Ladies and gentlemen, good afternoon. Welcome to the 2026 interim results briefing of Bank of China Hong Kong (Holdings) Limited. I am Sophie Huang, board secretary. To begin with our results briefing, I would like to introduce the senior management with us today, Mr. Sun Yu, Chief Executive. Mr. Xing Guiwei, Deputy Chief Executive. Mr. Wang Huabin, Deputy Chief Executive. Mr. Chan Man, Deputy Chief Executive. Madam Li Tong, Deputy Chief Executive. Madam Wang Chunfei, Chief Risk Officer. Madam Liu Chang, Chief Financial Officer. Today's meeting has three parts. First, our Chief Executive Officer, Mr. Sun, will introduce the implementation of our strategy in the first half of the year.
Then our C hief Financial Officer , Madam Liu, will present our financial results. Finally, Mr. Sun will share with us outlook for the second half and the new five-year plan before our Q&A session. Now, I would like to hand over to Sun Yu.
Mr. Sun, please.
Good afternoon, ladies and gentlemen. Since the beginning of the year, the global geopolitical landscape has undergone profound changes, and the major central banks tended to tighten monetary policies. The Chinese mainland and Hong Kong achieved resilient economic growth. We strive to promote high quality development and make a smooth start to the new five-year plan. During the period, profit attributable to equity holders rose by 7.1% to HKD 23.7 billion. ROE increased by 32 basis points to 13.18%. The board has declared a second interim dividend of HKD 0.29 per share, taking the total regular DPS for the first half to HKD 0.58 per share.
In addition, the board has approved the implementation of a three-year shareholder return program for 2026- 2028, including an orderly increase of dividend payout ratio within the established range, and extra returns of no less than HKD 10.5 billion to our shareholders during these three years, of which a special dividend of HKD 0.2388 per share was declared for 2026. We strengthened our integrated service capabilities in Hong Kong market, maintaining leadership in new residential mortgages, syndicated loans in the Hong Kong and the Macau market, cash pooling business, and IPO receiving bank service. In the first half, we grew the number of cash pools by 14% and accumulated deposits of over HKD 150 billion through our IPO receiving bank service. We also completed our first Islamic syndicated loan.
Capitalizing on market demand, we achieved double-digit growth in our private wealth customer base and increased the number of private wealth centers to 11. We gained market share in retail banking fund sales and grew our personal payroll amount and assets under custody by 13% and 35% respectively. The value of bonds underwritten grew by 29%, and we maintained our leading position in offshore RMB bond underwriting business. We further reinforced our integrated service capabilities. BOC Life and BOCI-Prudential led the market in terms of standard new premiums and MPF business. BOC Hong Kong asset management grew its AUM by over 10%. We were also appointed as a settlement institution for Hong Kong's central clearing and settlement system for gold and a designated vault, supporting Hong Kong's development as an international gold trading hub.
We continued positively to the cross-border financial development in the GBA and maintained our leading position in the mutual market access businesses. We supported the cross-border disbursement of portable cash assistance, rolled out the global account service in tandem with BOC, and launched an integrated retirement financial service solution, thus facilitating the integration of cross-border finance and livelihood. We joined the financial advisory task force of the Northern Metropolis, backing its development with our financial expertise. Our innovative tech customer base grew by 2.6%. We launched the BOC Guangdong Enterprise Treasury Center service solution and fully supported Chinese-going-global enterprises to access international markets via Hong Kong. We also continue to leverage synergies with our SEA entities. SEA related deposits and loans grew by 4% and 10% respectively, exceeding the average growth rates of the group. NPL ratio of our SEA entities decreased by 3 basis points to 2.08%.
We proactively participated in offshore RMB market development and further enriched of RMB product spectrum to enhance our role in promoting the international usage of RMB, achieving promising results. We cemented our leading advantage as Hong Kong's RMB clearing bank. Three of our SEA entities recorded a combined growth rate of 24% in RMB clearing volumes, while the Jakarta branch was appointed as the RMB clearing bank for Indonesia. We remained the industry leader in market coverage in terms of number of indirect CIPS participant banks, and became the world's first offshore e-CNY custodian bank. We maintained our market-leading position in RMB loans and deposits, as well as RMB standard new premiums. Our RMB public bond underwriting and fund distribution achieved the business volume growth of 1.4 times and 47%, respectively.
We boasted of RMB business innovation capabilities and participated in the Hong Kong RMB business facility, covering nine regions and countries across Hong Kong, Asia, and Europe. We became one of the first clearing members of the London Clearing House to support clients to deposit offshore RMB denominated Chinese government bonds as collateral. We also served as a designated liquidity provider for the Hong Kong Exchanges and Clearing's newly launched CGB futures. In addition, we again assisted the Indonesia government in issuing Dim Sum bonds. As a firm supporter of Hong Kong's financial infrastructure development, we refined the top-level design of our financial digitalization to enhance services, risk management, and intelligent operation capabilities. We were among the first participants to connect with the cross-border e-CNY transfer services platform. We explored ways to use e-HKD in the wholesale CBDC pilot for advanced margin payments in the derivative markets.
We led our peers in RMB transaction volumes and actively explored the business opportunities in tokenization. We deepened digitalization to empower business development. In our personal banking, nearly 90% of transaction volumes were online. In corporate banking, IGTB transaction volumes rose by 17%, while the number of BOC Connect registered users increased by 33%. In addition, we recorded 8% growth in the BoC Pay+ customer base, and 18% growth in BoC Bill settlement volumes. We strengthened tech governance and formulated a five-year plan for financial digitalization. We continued to build an integrated GenAI platform and further improved our digitalization KPI system and data governance mechanism. We also enhanced our intelligent operations and anti-fraud management capabilities, promoted the use of intelligent office assistants, and continuously supported a culture of technological innovation. We strive to fulfill our sustainable development ambitions and enhanced our service capabilities in green finance.
In the first half, we achieved a growth rate of 7% in green and sustainability related loans, 36% in personal new green deposits, 42% in ESG bonds underwritten, and 15% in banking book ESG bond investments. We supported the implementation of the Hong Kong Taxonomy for Sustainable Finance and successfully hosted the BOC Hong Kong Sustainable Supplier Forum to promote green and low carbon transformation along the supply chain. We continue to deliver on CSR commitments and engaged in more than 20 charitable initiatives and over 90 volunteer events during the period. We once again received the highest triple- A rating from MSCI ESG and the low-risk ESG rating from Sustainalytics, putting us in a leading position among our peers. This concludes the strategy review for the first half. Next, our Chief Financial Officer, Madam Liu Chang, will walk you through our financial performance.
Thank you, Sun Yu. In the first half of the year, amid a volatile market environment and intensifying market competition, we grasped business opportunities, strengthened asset liability management, and expanded revenue resources, realizing continued net interest income growth. Net interest income decreased year-on-year, reflecting a high base in the same period last year. Meanwhile, we improved asset quality through enhanced risk management. As a result, we achieved a post-tax profit of HKD 24.4 billion, up 6.8% year-on-year. We expanded our high-quality deposit base by providing diversified products and services to meet the needs of large corporates, financial institutions, and government and public entities, including settlement, custody, treasury, cash management, and IPO receiving bank services. With the focus on key personal banking customer segments, we expanded our payroll and wealth management services to attract sticky deposits.
Our customer deposit increased by 3.2% to HKD 3 trillion, with current deposits increasing by 4% and the current ratio up 0.5 percentage point to 53.8%. We continue to serve the real economy and capture business opportunities from the development of new quality, productive forces and supply chain shifts. Leveraging our advantages in RMB business, syndicated loans, residential mortgages, and customer resources. With the focus on the Hong Kong cross-border, Southeast Asian, and other key overseas markets, we deepened intragroup collaboration and pushed forward the solid development of our lending business. As at the end of June, we grew our customer loans by 5.9% to HKD 1.82 trillion, maintaining the largest market share. All loan types shows sound growth momentum, with loans for use in Hong Kong up 5.1%, loans for use outside Hong Kong up 7%, and trade financing up 21%.
In the first half, facing with a year-on-year decline in market interest rates, we flexibly managed deposit pricing and tenors and optimized the deposit mix. At the same time, taking advantage of the recovery in financing demand, we expanded our loan book and controlled the pace of bond investment to stabilize investment returns. Adjusted for swap impact, our net interest income increased by 3.3% year-on-year to HKD 29.9 billion, while NIM widened by 3 basis points to 1.57%. During the first half, against the backdrop of a volatile Hong Kong capital market and a recovering consumer confidence, we enriched our founder product shelf to meet diverse customer needs in asset allocation and risk management, stepped up product promotion, and enhanced the convenience of our offline and online payment channels. Fee income from funds distribution, credit card business, and bills commissions grew by 55%, 12%, and 15% respectively.
While securities brokerage fee income remained stable at a high level. Overall, net fee income fell slightly from the high base in the same period of last year, but rebounded by 19% half-on-half. We further strengthened the development of our wealth management business. Wealth management income in personal banking rose by 14%, including an increase of 50% in investment product distribution and 18% in insurance distribution income. Solid growth was achieved in our high-end customer TRB and private wealth customer base. In our insurance business, the group's CSM balance increased by 23.6% year- to- date, while BOC Life's standard new premiums and value of new business grew by 28% and 56% year-on-year respectively. We prioritize the resources allocation for key development areas in line with the group's strategic focus.
We refined our branch network layout, accelerated the application of AI and technological transformation, pursued low carbon operations, and deepened the integration of regional operating platforms so as to optimize resources utilization. In the first half, operating expenses increased by 6.7% year-on-year. The cost to income ratio stood at 22.5%, continuing to outperform the market average. We closely monitored market developments and customer dynamics, strictly supervised high-risk credit portfolios, carried out timely review of customers' internal credit rating, and strengthened credit risk management. Asset quality remained solid. As at the end of June, our impaired loan ratio was 0.89%, down 25 basis points from the previous year-end, mainly due to write-offs and loan repayments by certain non-performing customers. Our annualized credit cost was 0.27%, down 12 basis points year-on-year.
While the total loan provision coverage ratio edged up by 3 basis points to 1.12%, maintaining our robust capability to withstand potential risks. Our capital position remained solid, with the total capital ratio and the CET1 ratio standing at 25.7% and 23.8% respectively. Our liquidity position was sound, with average LCR and NSFR reaching 174% and 144% respectively in the first half. This concludes our interim results review. Sun Yu will now share the group's outlook for the second half, as well as the specifics of our new five-year plan.
Thank you, Liu Chang . Looking ahead to the second half, the global landscape will rapidly evolve, while financial markets still face great uncertainty. The deepening adoption of AI and technological upgrades present new development requirements for banks. At the same time, the nation's 15th Five-Year Plan will support Hong Kong to better integrate into and serve the overall national strategy. Hong Kong will also have its first Five-Year Plan, which will further consolidate and leverage its status as an international financial shipping and trading center, as well as a global hub for innovation and technology, and the core engine for the GBA. Positioned within the nation's new dual circulation development paradigm, Hong Kong will perform its roles as both a participant and a facilitator, thereby injecting strong momentum into the local economy.
In addition, Chinese enterprises will accelerate their global expansion and pursue high-quality development, while the international use of RMB will continue to grow. Hong Kong's emergence as a critical pivot for major strategic initiatives will create sustained development opportunities for its banking industry. Faced with new situations, new positioning, and new challenges, BOC Hong Kong will proactively serve the national strategies and Hong Kong's development, align with BOC Group's strategy and the core strategic objectives of globalization, and deeply implement the concept of sustainable development. We will enhance our role as a regional center in order to further optimize the operations and the management of our SE entities. We will solidify our role as a business center for BOC Group's offshore operations, focusing on key businesses such as custody, syndicated loans, cash management, private bank, asset management, and financial markets.
We will continuously improve our capabilities in regional business management, integrated operations, and digitalization with the goal of being a market leader in Hong Kong, a pioneer in the GBA, a deep participant in Southeast Asian markets, and a strategic participant in Belt and Road markets, while striving to become a regional leader in RMB business. By strengthening our talent pool, cultivating corporate culture, enhancing smart operations, refining comprehensive risk management, and securing robust financial resources, we will endeavor to set ourselves as a benchmark for regional headquarters across the border financial services, customer trust, and employee recognition. With the aim to building the best regional bank, we are committed to providing quality support in consolidating Hong Kong's status as an international financial center, and continuously creating value for our shareholders and stakeholders. This concludes our presentation. Thank you.
You are now very welcome to ask any questions you may have. Thank you.
Thanks to Sun Yu and Liu Chang for the presentation. It is time to answer questions from our analysts. The Q&A session will be conducted in Mandarin. For English-speaking friends, please feel free to ask for simultaneous interpretation headsets from our colleagues. We will start the Q&A session. If you have any questions, would you please raise your hand? We will give you a microphone. Would you please limit yourself to two questions each time, and introduce yourself before you ask your questions? Thank you.
Thank you. Congratulations on the interim results. It is a good set of results. First of all, on the special dividend, it is pegged to our stock code, and that is a very special arrangement. I have a question about shareholders' return. If I am correct in my calculation, this return in terms of our CET1 impact is about 30 basis points per year. How do we see this in terms of strategy and finance? After three years, let us say, how can we keep this rather high CET1 level?
Further, why do we have such a high demand in terms of shareholders' point of view? We should look at at least HKD 10.5 billion, and after that, we expect an upside as shareholders. How do we consider that question, please? Another point about risk management, we see that the NPL ratio and the credit cost NPL amount have all decreased. What does that mean? What is the reason for our development? Is it because we are already in a cycle of better asset quality, please?
Very important questions. First of all, on dividend, our Chief Financial Officer will answer the question, and our Chief Risk Officer will answer the question on risk.
Thank you, Gary, for your question, and thank you for your concern for our fine details. First of all, on your question on dividend.
On the first half of 2026, we were faced with complicated external environment, and we leveraged our central role in the group's global development. We actively served as a key hub for offshore and onshore collaboration and captured market opportunities, coped with risks and challenges, and steadily advanced development of capabilities, achieving positive results. The first half profit attributable to shareholders rose by 7.1%. ROE reached 13.18%, up 0.32 percentage points year-on-year. We took high regard of providing long-term stable shareholder return, focusing on development opportunities and regionalization in integrated services, and we maintain favorable profitability. We continue to deploy our capital and put business development at top priority. While Hong Kong this year's loan market demand showed signs of recovery, our loan growth increased at a faster pace of 5.9%, in which the Southeast Asian-related loans grew by a high single digit.
At the same time, to better meet the financial services needed for Chinese enterprises going global, we recently initiated the Going Global Universal Cooperation Alliance, and we based that in Hong Kong for cross-border SEA and other overseas markets. Through enhancing cooperation with our parent bank and other offshore institutions, we played an important role in helping Chinese enterprises expand overseas. Secondly, on regular dividend payout, we implemented a quarterly arrangement, and the board announced a second interim dividend of HKD 0.29 per share. Taking the total regular dividend for the first half of HKD 0.58 per share, we will also distribute a third interim dividend as planned. Regarding full year dividend payout ratio, we consider the relevant factors and also keep it within the 40%-60% regular dividend payout range.
We strive to be orderly manner in increasing our dividend payout ratio. The board has already approved, as we heard, the 2026, 2028 shareholder return program, including an orderly increase of the regular dividend payout ratio within the range and plan to provide the extra returns of HKD 10.5 billion in three-year period. For 2026, a special dividend under this plan is HKD 0.2388 per share. Going forward, we will effectively balance between business and development needs, operating safety, prudent operations, business environment, profit performance, risk situation, capital level, regulatory policies, as well as shareholders' expectations to review our return program to strive for long-term sustainable return for our shareholders. For 2027 and 2028, this will be decided after the board's approval and according to the listing rules for disclosure.
For the HKD 10.5 billion, the consideration behind that, let me just explain. There are two considerations. The first is business development needs, which require us to retain necessary endogenous capital to support priority business and credit expansion, particularly the opportunities presented in our new five-year plan in areas such as the development of SEA business, GBA business, integrated service platform, digital transformation and green finance, so as to achieve high quality development across our major business centers. The second is safe and prudent operations. We need to ensure that all capital indicators continue to meet regulatory requirements and provide adequate buffers against credit and market risk in the current complex and volatile financial market environment. From a capital adequacy perspective, as a DSIB, we need to manage capital carefully, with our capital ratios to be benchmarked against those of peers.
Going forward, we will continue to review and assess the specific implementation plan of the three-year shareholder return program, and we will make further announcements to the market upon approval by the board.
As Gary, you have mentioned and noticed in the first half of the year, our bank's asset quality had been good. We have been able to, overall, the provision coverage was 124%, and it was up 28.9%, and the total loan provision ratio was up 1.12%, up 3 basis points, ensuring sufficient provisioning. There are two factors to it. One is external. In the first half of 2026, we see that Hong Kong's economy grew by over 5% and the macro economy is going stably.
We also see that in a number of areas, including our retail and also the trade and residential property market have improved and the office market has stabilized while retail properties face certain pressure. We continue to closely monitor market information and customer dynamics to strengthen our credit risk management framework and measures and to maintain strict supervision of high-risk credit portfolios and timely review internal and loan ratings of our customers. Benefiting from prudent risk management and strong customer base, our overall asset quality remains solid with adequate provisions. The impairment and the cost of loans have both decreased. Looking forward, for the second half of this year, the market expects a modest rise in U.S. interest rate while growth momentum for major economies may slightly moderate. The steady and positive economic trends for Chinese mainland and Hong Kong are expected to remain unchanged.
Now, we are in phase of a complex and evolving external market, and we will continue to closely monitor the global political and economic situation and the status of high-risk credit portfolios. We dynamically will adjust our credit policies and effectively manage our credit risk. We will strive to maintain a relatively stable impaired loan ratio, ensuring that remains better than the market average, and will adhere to a consistent and prudent approach with adequate provisioning. The global economies and property markets continue to develop steadily. Credit costs in the second half may ease sequentially, and full-year credit costs is expected to decrease compared to the previous year.
Next question.
Thank you. I am Zhang Michael . Two questions just to follow up on the return on assets.
We have a special dividend this year and maybe the next two years with share buyback and also with special dividends, we were able to live up to our HKD 10.5 billion level. I would like to know, after three years, would you still be able to have this annual increase of dividend payout? For per share dividend, will there be orderly or increase every year-on-year? That's the first question. Second question, I would like to know about the NIM. In the second quarter, there had been certain pressure. Can you look into the second half of the year for us in terms of NIM?
Thank you, Michael. First of all, in relations to capital, indeed, going back to ordinary dividend, from this perspective, in the long term, BOCHK adhere to a prudent dividend policy to balance the long-term development of shareholders' interests and long-term development of a bank. So the range is still between 40%-60% of the dividend payout ratios to balance with monetary requirement. We will also adjust to the changing environment and will continue to review our dividend payout policies and upon the approval of the board, and also subject to listing rules, we'll make timely announcement if appropriate. Also in relations to NIMs, I'll also answer to that questions.
In January, U.S. Fed has paused rate decrease. In the first half, average one-month SOFR and HIBOR stood at 3.65% and 2.53% respectively, down by 67 and 35 basis points compared with the first half of 2025. With the options of rate hike on the table, the yield curve steepened in the second quarter. The average spread between one-month and one-year tenure for both HKD and USD rates widened by 9 and 31 basis points respectively. HKD and USD interest rates differential narrowed, contracting by 15 basis points for the first quarter to 105 basis points. In the first half, average one-month SHIBOR and CNH HIBOR were 1.48% and 1.61% respectively, down by 26 and 61 basis points year-on-year. In the first half of swap adjusted NIM, net interest income reached HKD 30 billion, up 3.3% year-on-year.
Corresponding NIM was 1.57%, up 3 basis points year-on-year. During the period, Hong Kong dollar interbank rate declined at the beginning of the year and hit a six-month low in March, putting pressure on asset yield. The swap-adjusted NIM in the second quarter was 1.55%, down 4 basis points quarter-on-quarter. The solid performance in NIM and net interest income was primarily driven by dynamic asset liability management. On the liability side, we leverage strength in wealth management, payroll, cash pooling, custody, and IPO-related business to build close-loop funding flow. Our accumulating low cost and stable deposit. Cost of deposit increased by HKD 63.2 billion, or 4% in the first half, with the average CASA ratio rising 4.2 percentage points year-on-year to-
56.5%.
We've flexibly adjusted deposit pricing and tenure, with average customer deposit rate falling by 48 basis points year-on-year. On the asset side, we capitalize on rising market financing demand and outbound activity by Chinese enterprise, strengthen collaborations with onshore and offshore entity of BOC Group, achieve a loan growth of 5.9%. For the second half, from the perspective of interest rate outlook, the probability of further rate cuts in the short term is low, but market still holds divergent views on rate hike. The actual path depends on factors such as future inflations, economic conditions, government and tariff policies, and geopolitical development. On the other hand, the steepening of sovereign yield curve has caused some disturbances to net interest income, so overall, the NIM will still face certain pressure.
Going forward, we'll closely monitor market interest rate trend, fully assess the impact of the shift in interest rate cycle, proactively and flexibly manage our asset liability portfolio allocations and term structure. We'll adopt multiple measures to alleviate downward pressure on NIM. At the same time, we'll also leverage our advantages in key business areas such as RMB, Chinese enterprises going global, regionalized layout, and more to solidify business foundation, deepen customer relationships, and drive steady growth in volumes.
Thank you, Liu Chang . Coming up next, Emma please.
Thank you for the opportunity for the questions, and congratulations for the outstanding performance. I've got two questions. Number one, the regulatory side has tightened the requirement on investment account opening, while at the same time, Chinese mainland have actually made some adjustment in relations to tax on investment products. Has it caused any implications on your business?
While on the fee side, we have achieved a good growth quarter, half- on- half, but actually, in terms of year-on-year growth, there is still a gap. Another question is in relations to loan. Loan in the first half has grown by 5.9%, which is quite robust. However, the industry average in the previous years, you mentioned that you are trying to gain shares and outperforming the market. How about this year? What is your strategy? Do you want to grow the growth rate and capture more shares? Thank you.
You have actually asked three questions. First of all, Mr. Chan Man will answer the first question, and then Vice President Wang will answer your two other questions.
Thank you, Emily, for your question. First of all, concerning the cross-border situation. Overall speaking, the policies and measures that have been announced lately actually reflects the development of our country in terms of deepening the opening up of the financial market. In this respect, Hong Kong as an international financial center and a wealth management center, this is a time for us to link up with the international arena for the mainland and also with the Hong Kong government using Hong Kong as a hub for wealth management and asset management.
Hong Kong has its bridging role connecting the Chinese mainland with the rest of the world.
At the same time, we continue to strictly adhere to the regulatory requirements of Hong Kong and the mainland and continue to have very close communication with the regulators so as to ensure that we continue to have our advantage.
We will continue to leverage our professional expertise to provide customers with professional, compliant, and comprehensive wealth management services. From their perspective, as the connectivity between Chinese mainland and Hong Kong financial markets continues to deepen, customer demand for cross-border wealth management and asset allocation is steadily growing.
The cross-border investment measures recently introduced by the Chinese mainland aim to redirect funds back into lawful and compliant channels, which is conducive to the healthy and orderly development of the market over the long term. Overall speaking, our account opening process remained smooth in the first half. The customer base, TRB, and income of our personal cross-border businesses all maintained steady growth, while our personal wealth management income grew satisfactorily.
As we have mentioned by the CE in the presentation, we continue to see that there is increase for 2026 first half in terms of trade, in terms of retail, and also tourism, there had been certain increase. Also there had been a net fees income of-
HKD 6 billion.
Hong Kong dollars as we proactively seize the business opportunities. On the one hand, for fees income, we continue to deepen the customer acquisition and engagement strategy in brokerage securities business. We proactively seize these opportunities.
For investment-related business, fee income from funds distribution and fund management increased by 55% and 78% year-on-year, respectively. In traditional fee income business, while our credit card retail spending rose by 8.6% year-on-year, BoC Pay+ RMB transaction volume rose by 15.5%, and BoC Bill cumulative merchant acquiring volume rose by 17.6%, all contributing to a 12% year-on-year growth in credit card fee income. In addition, our loan commission income saw a 2% growth despite the high base in the previous 18 year. Traditional fee income recorded relatively steady growth.
If I may go into our insurance fee income for the first half, primarily because our distribution income for BOC Life Insurance cannot be reflected in the fee income line due to consolidation of accounting statement. You can see that the group's contractual service margin balance rose by 24% from the end of 2025. During the period, BOC Life launched a series of policy subscription concession, customer promotions, and wealth legacy service packages. With strong sales performance to kickstart the year, therefore, in the first half, our standard new premiums actually increased by 28% year-on-year, while new business value rose 56%. In the first quarter, BOC Life ranked second in terms of standard new premiums in the Hong Kong market.
For the second half, we will continue to seize opportunities from macroeconomic growth, closely follow up on regulatory requirements and policy developments, and develop business in line with our strategic positioning in wealth management, private banking, asset management, custody service, and strengthen our cross-business segment collaboration with the group, fully exploring the potentials for our customers and to broaden the diversified sources of non-interest income.
Thank you for your interest in the loans area. In the first half of the year, both Chinese mainland and Hong Kong economies sustained a solid recovery, with GDP growing 4.7% and 5.1% respectively. The local residential property market and retail sales showed positive momentum, while imports and exports grew rapidly, driving overall loan demand up by over 6%.
We seized business opportunities. As of end of June, customer loans reached HKD 1.82 trillion, up 5.9% from last year-end, maintaining our market leadership with a local market share of 16.18%. What had been growing very well is corporate loans for use in Hong Kong, increasing by 6.3%, and mainly this is driven by loan growth from SOEs in Hong Kong and local leading enterprises.
Loans for use outside Hong Kong grew by 7%. Trade finance grew by 20.8%.
We grew Hong Kong residential mortgage loans by 3.3%, maintaining our leading position in terms of new mortgage loans. Also Southeast Asia-related loans increased 9.6% with enhanced distribution to the group. In the second half, global economic growth may remain low due to various reasons, tariff policies, geopolitical risks, et cetera. Key markets where we operate, the Chinese mainland is strengthening counter-cyclical policies, accelerating fiscal expenditure, and boosting investment confidence. There is new quality productive forces promoted as well. With AI-related products, Hong Kong goods exports will continue to develop rapidly. Following the signing of the China-ASEAN FTA 3.0 Upgrade Protocol, trade exchanges will become more efficient. This will continue to support the steady loan growth for the Hong Kong market.
While facing challenges and opportunities, we continue to focus on Hong Kong cross-border SEA and other overseas markets, serving the real economy and leveraging our strengths in RMB business, residential mortgages, green loans, business opportunities in tech finance and commodities, and capturing opportunities from going global. While maintaining strict risk controls, we balance returns and scale to achieve solid loan growth and continue to outperform the market for the full year.
Thank you both. Next question please.
Thank you, management, and congratulations on this very good set of performance. I am Sam from Optimas Capita l. Regarding the shareholder return program, does management plan to deliver the remaining part of shareholder returns through increased dividends or share buybacks over the next two years? Separately, property revaluation gains turned from negative to positive in the first half of this year. Is this a sustainable trend, and does it indicate that Hong Kong's commercial real estate market has already bottomed out?
Thank you. Liu Chang , please.
Thank you for your questions. In relations to shareholder returns programs, as well as its details, the board has approved the tools available to us, including the special returns, and as well as share buybacks. However, for the details, we have many factors to consider, as we mentioned during the presentation. In the future, we will consider factors including stock price, as well as other factors to implement the details of shareholder return programs. We have disclosed the program for 2026. However, for the plans of 2027 through to 2028, it is subject to further approval of the board, as well as listing rules. In relations to the property reevaluations in the first half of the year, the office market has resumed, and also the premium to locations has been favored by the market, while rental market has actually increased.
Tier one office trading has increased by 56% to HKD 24 billion. For the second half, we believe the core office market will bottom out. For non-core regions, the vacancy rate remains relatively high, while the retail market remains sluggish. It is still under pressure. Generally speaking, we believe that in the second half, the investment property evaluations remained stable, but we should closely follow the market fluctuations as well as changing policies for the impact assessments of our property.
Thank you, Liu Chang . We have more than 80 investors as well as analysts online. Coming up next, we would give the opportunities for online investors and analysts. Number one, for the first half of 2026, the cost of the bank has grown faster compared to our income. How about the second half? How about the outlook for CIR? Second question is in relations to wealth management. This is a focus for interbank competitions, so could you please share the trends and your strategy for wealth management?
Thank you. For the first question, the Chief Financial Officer will answer the question.
Thank you for this online question concerning cost. We have a principle for managing our cost, and this is about our long-term investments. We would want to, on the one hand, increase our revenue, and at the same time, for cost, we want there to be a virtual relationship. For the first half, this is the operating expenses reaching HKD 9 billion and up 6.7% year-on-year. Also, for the cost to income ratio, it stood steadily at 22.5%, remaining at a better level compared with local peers. We have increased headcounts and salary levels, drove HR expenses up by 7.1%, increased investment in IT and network layout optimization led to a 14% rise in premises and equipment expenses. Higher spending on advertising, business promotion, and professional consultancy contributed 13.3%.
We also, with business opportunities for Chinese enterprises going global, there is accelerated inflow of foreign customers into the Hong Kong market, and we will continue to continue our digital transformation and IT investments. For the second half, we continue to implement digital efficiency by enhancing strategy, focusing on process streamlining and asset light development approach to support expense growth and income growth. Key initiatives would include AI-based automation and cost reduction driver and increasing GenAI investment, expanding the scope of automation to replace manual tasks, and advancing branch transformation and business model innovation. We continue to expect a steady growth for 2026 operating expenses, while CIR remain relatively steady at a level better than the peers. For wealth management, according to BCG, Hong Kong's cross-border wealth management AUM had reached $2.95 trillion in 2025, making it the world's largest cross-border wealth management center for the first time.
Beginning of 2026, amid complex and changing geopolitical dynamics and significant volatility in the global capital markets, risk-averse capital had sought safe harbor. Leveraging on this, Hong Kong continued to attract capital inflows, sustaining strong momentum in wealth management. Our bank actively seize the opportunities to promote our business in wealth management in three key areas. First, our wealth management income grew strongly supported by our Wealth Plus strategy, capitalizing on favorable investment market sentiment and strong demand for IPOs. We strengthen our ability to acquire and engage customers for security services, enriching fund product choices, providing exclusive offers and promotions for key customers. We also upgraded online and offline service channels and improved customer experience. Securities customer numbers continue to grow, and fund sales transaction volume increased 31%.
Personal wealth management income rose 14% year-on-year. Investment distribution income up 50%. Our private banking fee income rose by 15%. Fee income, commission income from funds distribution, fund management securities brokerage rose 55%, 78%, and 2%, respectively. Second, we enhanced wealth management service capability, supporting the government's family office policy, strengthening intra-group collaboration, enhance our influence in family office sector. BOCI Private Bank in January grew private banking AUM by 20% in the first half, and comprehensively meeting high-end customers' needs for wealth succession and appreciation. We increased the number of private wealth centers to 11. The flagship center in Tsim Sha Tsui officially opened in July. Our private wealth customer base and TRB increased by 11% and 15% year-on-year, and our securities investment AUM rose 15% year-on-year. Premium family brand, FamilyMAX, offered holistic wealth and Wealth Plus services to meet the demands for high-end families.
FamilyMAX customer numbers and TRB grew steadily with securities investment AUM rising 16% in the first half. Thirdly, we achieved notable results in integrated service development. We enhanced professionalism of our custody services and expanded coverage of our global custody network. Several key client portfolios successfully onboarded with total custody assets rising 35% from previous year-end. BOC Life standard new premiums rose 28% in the first half, ranking second in the market in the first quarter. Our asset management continued to drive product innovation, launched the BOCHK All Weather Global Investment Grade Bond Fund, and established a new venture capital fund to support promising Hong Kong innovative science and tech enterprises. Investment and advisory AUM rose by 14% in the first half.
For the second half, with the nation's 15th Five-Year Plan supporting Hong Kong as a wealth management center, and the Hong Kong government stepping up efforts in various areas, including tax and market reforms, to attract global capital for Hong Kong, BOC Hong Kong will seize the policy opportunities and strengthen intra-group synergy, focus on wealth management needs of high-end cross-border and family customers, and enrich diversified product solutions. Top of acquiring new customers, we will deepen relationship with existing customers, target niche customer segments, and drive product innovation and channel synergies. Data empowerment and analytics. Through this, we aim to enhance service efficiency, custody services, private banking centers, and promoting high-quality, sustainable growth in our wealth management business.
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Thank you so much.