Good afternoon, ladies and gentlemen. Welcome to the 2017 annual results briefing of Bank of China Hong Kong Holdings Limited. I am Kenny Luo, Company Secretary of Bank of China Hong Kong. Before we begin, may I draw your attention to this slide, which set out a disclaimer regarding the forward-looking statement. Please also note the adjustment to the reporting basis that has been made in today's presentation. Now let's start our result briefing. First, I would like to introduce our senior management team with us today. They are Mr. Gao Yingxin, Vice Chairman and Chief Executive. Mr. Li Jiuzhong, Executive Director and Chief Risk Officer. Mr. Yuan Shu, Deputy Chief Executive. Mr. Zhong Xiangqun, Chief Operating Officer. Madam Sui Yang, Chief Financial Officer. Ms. Ann Kung Yeung, Deputy Chief Executive. Today's agenda is divided into three parts.
First, Chief Executive Gao will start with the strategy review for 2017, followed by CFO Sui, who will give a report of our financial performance for 2017. After that, Chief Executive Gao will discuss our outlook and strategy for 2018. Then we will open the floor for a Q&A session. Now, Chief Executive Gao, please.
Good afternoon, ladies and gentlemen. It's my great pleasure to meet all the new and old friends here today. Over the past three years, under the leadership of Mr. Yue Yi, Bank of China Hong Kong has developed in a rapid and healthy manner, further enhanced its market competitiveness, and entered into a brand-new chapter of regional transformation. First, I would like to take this opportunity to sincerely thank Mr. Yue for his contribution to the company during his tenure. In 2017, global economic growth remained favorable. Against this backdrop, our operating environment improved. Market competition further intensified. We face both opportunities and challenges in our management and operations. During the year, we strictly followed the group's development strategy, made progress while ensuring stability, and remained proactive in our support of Hong Kong's economic development.
We continue to deepen our transformation into an internationalized regional bank, further strengthen our RMB business leadership, and achieve solid business growth. We also carved out new competitive advantage by enhancing our leadership in fintech innovation. Thanks to the diligence of our staff, we continue to deliver profit growth and significantly boosted our century-old brand. For the full year, our attributable profit grew 16% year-on-year to HKD 28.5 billion, setting another record high since our IPO. We steadily increased our total assets, optimized our income mix, and achieved robust performance in our key financial and risk indicators. The board has recommended a final dividend of HKD 0.758 per share. Together with the interim dividend and the special dividend, the full year dividend will be HKD 1.398 per share.
Over the past year, we have capitalized on national strategy initiatives and achieved substantial advance in our transformation into an internationalized regional bank. We completed the sale of our stake in Chiyu Bank, as well as our integration with BOC Thailand , Jakarta Branch, and Phnom Penh Branch. The acquisition of BOC Manila Branch and the Ho Chi Minh City Branch were also completed in early 2018.
Together with BOC Malaysia and our own Brunei branch, which became part of the group in 2016, we have now extended our Southeast Asia footprint to seven countries. Following the acquisition, we stepped up our integration with the new institutions in terms of business systems and corporate culture. Seizing the opportunities from the important national strategies such as Belt and Road Initiative, the going abroad, going global strategy of the mainland enterprises, and RMB internationalization.
We realized our synergies and achieved rapid growth in our Southeast Asia business. We continued to deliver progress toward building a regional risk management system to enhance our risk compliance and internal controls. At the same time, we strengthened talent exchange and staff training, and promoted a stronger corporate culture to support the group's development in Southeast Asia. As the first mover in the offshore RMB business, we proactively supported RMB internationalization, and further expanded our market-leading position. As the sole RMB clearing bank in Hong Kong, we continually upgraded our RMB RTGS system, which handled a total clearing volume of CNY 230 trillion in 2017, up 6% year on year and accounting for 76% of the total offshore market. Our distinctive advantage in the RMB business was therefore further affirmed.
We fully leveraged our extensive experience gained from the Shanghai, Hong Kong, and the Shenzhen, Hong Kong Stock Connect platforms, and became the exclusive cross-border fund settlement channel under Bond Connect. We also successfully issued a total of CNY 9 billion of Panda Bond, the largest single issuance by far in the mainland interbank bond market. We successfully developed customer relationship with central banks, sovereign funds, and international financial institutions. Their date securities transaction numbers and volume through us grew strongly by 79% and 147% respectively during the year. At the same time, we also actively promoted financial collaboration related to the development of the Guangdong, Hong Kong, Macao Greater Bay Area, and further strengthened our free trade zone business and BOC Group's market position as the first choice bank in China's free trade zone.
In order to enhance our comprehensive servicing capabilities, we continued to invest in our diversified business platform. The profit contribution from the eight key business platform to the group further increased, driven by year on year growth of 16% in operating profit. In our credit card business, we maintained our leading position in the UnionPay merchant and card issuing business in Hong Kong. In our private banking business, we deepened cross-border business expansion. This increased the relevant customer base and the monthly average AUM by 28% and 62% respectively. Our life insurance arm, BOC Life, achieved 38% growth in net insurance premium income during the year, underpinned by our efforts to strengthen product and service innovation and expand sales distribution channels. Our asset management platform delivered strong performance across its major investment portfolios, and its AUM grew 25% year on year.
Our cash management business strives to grow low cost funding base and strengthen our competitiveness in the cash pooling and the corporate treasury service. Our custody business grew its total assets under custody to HKD 1.16 trillion. BOC Prudential Trustee further consolidated its market position and recorded 28% growth in the MPF related AUM. Our Po Sang Securities and Futures made new breakthroughs in its business model development by officially launching stock trading and stock financing service to individuals and institution customers. We continue to invest in fintech innovation in order to promote financial inclusion and provide tangible support to Hong Kong's plan to develop into a smart city. We continue to break new ground in the application of innovative technology, such as blockchain, biometric authentication, and big data.
Blockchain technology has been used in 85% of our mortgage valuation cases, and its application has also been smoothly extended to trade finance. We developed biometric authentication applications for various scenarios and are proud to become the first Hong Kong bank to introduce finger vein authentication in self-service terminals. Our big data platform, which is an ongoing customer expansion, consistent expansion, has also enabled us to establish a comprehensive customer profiling. During the year, we pursued a determined strategy to enhance the intelligence of our electronic channels and upgrading our mobile banking service. As a result, the number of our mobile banking customer increased by 23% and the number of corporate customer using e-banking increased by 11% year-on-year. We also reinforced our strategic collaboration with large telecom and internet companies and enhanced our overall competitiveness in both fintech and cross-border business.
Let me end my business review of 2017 here. Next, Madam Sui Yang , our CFO, will walk you through the group's financial performance in 2017. Please.
Thank you, Chief Executive Gao. Bank of China Hong Kong profitability further increased in 2017 and achieved strong results as measured by key financial indicators. Profit attributable to equity holders from continuing operation increased 15.9% year-on-year to HKD 28.5 billion. Total assets increased by 12.4% to HKD 2.6 trillion, while total liabilities increased by 13.1% to HKD 2.4 trillion. Total customer loans and deposits experienced strong and balanced growth. Our continuing operations generated an ROA of 1.14% and an ROE of 13.5%, up one basis point and 1.3 percentage points respectively. We remained well capitalized. As of the end of 2017, our CET1 capital ratio was 16.5% and our total capital ratio stood at 20.4%. During the year, we achieved a strong growth in deposit, thanks to our efforts to develop our cash management business, payroll services, custody business, IPO receiving bank business, and settlement services.
As at the end of 2017, our total customer deposits reached HKD 1.8 trillion, up 16.5% from the end of previous year, outpacing the market growth. Our market share in Hong Kong rose by 0.9 percentage point to 14.1%. We proactively enhanced our customer deposit structure. Personal banking customer deposit increased to 20.6% and contribute 47.9% of our total customer deposits, an increase of 1.6 percentage points. At the same time, we made efforts to grow low cost deposit. As a result, our CASA deposits increased 13.7%, outpacing the market growth of 8.3%. Our CASA mix was 62.8%. We deepened our local market commitment and collaboration with BOC Group to capture the opportunities arising from Belt and Road Initiative, Mainland enterprises going global, the development of Greater Bay Area, as well as the Southeast Asian market.
As at the end of 2017, our total customer loans increased to HKD 1.1 trillion, up 15.8%, of which Lending to industrial, commercial, and financial sectors in Hong Kong increased by 16.3%. We continue to grow our client relationships with local family-owned corporations, chambers of commerce, and second- and third-tier list companies, as well as government and public institutions. We also worked diligent to improve our SME service capability. Lending to individuals in Hong Kong increased by 11.7%, while residential mortgages maintained a steady growth. We continued to enrich our personal loan product by promoting insurance policy, pledge loans, insurance premium financing, and personal and unsecured loans. We took advantage of market opportunities and proactively manage our assets and liabilities. Our net interest income increased by 33% year-on-year, driven mainly by the higher yield generated from customer loans and debt security investments.
We also captured the interbank market opportunities by conducting swap deals at a considerable scale, which significantly increased interest income from balance and placements with banks. Average interest earning assets stood at HKD 2.2 trillion, up 14% year-on-year, higher than the total asset growth rate. Our assets and liability mix was further optimized. Excluding foreign currency swap-related factor, our net interest margin would have been 1.44%, up five basis point year-on-year.
Pricing of loans and deposits remained under high pressure due to the abundant market liquidity, the key market competition. On a quarter-by-quarter basis, this pressure persistently weighed on our margins in the second and the third quarters, before beginning to stabilize in the fourth quarter alongside the rise in the market interest rates. We diversified our income source by making the most of positive market conditions. Net fee and commission income grew steadily and increased 7.8% to HKD 11.5 billion.
Within this, investment and insurance-related net fee income increased by 22%. Riding on improved market sentiment, we expanded our mid and high-end and cross-border customer base, while strengthening product promotion. As a result, our net fee income from security brokerage increased by 35%, and that from funds distribution increased by 34%, offsetting the impact of decrease in insurance fee income. Net fee income from traditional business was stable and increased by 4.3%.
Our operating efficiency consistently improved, while our operating expense increased by 9.5% year-on-year to HKD 13.7 billion. The cost-to-income ratio continued to stay at 28.1%, which was lower than the local banking average. Our staff costs increased by 12.6%, mainly due to annual salary increment, as well as increase in staff and the performance-related remuneration. Business-related expenses increased by 7.6% as a result of our ongoing investment in service capability, business systems, and platforms to support long-term business growth.
We continued to strengthen our comprehension risk management and maintained a stable performance in our key risk indicators. The classified and impaired loans ratio of the group was 0.18%, down 5 basis points from the end of previous year, and notably better than the market average. Provision remained sufficient, with our coverage ratio at 196%, up 46 percentage points from the end of the last year. We consistently enhanced our liquidity position. Our average LCR across the four quarters of 2017 was 125.5%, which is above the regulatory requirement. This concludes my review of our 2017 financial performance. I would like to return the floor to Chief Executive, Gao, for our business focus in 2018.
Thank you, Madam Sui. In 2018, uncertainties will remain in the global economy. Financial regulation will tighten further. Market competition will become more intensified. The emergence of new mode of financial service and the new business model will also pose fresh challenges to the operation and the management of the bank. On the other hand, China is developing towards a modernized economy and setting the pattern of all around opening up in accordance with the grand blueprint outlined by 19th CPC National Congress. This will inject impetus and create opportunities across the globe, and bring about bright prospects for Hong Kong. The new administration of Hong Kong government has placed its focus on improving the economy and the people's livelihood, and playing an active role in promoting the Belt and Road Initiative.
I just read the news today, this afternoon, that Hong Kong government just signed the memorandum with State Planning Commission from central government will support Hong Kong to play a very important role in the Belt and Road Initiative. The development also of the Greater Bay Area. It has continued to enhance Hong Kong's traditional advantages and identify new economy growth drivers, which will bring enormous business opportunities to the local banking industry. The globalization efforts and the steady support from our parent bank, Bank of China, will also provide a solid foundation for the next stage of development of Bank of China Hong Kong. I previously worked with Bank of China Hong Kong for over 10 years. Returning to this familiar place, I enjoy the homey feelings and they bear a strong sense of responsibility.
I will work together with my entire management team to continue to strictly follow Bank of China Group's development strategy and push forward our strategic transformation. We will achieve our strategic objectives to build ourselves into a top-class, full service, and internationalized regional bank by providing comprehensive service through digitalization and globalization. For 2018, we have set out a number of key business priorities with a view to maintain our balanced and sustainable development. This include the following: ensure the smooth integration of Southeast Asian's institutions, pursue technological innovation and product R&D, develop our diversified business platform, and build an integrated model for commercial and investment banking, deepen our local market commitment, foster collaboration in the Guangdong, Hong Kong, Macau region, and continuously enhance our risk management compliance and internal controls, while strengthening our operating management and talent pool.
We will embrace market opportunities to achieve balanced growth in our loans and deposits, as well as higher net interest margin. In order to maintain a steady fee income growth, we will further improve our customer mix and product development by reinforcing our risk management and internal control. We will strive to keep asset quality at a manageable level. We will also ensure a sensible control of expenses, and seek to enhance our operating efficiency, and therefore, maintain a relatively stable cost-to-income ratio. We will closely observe regulatory changes and adhere strictly to compliance standards. By doing so, we will devote our best efforts to attaining excellence in a bid to reward our investors, customers, employees, and the whole of society. This is the end of our presentation. Thank you. We will now open the Q&A sessions.
Okay. Thank you, Chief Executive Gao. Before the Q&A session officially starts, please allow me to declare some rules here. Before you ask a question, please speak out your name and the institution you serve to the senior management. Then you can ask your question in both Mandarin or English at your convenience. For those you need to listen to the English answer, we prepare the simultaneous translation, so put up your earphones if you need. Now I think it's the official start of our Q&A session. Please raise your hands. Okay, I would like to give the first question to a lady. So the lady in front of me in the third row next to the gentleman. Hi, Winnie.
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Okay. Next question goes to the gentleman in the middle of the second row.
Thanks, Kenny . This is [inaudible] from Morgan Stanley. Congratulations on very good set of numbers. I have two questions. The first one is on acquisitions. In the last three years, obviously the bank was focused on absorbing the Southeast Asian businesses, but even after these acquisitions, the CET1 ratio is still above 16%. How are you thinking about acquisitions moving ahead, either in terms of geographies like say Singapore or in terms of non-banking businesses? So that's the first question. The second question is for Madam Sui Yang. Should I ask now or later?
Later. I answer your first question. Yeah.
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Please ask your next question.
Sorry, the second question is on margins. You made a statement that the competition for loans and deposits reduced or declined in the fourth quarter. Can you talk about that? Which sectors have you seen less competition in? Do you expect that to continue in 2018 also?
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Okay. Next question goes to the gentleman in middle of third row, just behind Daniel.
Thank you for taking my question. This is Gurpreet from Goldman Sachs. I have one question and very simple one. On the cost side, overall operating expenses, they were up 9.5% year-on-year. If you look at the cost growth for BOC Hong Kong for the last few years, that was a big pickup. Is there any one-off in the cost increase for last year? How do you see the cost growth for the next few years, especially as you build out into the ASEAN region?
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Okay. Next question, the lady in front of me in the third row. Yes.
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Now we only have the time for last question.
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Two more, o kay. The gentleman in the third row on my right-hand side.
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Okay. The real last question goes to the gentleman in the middle of second row. Next to Daniel, yes.
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Okay. Due to the limit of time, I have to call end to this meeting. Thanks for your attending. Should you have any further question, just feel free to call our IR team or myself. Thank you. [Non-English content]