International, please.
First, thank you for the opportunity. My question is about SME loans. NPL ratio is increasing. Is it a major concern for your bank from the perspective of the Q1? The asset quality of SME is good or bad for you? According to some sources in the nation, last year's loans for SME, some of them are matured and have been repaid. For some SMEs, they are not going to renew their loans. They don't have 30 million. For the economy outlook, they are seeing pressure. That's the reason. So for your bank, what's your information, I think?
Thank you. Mr. Liu from SME Department will take the question.
Let me respond to your question, and other colleagues would make some additional comments. As for SME, we were an early mover. We have a large customer base. We have also a large base of account managers. Since last year, our loans extended last year were also pretty handsome. From Q1, inclusive finance for SMEs NPL is about 8.9%. Compared with last year, it's about 23 basis points decline. Overall, NPL ratio, compared with non-financial institutions, we are still below average. In recent years, we are adopting a barbell strategy. Since last year, our bank has been strengthening our input of IT and big data. Therefore, using big data to control risk. For the last two years, in Q1, we also see some breakthroughs in Q1, this Q1 and last year's Q1. Going forward, further risk control, as well adding improvement in quality, they're instrumental and a cornerstone.
Let me respond to your first question. Question two, about the demand for new loans. Compared with last year's SME business, our loans for SME maturity is about one year. Duration about one year. Some are about seven to eight months. Some are calculated on a basis of months, some are calculated on the basis of a year. Anyway, they will mature within one year. As for the renewal rate, some of them are not renewing their loans. That's normal, because customers have their own plans for their business. Some are seeing worse than expected in their own operations. For our bank, our renew rate are stable. About 70%- 80%. 70%, 80% to 80%. They will renew their loans with us. As for customer onboarding, according to our big data, we are also acquiring information. As for demand for renewal of loans, that's my answer. Thank you.
I don't know whether my colleagues have additional comments to make. Funding department may have some additional comments to make first.
As for asset quality, for some loan business we are improving on stated cities. The SME loans are going to Yangtze and the Pearl River Delta, which is more prosperous. There is more demand. For Zhejiang province, the asset quality is just at 1% or even lower, and their asset quality is very high. We are all confident about their credibility. Asset quality is properly controlled in such regions. In the adoption of IT, especially for internet financing or internet loans, this is also an important measure to control asset quality. Mobile loans is pretty high. For mobile loans, the share is 48%, 47%. I mean, mobile phone as outlet. It's an important role to control risk. Secondly, efforts are on the way. Going digital.
For the mobile sales and risk control, mobile extension, credit can be extended on-site and also pre extension of the credit. Thirdly, utilizing our network foundation. Given authority from regulator, we are making efforts. We're going into rural China and penetrating into their market. And asset quality, we are making efforts on three fronts so that quality can be maintained.
In the interest of time, we can only receive the final question.
Final question. From Haitong International, Steven Chan. Please.
Thank you for the final opportunity. Two questions about inclusive finance in SMEs. In the central government meeting, and the regulator also told us that if the banks industry is going to maintain a cost recovery and a slight profitability with the NPL ratio under 3%, therefore inclusive finance interest will be 5%- 7%. In that way, can we make sure that we will see some break-even or even slight profit? For your bank, interest rate for loans for inclusive finance is about 6.86%. Will you see some pressure for margin declining in order to break even? How to break even, I mean. Second, in the past, for many quarters, provision coverage ratio is as high as 350. So going forward, what's your outlook for the coverage ratio? Will it peak? Thank you.
Thank you. First question. Mr. Liu will take the question.
My colleague may also add something else. For interest rates for SME loans, State Council briefing also informed the public together with the regulator. They are pretty candid. As for interest rate as well as break even, we have to look at the cost of loans, the cost of funding, as well as the cost of risk, cost of operation.
They should all be factored into our final answer. Yesterday, regulator were approaching the question from a national perspective. The NPL ratio is under 3%, and interest rates about 5%- 7.5%. That will secure break even. In terms of financial institutions, it's also interpreting from their own perspective. For example, the cost of risk, operation, cost of funding. Three metrics. They may have different interpretations. For our bank, according to our calculation so far for Q1, 6.86%, excluding the policy, favorable policy for the favorable tax cuts for VAT cuts, for comprehensive financial service subsidy, including those policies, our bank will be able to break even with slight profit, which will be sustainable. We are charging higher interest rate. We are 2.91%, at least under 3%. We're able to break even. We have calculated that already. We can break even.
Whether we will reduce that level, at least will be reasonable in the level. CBIRC, together with other departments of the government also see the fact that we are large in size and have rapid growth and a special structure company base. They know that for some historical reasons, they're offering us differentiated KPIs. Our interest rate will also be both sustainable, and then take into consideration the fiscal policies of the country. We've also given some policies to the customers. As for the provision coverage ratio, risk management will take the floor. On many occasions, our CEO has made the point that we will have to make preparation when the weather is still good. With the changes in the macro economy, preemptively, we'll make preparation for the coverage so that we can better prepare for the risks in the future.
In Q1 2019, our provision is about CNY 136 billion, a growth of CNY 8.5 billion, considering with the year to year actual cost of credit will be stable. Some additional comments or explanation. We are seeing a little volatility in the macro economy for the banking industry. It is somewhat disturbing. We may be prone to some uncertainties in the macro economy, but the asset structure of our bank is reasonable and proper, we're able to withstand such a shock. In the future, asset quality is under product control to rest assured. We'll be prudent in our setting aside of provision. We build proactive in the provision for any asset impairment so that we can better withstand the risk. Thank you.
So far, together with the six management members and eight investors have joined the conference. Together 15 questions. In the interest of time, we have to conclude here for the Q&A session. Thank you. Thank you for your questions. in Q1 2019, our bank is keeping a good momentum after our IPO. We will continue our communication with investors and analysts so that we can give you more understanding of our bank. I can give you some announcements. On the 10th of May , in Beijing, Convention Center, which is the venue of the Belt and Road Forum for International Cooperation, we will hold an event, Future Integration, Empowerment, Reshaping, and the New Blue Ocean for the Retail, which is the 2019 Capital Market Open Day.
With forum discussions, we will focus on e-Payment, online credit, rural e-commerce, the personal finance, the fintech, as well as the transformation of retail outlets. We will approach from different swamps to give you a better understanding of the retail finance of our bank. Our President elect, Mr. Zhang Jinliang, as our Vice President in charge of the retail and IT, together with the directors of other management members, will discuss with investors and analysts in detail about our outlook for the future in the industry. We will give you a detailed map of the new ocean of our retail business. We are looking forward to your participation. 2019 Q1 and our results briefing is concluded. Thank you.