Kenny Luo, company secretary of BOCHK. Before we begin, may I draw your attention to this slide, which sets out a disclaimer regarding forward-looking statements. Please also note the adjustment to the reporting basis that has been made in today's presentation. Now let's start our results briefing. First, I would like to introduce our senior management team. 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, Deputy Chief Executive. Today's agenda is divided into three parts. First, Chief Executive Gao will start with our strategy review for H1 2018. Followed by CFO Sui. She will give a report of our financial performance during the period.
After that, Chief Executive Gao will discuss our outlook and strategy for the second half of 2018. Then we will open the floor for our Q&A session. Now, Chief Executive Gao, please.
Good afternoon, ladies and gentlemen. Here I'm going to introduce our strategy review in the first half of this year. During the first half, the global economy continued to recover. The Chinese economy was stable with the improvement, while Hong Kong enjoyed a strong economy growth. However, there were still uncertainty within the global economy and the financial market. Aiming a complex and changing economic and financial environment, we earnestly follow BOC Group's strategic plan and work toward our goal of building a top-class full service and internationalized regional bank. We proactively push forward our business focus and made solid progress in our financial performance. In H1 2018, our profit attributable to equity holders increased 17.7% year-on-year to HKD 17.5 billion. Total assets and liabilities expanded to HKD 2.8 trillion and HKD 2.5 trillion respectively.
Earning per share were HKD 1.6578. The board has recommended an interim dividend of HKD 0.545 per share. We seized market opportunities, remain committed to the Hong Kong market, and further consolidate our market leadership. Solid progress was made in our regional expansion strategy. With steady growth in Southeast Asia business, our efforts to achieve integrated development in the Greater Bay Area began to bear fruit. In order to enhance our full service capabilities, we continue to develop our diversified business platform. We also accelerate fintech innovation to pursue a digitalization strategy. At the same time, we step up our efforts to enhance comprehensive risk management and internal control so as to ensure a balanced, sustainable, and high-quality growth. In this January, we completed the acquisition of the Philippines and Vietnam business of Bank of China.
In the first half, we promote the integration of the Southeast Asia institutions and improved regional management model. We strengthen the function of business frontline as SBU. Coordinate the mid-office professional management and the local operation to effectively control risk, and centralized bank-wide back office operations. Meanwhile, we made steady progress in building our regional management system with respect to mechanics, culture and staff, and realized stable and healthy growth. The aggregate net operating income before impairment allowances of our seven Southeast Asian institutions was HKD 1.07 billion, up 24.4% year-on-year. Deposits from the customers amounted to HKD 41.6 billion, up 7.2% from the end of 2017. Advances to customers grew by 11.3% to HKD 36.4 billion. We stuck to prudent risk management principles and adopt proactive monitoring measures.
The asset quality of our Southeast Asia institutions was steady and maintained at a sound level, with NPL ratios outperforming market average. We leverage our unique competitive advantages and actively developed RMB products and the treasury business. Our Manila branch helped the Central Bank of the Philippines to successfully issue CNY 1.46 billion of Panda bonds in China's interbank bond market. In line with BOC strategic plan, we will leverage BOC Group's internationalized and diversify advantages, and fully perform our role as the chair of the integrated developed committee, seeking to become the first choice bank in the Greater Bay Area. We will strengthen collaboration with our sister companies and develop products in account management, wealth management, and payment for Hong Kong and Macao residents residing in the Greater Bay Area.
We push forward cross-border payment to support people's livelihood in the Greater Bay Area by launching the mobile payment service of BoC Pay and Dual Currency Card. In addition, we promoted cross-border two-way RMB cash pooling service and helped to enhance the competitiveness of our corporate customers. We collaborated with BOC Guangdong Branch, Shenzhen Branch, and the Macao Branch to provide a consistent experience for wealth management customers in the Greater Bay Area. We continue to invest in our diversified business platform in order to enhance our comprehensive service capabilities. The operating profit from our eight key business platform grew by 45.3% year-on-year with increased profit contribution. In our credit card business, cardholders' spending and merchant acquiring volume increased by 13% and 19% year-on-year respectively, and we maintain a leading position in UnionPay business in Hong Kong.
In our private banking business, our customer base was up 50% from last year end, and average AUM increased 41% year-on-year. BOC Life achieved 35% year-on-year growth in net insurance premium income, with its market ranking rising to first place in the Hong Kong market as of end of the first quarter. BOC Hong Kong Asset Management proactively explored new markets and its average AUM grew 20% year-on-year. Our cash management business accelerates the development of its cash pooling and treasury center business. It also successfully launched a global cash management platform, and it's gradually become the first choice bank for cross-border pooling services. Our custody business grew its total assets under custody to HKD 1.17 trillion and maintained leading position in Bond Connect custody business. BOCI-Prudential Trustee achieved a 13% year-on-year growth in its MPF related AUM and a market share of 7.5%.
Po Sang Securities and Futures, our security brokerage saw total transaction volume grow by 83% year-on-year, underpinned by large client base and an expanded range of products and service. We strive to advance our business through technology and innovation, and persisted to enhance our fintech competitiveness as part of a wide effort to become a leading digital bank. We launched brand new version of SMI, smart mobile banking in March. It support fingerprint authentication, facial recognition, and the mobile token, allowing for high service efficiency and a better customer experience. The number of active customers using our mobile banking increased 25% compared with last year end, with much faster growth in our new customer base. We successfully introduced BoC Pay, the first e-wallet in the Hong Kong market that supports one stop cross-border QR code payment.
It take cares of your consumption payment, bill settlement, small value transfer, cross-border remittance and other simple financial services, offering a seamless, fast and simple mobile payment experience. We accelerate innovation in online financial services that support people's day-to-day life. A new generation of iService was introduced. The Science Park Banking Service Center commenced operation featuring new 24 hour video banking service. This represented our efforts to explore the bank branch of the future. In April, we completed the integration of core banking system of BOC's overseas operation, and ensure a smooth system switch over while maintaining daily normal operation and manageable risk. This further enhanced the technological foundation for our regional development. We actively promoted the development and application of fintech in Hong Kong's banking sector. We hosted a competition with the title Future Bank and AI, which was well received by all sectors of the society.
Now let me end my review of the first half of 2018 here. Next, Madam Sui Yang, our CFO, will walk you through our financial performance and the numbers, please.
Thank you, Chief Executive Gao. BOC Hong Kong further increased its profitability in the first half of 2018 with solid financial indicators. Our profit attributable to equity holders increased 17.7% year-on-year to HKD 17.4 billion. Compared with the end of 2017, total assets increased by 4.7% to HKD 2.8 trillion, while total liability increased 5% to HKD 2.5 trillion. This has turned good performance in ROA and ROE, which stood at 1.27% and 14.32% respectively. Our capital adequacy was sufficient with CET1 capital ratio at 17.62% and the total capital ratio at 20.12%. We adopt a flexible strategy and took various measures to drive deposit growth and optimize our deposit structure. We enhanced our payroll account service and enriched our wealth management solutions. Our personal deposits grew by 5.8%, with its proportion of total deposits increasing to 48.5%.
We also strengthened business relationships with major central banks, national treasuries, and sovereign funds to expand the deposit base. At the same time, we leveraged our unique competitive advantage and maintained our leading position as the main receiving bank for IPOs. As at the end of June, our total customer deposit reached HKD 1.9 trillion , up 4.4% from the end of previous years. This growth rate was notably faster than the market average. Our market share in Hong Kong also rose by 0.37 percentage point to 14.45%. We continued to deliver our commitment to the local market while collaborating within BOC Group to capture the opportunities arising from the Belt and Road, and the Greater Bay Area and Southeast Asia. Our total customer loans increased to HKD 1.2 trillion , up 7.3% from the end of 2017.
Our market share in Hong Kong rose by 0.21 percentage point to 12.18%. In terms of composition, our lending to industrial, commercial, and financial sectors in Hong Kong increased by 8.8%, with all key sectors showing favorable growth. We made further efforts to strengthen our services to local industrial and commercial corporates, as well as small business retail customers, resulting in a solid growth in SME loans. Lending to individuals in Hong Kong increased by 4%. During the reporting period, we enhanced the professional services capability of our mortgage business by setting up six mortgage centers, therefore maintaining stable growth in residential mortgage. Loan for use outside Hong Kong continued to grow at a relatively fast pace, increasing 13.1% from last year-end. We proactively managed our assets and liabilities, achieving stable loans to depositors spreads and higher average yield on our debt security investment.
Our net interest income increased by 7.5% year-on-year. Average interest earning assets grew 14.4% year-on-year to HKD 2.4 trillion , with further optimized assets liability mix, including the funding income of cost of FX swap contracts. Our net interest margin was 1.56%, up 10 basis point year-on-year. We actively captured market opportunities and diversified our income sources. Net fee and commission income grew steadily by 12% year-on-year to HKD 6.5 billion . Within this, the investment and insurance related net fee income increased by 46% year-on-year. We intensified our efforts to expand our mid to high-end and across border customer bases. We will also strengthen product and services. Net fee income from security brokerage from the distribution and insurance increased 62%, 26% and 27% year-on-year respectively.
Net fee and commission income from traditional business fell 6.2% year-on-year, mainly due to the lower loan commissions income on the slower loan growth. Other fee income business largely delivered good performance. Credit card income increased by 5.3% year-on-year, while income from currency swap, trust, custody service realized notable growth. Our operating efficiency consistently improved. While operating expense did increase by 12.2% year-on-year to HKD 7 billion , our cost to income ratio stood at 25.4%, thus remaining lower than the local market average. Within this, staff cost increased by 9.6%, mainly due to annual salary increment, as well as increase in head count and performance related remuneration. Business in expenses, including premise and equipment expense, as well as depreciation increased by 5.3% as we keep our investment in enhance our service capabilities, as well as business systems and platforms to support the longer term business development.
We continue to strengthen our comprehensive risk management and maintaining solid performance in our key risk indicators. The classified or impaired loan ratio was 0.22%, better than the market average. Provision remained sufficient with our coverage ratio standing at 193%. We consistently enhanced our liquidity position. Our average LCR in H1 2018 was 140.4%, and our Net Stable Funding Ratio was about 118%. Both were above regulatory requirement. This conclude my review of our financial performance. Now, I will hand back to Chief Executive, Gao.
Thank you, CFO Sui Yang. Looking to the second half of 2018, we expect the global economy to continue its recovery in steady manner. Despite various uncertainties in the background, in particular, the U.S. is changing its external trade and investment policy. The threat of de-globalization has become more severe. The possibility that the China-U.S. trade dispute might escalate further. At the same time, major developed economy are normalizing their monetary policies. This will create more uncertainty in the directions of global capital movements, adding pressure to Hong Kong dollar interest rate. On the bright side, despite all these uncertainties, the major trend towards economy globalization remain unchanged. The Chinese economy will continue its growth momentum, and Hong Kong is also expected to maintain solid growth.
Just as we reach the 40th anniversary of China's national reform and open up, the Greater Bay Area will kickstart a new stage of development. This will bring about new growth driver for the Hong Kong economy and a huge business opportunity for the banking sector in terms of financial needs related to people's livelihood, innovation, Silk Road area, and environmental protection. In the second half of 2018, we will continue to adhere to our strategic goal of building a top class full service and internationalized regional bank. We will speed up technology, innovation, and the products R&D. To pursue digitalization, we will continue to enhance our growth quality by deepening local market commitment, with focus on enhancing our services for local industry and commercial customer, as well as individual customers.
We will also strengthen our regional development to ensure sustainable growth in our Southeast Asia business, and to make ourself the first choice for banking customer in the Greater Bay Area. In addition, we will closely monitor the change in the global economy and financial market, and continuously enhance our risk management and internal control. We will strive for a strong bank culture to support balanced and long-term sustainable development. At the same time, we will adhere to a people-oriented principle, reinforce staff support and talent building, undertake our corporate social responsibilities, and elevate our brand image. With the commitment of our entire staff, we were fully, truly confident to achieve stable growth for the whole year, strive to reward our investors, customers, employees, and society with outstanding operating results. This is the end of our presentation. Thank you. We will now open the Q&A session.
Okay. Thanks for the presentation by Gao Yingxin and CFO Sui Yang. Now let's begin the Q&A session. This session will use either English or Chinese. My colleague will help to translate questions from English to Chinese, and we also have simultaneous translations for the answers from Chinese to English. As always, anyone who has question to senior management, please raise your hands, and I will ask my colleague to give you a microphone. Please tell your name and institution before asking, and ask no more than two questions each time. Thanks for your cooperation. Now let's start. The gentleman in the second row in the middle. Vincent.
Thank you. I'm an analyst from a Chinese enterprise. I have two questions. The first is about the net interest spread or margin. What I like the management to share with us, with regard to the net interest margin. With regard to HIBOR when compared to June at its peak, it has already come down. Can you analyze with us the situation? The second point is about the increase in loans. For RMB, the exchange rate is not very stable, would it also slow down the growth in RMB offshore loans? Can the management share with us your views on these? Thank you.
CFO.
Thank you very much for your question. With regard to this, what the latest situation, I'm sure you will understand after the swap contract, the net interest margin has improved slightly by 1.5%, and also after July and in August, we've also further improved a little bit. As in June, there were several major IPOs and there were other factors. That's why that stood at a high level. In the second half, despite the uncertainties, other than the trade dispute between the U.S. and China, and also that there are also other uncertainties, with regard to RMB exchange rate, I think it has already moved on to the right track. Therefore, I believe that it's going to go up steadily. That's the situation with regard to interest spread or margin that would also be beneficial to our improvement.
But from the deposit to loan ratio, in detail, that would also continue to speed up, in particular for interest rate hike in the U.S. That will continue to increase in terms of pace. So, in terms of our cost control, that would also add some pressure. Also because microscopically, the overall market condition is very good. But there are also some uncertainties. That is why in the second half, in terms of the loan end, we have to be more cautious. That is why we have to ensure that we will be adopting a more prudential risk management approach in order to ensure that the quality of our loans will be kept at a very good level. But from these two perspectives, yes, there would be some pressure. Yet, in terms of net interest margin, if we can continue to move steadily, that is still rather promising.
With regard to increase in loans, in terms of the pace of increase, that is rather rapid in the first quarter. In the second quarter, there has been some adjustments, but as I said, in the second half, in the market, in terms of the liquidity is rather sufficient. Also, we will be more selective so that they will be able to meet our preference and also the quality would also be better. So our guideline to the market is that we have to lend money to the better quality debtors. The present environment, including that on the mainland, the demand is there. But given the current economic situation, and also there have been some adjustments, and as the CFO just said, on the one hand, you will have to control risk. You will have to select your customers wisely.
At the same time, with the increase in cost, we have to further improve the quality of loans. So that is a very important point. It is not just about the demand. There is a strong demand for that.
On my left. Middle of second row.
Thank you very much, management. I have two questions for you. The first question is about NIM, net interest margin. Recently, I received a lot of information from investors, and they are all concerned about the underlying NIM as well as the reported NIM. There are some differences. A lot of investors noticed that the headline NIM is not growing that fast. Can you please explain to us further why there is such a difference between these two NIMs? As for swap and the currency swap, what is the influence on NIM? The second question is about the Belt and Road Initiative, as well as your growth in the Southeast Asian countries, your growth strategy. We have seen that the Belt and Road Initiative, comparing with the past, there are a lot of political uncertainties. For example, in Malaysia, some projects have been influenced.
For BOC Hong Kong, it is the Chinese capital bank, and it is now supporting the Belt and Road Initiative. For example, in Malaysia, the developer, like Country Garden, are they one of your potential customers? Thank you.
Regarding NIM, your follow-up question, just want to explain very briefly. Swap, while we manage our assets, is one of the most commonly used tools. Mainly the Hong Kong dollar, USD, as well as in RMB, we have more Hong Kong dollar and the RMB-denominated currency is quite limited. That is why we use the swap to have either price or interest gap accretion gains. This is not a one-day or two-day thing. This is a very common rule for us. However, we have to make sure that it is the right exposure for us to swap. As about the difference between two NIMs and its influence.
Last year, we shared our understanding with investors. Last year, in the second half last year, there was a confusion because of the swap. The reported NIM grew up by over 20 percentage basic points, and it was hard for us to communicate to the market. As the annual disclosure, we disclosed our adjusted NIM. That is why after the adjustment, net interest margin increased by 5 basic points. It is true that the high point was really high. After the swap, after all the interest gains, the revenue was reflected in the NIM, and the cost was reflected in the There was a loss in the net transaction gains. That is why there was a big influence. This year, there have been a lot of changes in the market. Please, you are investors.
If you communicate with your clients, please use the same statistics to exchange this message to them. Just the same as we disclose the annual report. Thank you. Your second question about the Belt and Road and the Southeast Asian countries. For BOC, as well as BOC Hong Kong, we think that the Belt and Road Initiative is very important, and we have been supporting it as a leading role. However, we stick to the principle of a prudent risk management policy. When we select a project to invest, we work together with the Chinese companies. Actually, among all these Belt and Road projects, fundraising, you know that there are a lot of major investment projects. They are long term of investment and construction, and they need preferential interest rate. BOC is not a major lender to those projects.
However, among all these projects, we can provide a lot of financial services. Financial services are not about lending only. It is all around services, including the value reservation of the evaluation of a project's feasibility study of a project, and risk analysis, and so forth. We can play this role, and we can play a more important role in this respect. I must say that in Belt and Road, BOC Hong Kong is a very important player. Recently, in the world, in some countries, there have been some changes to those Chinese projects. We have been keeping a close eye on them. For BOC Hong Kong, so far, we don't feel any direct or major influence because of such changes. Just now in your question, you mentioned some specific projects.
You may have noticed that regarding the property industry, particularly those major developers in Mainland China, if you look at our balance sheet, our risk exposure to those major developers in China is quite limited. Thank you.
Gentleman in this-
Thank you for giving me the opportunity for asking questions. My questions are also related to interest margin and also the funding cost. If you look at the loans to deposit ratio, that's on the high side in H1 2018. You also said that in the future, you also expect that trend to continue. My question is that w ith regard to saving cost or deposit cost, has there been any increase? You also talk about interest rate normalization. Therefore, in the second half of this year, there is a high chance that there is further increase. So will interest rate go up further? Given that situation, what will the impact be on the overall profit of the bank?
Well, for the deposit cost, I would like to ask our CFO to explain. Also for mortgage interest rate, she can also elaborate on that.
Yes, thank you. With regard to the term deposit trend, I think that has been very clear. In the first half is about 0.217. In the second quarter, that has already gone up. That is one of the main factors. Also, when compared to the market situation. For this year, if you look at our group, when compared to the market, first, the ratio has increased when compared to last year. For the major banks, even for our banks, I think we still enjoy some advantage, because if you look at our deposit, it is still quite sizable. Therefore, that would also be beneficial to further improvements. Also for the trend on time deposits. As to which deposit would be preferred, and also what kind of maturity would we prefer?
Well, in the U.S. dollar, we would like to see longer maturity. For Hong Kong dollar, we have different term deposits, and we will determine our strategy accordingly. For time deposits at present, yes, there has been some growth, but as you can see, more growth would be in individual deposits. Therefore, in terms of our liquidity target, there would also be some improvements.
Okay.
For mortgage, we see that as interest rate normalized. For the past two years, the HIBOR rate had continued to climb steadily. This should have reflected all through the mortgage pricing, except for the prime cap. In middle of August, you notice that we had increased our prime cap and also for the prime rate mortgages. This did not fully reflect the increased interest rate, but did help pass along some of the increase in cost to the customers. This would, I think, help with the continuous growth of our mortgage business in a healthy way. Looking forward, as the Fed rate might have a good chance of increasing in September, the pressure to increase prime rate in Hong Kong might increase. This would transfer to the entire mortgage base, because the new mortgages, as we increase the prime cap, would only apply to the new mortgages, not the existing portfolio.
The gentleman in the left-hand side.
Good afternoon, management. The BOC Prudential, standing here. Two questions for you. The first one is about the Greater Bay Area. People have talked a lot about it. My question is, your parent company is in Mainland China, for example, in Guangdong, you have programs like this. What is the cooperation like between you and the parent company? The second question is, do you have any business in Turkey?
You mean the exposure to Turkey? Thank you for your questions. Regarding your first question, in my presentation, I already said that between BOC Hong Kong and our parent company in Mainland China, in the Greater Bay Area strategy in Guangdong, Bank of China (Shenzhen Branch), Bank of China Guangdong Branch, as well as the Bank of China (Macao) branch, as well as the BOC Hong Kong office, plus some other diversified platforms, there have been corporations. The BOCI, BOC Insurance, Bank of China Group Investment Limited, there have been several such internal cooperation platforms. There is a committee for coordinating the programs, and BOC Hong Kong is the leader to coordinate all the business in the Greater Bay Area. You asked that in the Greater Bay Area, how we provide services.
It is not that we set up more branches in the Greater Bay Area, because we have already got network. For example, in Guangdong, we have our network, the outlets in the province, and we have the BoC Pay. BoC Pay is that you are in Hong Kong, you have got your BOC bank account. You use this, the virtual wallet, and you can scan a QR code and pay. As for the wealth management customer, we are also working together with the BOC outlets in Mainland China to provide all around services to our customers. Internally, we are cooperating with each other to provide cross-border integrated services to our customers. This is the model we have. As for the exposure to Turkey, we do not have any direct exposure to Turkey.
However, the issues in Turkey may influence some banks in Europe, for we do have some transactions with the local banks there, but we do not think the exposure is big, and all the risks are totally controllable.
Thank you. My name is Richard. I'd like to ask the management. RMB depreciated rather substantially, so with regard to the depreciation, what's the impact on our bank, including loans and also interest rate income? Also, because of the fierce trade war recently, what's your view on the impact of the trade war on Hong Kong's economy and also people's livelihood, and also what kind of impact would it have on our bank? Also, what's the impact going to be like on the overall condition? Thank you.
Well, for the depreciation of RMB, yes, there has been some volatility lately, but in the long term, we believe that it's going to be stable because nobody has got a very pessimistic outlook on RMB. So with regard to the business development of RMB, we are rather optimistic, and also, we do not have RMB deposit, and the prospect is still very promising. Also, on the trade war on Hong Kong's economy and also on our group. Whether it's trade dispute or trade war, actually it has already started. As to when it's going to end and how it's going to end, well, there are diversified views. As to its impact, we have to look at it from different perspectives. For short term, what we have to analyze is impact on first China. So it affects our overall, or China's export.
It accounts for about 2%, and if it's increased to $250 billion , then it's about 10%. So in terms of the ratio, it's not just going to affect the export industry. It's also going to affect the upstream and downstream production, and it's also going to affect investment demand and sentiment. So in the long run, we still need to be vigilant about that. As to the impact on Hong Kong, well, if you look at the trade volume last year, according to our figures, what Hong Kong dealt with re-export between China and the U.S. is about HKD 40 billion. That's about 9% of the total GDP in Hong Kong or export in Hong Kong. And if it's to be increased to $250 billion. So for those that would be re-exported via Hong Kong, that's about $20 billion , so less than 5%.
So if you look at the volume, it's not very direct, and therefore, in terms of its impact on Hong Kong's economy, including Hong Kong's export, I don't think it's very significant. It's still under control or manageable. Hong Kong is a very small and open economy, and it's also an international financial center. Trade war is not just about trade. It also affects investment sentiments and also the debt market and also the stock market and every sector in economy. We have already seen that there has been some blow to the Hong Kong economy, and therefore, as an international financial center, if you look at the long-term impact, we have to be very closely watching it. As far as the BOC is concerned, Hong Kong is an international banking sector.
So as far as the banking sector is concerned, well, there are market conditions. It is not just about the trade war between China and the U.S. In fact, everybody else is involved in the world. Therefore, stock market, exchange market will also be very volatile. Therefore, that would also affect people's sentiments. Also for market risk management difficulties and challenges, that would also grow exponentially. Also as far as our clients are concerned, for those that are involved in the trade dispute, also for products that would be subjected to the increased tariff. If you look at the quantity, also if you look at our client base and so on, the ratio is not very high, and the risks are also manageable. Therefore, we have also conducted different stress tests.
As far as the present situation is concerned, if you look at the result of the stress test, that is still within expectation. Therefore, at present, this is still very much within our expectation. Of course, for the overall development in the future, it is hard to tell. Therefore, like you, we are very concerned about it, and we will be watching it closely, and we will be looking at the market developments and also the impact on us. We will be taking measures accordingly. Definitely, there will be some impact, but then we will try to minimize that impact. Thank you.
Invite the last question. The gentleman.
Thank you for this opportunity. Johanna from Credit Suisse. Two questions for you. The first one, in Mainland China, the currency policy will change in the second half, particularly during the process of deleveraging. It will be a more orderly process. My question to you is that, in Mainland China, the change of a currency policy in Mainland China, what will be the impact to us? What I can think of are three things. Number one, from the demand for loans. We have seen that in the first half, aside of Hong Kong, the loan increase is pretty good, maybe partially because of the credit lines is very stringent. That is why a lot of demand coming to Hong Kong. If this is one of the factors, how do you think about the change in the second half?
The interbank interest rate, including the [MI2], all this kind of operations, it seems that it is getting lower and lower. I am not sure whether it is because of the position and the yields of investment of the investors. The second question of mine is about the loan increase. The loan increase, not only in the second half, but also in the long run. What is your view on it? In the first half, we know that the loan yield is improving. Can I understand in this way, that the logic of a loan issuance as comparing with the speed of increase, you pursue more on the return on yields of such loans.
In the long run, next year and the year after next year, if the loan increase is good enough, so in terms of the cycle of interest generation in the long run, how do you think about the speed of loan issuance? As well as what is the philosophy of a loan issuance? Can I ask the follow-up question? Currently in Southeast Asian countries, in Singapore, do you have any clear agenda for it? If no agenda yet, what is the reason for it? Can you please share with us more information? Thank you.
Thank you for your questions. The first question is about the policies from Central Bank. In order to support real economy, particularly supporting those SMEs, the Central Bank of China decided to issue more policies on supporting the liquidity. The direction is quite clear.
That is to say, they are leading the capital from the banks to real economy, particularly to support the growth of our SMEs. This year, what you said is absolutely correct. In terms of the bank loans and the credit granting, if you look at the total volume versus the speed, there have been increases in both sector. You also understand the overall financial environment in Mainland China. Even though the loan increases year by year, however, the total financing volume in the whole society, I must say that from the point of view of total financing volume, there has been a decrease. The credit demands, the capital demands, generally speaking, has been very tight. In Hong Kong recently, the People's Bank of China issued some policies and whether there will be a major change in the credit demands in Hong Kong, we do not feel it very obviously.
Whether there will be any big impact to the credit market in Hong Kong, well, the market in Hong Kong, I believe that it has its own features, and because it is still a very short period of time, and we do not feel any big impact yet. About the interest rate. The interest rate, the trend is becoming weakened than the second half last year, and we outsource some of the capital is on such market. From the first half year now, basically the Hong Kong dollar liquidity and the RMB cost has been very low. There are two ends. We have a lot of RMB business, and the interaction between these two ends are quite obvious. If you still have confidence about the economy in mainland China, the NIM between these two ends will not be converted. Yet we see some influence.
The interest will follow such changes. I believe that the NIM won't change in a big scale. In terms of the increase of loans or the speed of such increase from the first quarter to now, we are trying to satisfy the major customers' needs. The overall loan issuance is slowing down. As for the yields, has increased because of the improvement of a benchmark interest, and also the spread also increased. If you look at loans now, while we're pushing forward, all the risk indicators are reflected in our financial statement. The constraint on capital and the regulator has always been strict on the constraining capitals. As for the loans, how they can be under our eye, what will be the expectation for the frontline business units for our customers, we do have our own expectation.
We hope that within the short period of time, for our ROA, our ROE, we can improve both indicators. In terms of their loans, in a pretty long period of time, we have been maintaining the high growth. Mainly because of two factors. Number one, risks. The risk factor is the most important one. Number two, price. That we will wait for the good projects to loan. As you know that we don't have lack of demand. It's only that we can't find the right project easily, which can satisfy our ROE expectations. Your last question is about Singapore. Because it involves two listcos, Bank of China and BOC Hong Kong. So far, we don't have anything to disclose yet. If we have any concrete improvement, we will disclose immediately.