Dear friends, dear analysts. My name is Geng Wei. I am Board Secretary of BOC Limited. Welcome to our old friends and new friends to our midterm results release press conference. We have invited almost 100 analysts from domestic and overseas institutes. I know some of you just have traveled from another press conference. Not easy. I would like to thank all of you for your support to BOC. I also hope today's release will be helpful to you. Our main session is in Beijing. At the same time, we are also connected to our concurrent session in Hong Kong. Now, for the midterm results, they are already available on the website of The Stock Exchange of Hong Kong and BOC .
For today's presentation materials, they are also available upon the BOC website. If there are no special clarifications, then all the statistics are compiled and edited according to the international accounting rules.
Also, please pay attention to the disclaimer before our conference formally starts. Now, let me introduce to you the executives of the BOC management team. We have President Chen Siqing, EVP Zhang Qingsong, EVP Liu Qiang, CRO Pan Yuehan. Our agenda is as follows. First, I will give the floor to President Chen to give us a presentation about our midterm results and also about forecast of the second half of this year. After that, we will have a Q&A, so you can ask questions interesting to you, and I will distribute the time between the Beijing session and the Hong Kong session. Now, without further ado, I give the floor to President Chen Siqing.
Dear analysts, not easy for you to come to our press conference now at this moment, because I know for these days, you have traveled from one press conference to another, as many listed companies are releasing their midterm results. I try to be brief in my presentation. In fact, every year, I will meet analysts once or even twice, because I know you are very insightful, very good analysts. Sometimes as insiders, we might not perceive everything at our bank. But for analysts, as the very good observers, you can even better understand our bank. Originally, in mid-August, I would like to have the meeting with analysts to answer questions so that today, I can make a more relevant presentation. But due to my timetable, I couldn't make it. But in September and October, I think I will still arrange for some meetings with the analysts.
I want to know your questions. I also want to know your observations about the banking industry. For many of you represented here today, in fact, you are my friends. We are old friends. By WeChat or by other channels, you already have raised some questions to me. Maybe some of you have changed your jobs. You are now an investment banker, but they still love maintaining such very good relations with BOC . Also, you are very helpful and very frank in telling me your observations and in making feedbacks to me. Very helpful. I am also very grateful to you. Then today, I am not alone. I also have some other colleagues sitting at the table. Two of you, I think, need some introduction. But I don't think I need to introduce Mr. Pan to you, our CRO. You already have met him maybe multiple times.
Then I would like to introduce to you EVP Zhang Qingsong. He has, in fact, been working at BOC for 26 years. He is the EVP to be appointed. I think he joins BOC in a very similar year as me. He has been working at BOC for 26 years. In fact, I think I came to BOC a little bit later than him. He used to work at Asset and Liability Department. Also, he was the General Manager of the Securities Investment Department under the Global Markets Unit, General Manager of Hong Kong Trading Center, General Manager of Singapore branch, and General Manager of the Clearing Department. For the RMB internationalization initiative and for the deployment of our clearing banks, he is a contributor behind it. Mr. Zhang is a very experienced banker, both in terms of the front office and the back office.
He has a lot of experience and insight. I think you will frequently talk to him in the future. Then for EVP Liu Qiang. He is the youngest among us, I think. But in terms of working experience, he is quite good. He used to work at ABC for multiple years, and held positions in different departments of ABC. He served as General Manager for the business departments, the big client departments, and the asset liability management departments at the head office, as well as the General Manager of the Shanghai branch, and the Executive Deputy Director of Shanghai Management Department. He was born in the 1970s, so very young, very experienced.
After joining BOC, I think he will even have a better performance. Both of them already have been appointed as EVPs by the board. But still, we are waiting for the final regulatory approvals.
They even need to sign up for some examinations. Of course, that is formality. Today, on this occasion, I would like to formally introduce them to you so that you can also become good friends. Now let me go down to business. That is, I am going to present our midterm results in 2016. For the 16 listed banks in China, five of them are the so-called Big Five, and BOC is a little bit late in releasing our midterm results for ICBC and others. They already, I think, have released midterm results. I think by the end of the day, all the major banks should have released the midterm results. You can make comparisons. In the year 2016, BOC has continued to follow the principle of undertaking social responsibility and being the best bank. We have accelerated our strategy of globalization or internationalization.
For the working priorities for 2016, they are as follows: innovation, transformation, prevention and mitigation of risk, and risk management control. We have been carrying out these priorities. As a result, our business performance is steady with good progress. The performance, I think, can be described as good with a number of highlights. For the first half of this year, our after-tax profit was CNY 107.3 billion , up 12.97%. BOC has got three listed companies. So, I also need to tell you the profits due to shareholders. It was CNY 93 billion , up 2.52%. For our assets and liabilities, the total size in the first half of this year. How about it? In the first half of this year, we sold Nanyang Commercial Bank. Despite that, both assets and liabilities increased by 4.7%.
At the same time, our asset quality also has maintained stability with sufficient provision and with good risk management and recovery capability. Our NPL provision ratio is 155% for domestic branches. The provision-to-loan ratio is 2.74%, both meeting the regulatory requirements. Moreover, our market position has been further consolidated. I'd like to share with you some numbers. Yesterday, for the China Banking Association, it released the Top 100 Banks rankings. BOC ranks number three. For the Global Top 1,000 World Banks, we rank number four. For the Forbes Global 2,000 businesses, we rank number six. For the Brand Finance Banking 500, we rank number six. Also, for five years in a row, we have become the G-SIB bank. For the Fortune Global 500, ever since 2012, I would like to brief you about our rankings and the changes.
In the year 2012, we ranked number 93. In 2013, number 70, up by 13 echelons. In 2014, we ranked number 59. In 2015, 45. This year, our ranking is 35. Every year, we move steadily by about 10 positions. That's to say, BOC in recent years, has maintained a very good pace of development. At the same time, our income and expenditure structure has continuously been optimized. Our operating income is steadily increasing while operating efficiency continues to increase. In the first half of this year, our non-interest income was CNY 107.8 billion, up 42.8%, accounting for 41.03% of our total income. At the same time, in terms of strategy, we have given a strong boost to internet finance, RMB internationalization, and the deployment of smart and intelligent outlets. We also have strictly controlled the increase of administrative expenditure.
The cost-to-income ratio is around 24.25%, down by 60 basis points. At the same time, BOC has continuously strengthened the control of capital cost. In particular, we would like to optimize the structure of our capital sources. For the domestic RMB current deposits balance, its share increased by 2.95%. For the administrative institutions deposits, they increased by CNY 254.8 billion, up 12% for the global cash management business, growing very fast. The daily deposits was CNY 600.4 billion, up 14%. For our custody business, we already have the global network advantage. Total assets under management are about CNY 7 trillion. But I acknowledge we have a huge stress in terms of NIM, net interest margin. Among the Big Four, our NIM and fluctuation lag behind a little bit, but our NIM now is 1.9%. There are three reasons accounting for this narrowing of NIM.
The first reason is the narrowing of RMB interest rate spread, 20 basis points indeed. Also, China has the business tax to VAT reform that's dragging down by 6 basis points. But our asset structure is optimized, thus increasing our NIM by 4 basis points. But among the peer banks, our net interest income reduction is the slightest. What about our asset quality? I think it's a very interesting question to you. In the first half of this year, I can say our asset quality remains stable. Around those key areas and key segments, BOC has increased our professionalism and the lean management capability for risk prevention, mitigation, and control. BOC also has innovated the ways we resolve NPLs.
The distressed assets were resolved substantially, and asset quality were controlled. First, the bank's NPL ratio remained stable. It is at 1.47% right now. The average for the commercial bank is about 1.75%.
At the same time, we seriously controlled the newly formed NPLs. The new NPL ratio at domestic institutions stood at 1.59%, down 4 basis points, and there were no signs for widespread NPLs by region and sector. Thirdly, we carry out the policy of entering into some sectors and exit from certain other sectors, and supported the national policy of reducing the overcapacity and reducing the stock in certain industries. Our outstanding loans to overcapacity sectors, coal industry, local government financial vehicles, and real estate sector declined. From Page five, at the lower left-hand side, you can see that we had altogether 916.6 billion loans, a reduction of 5.48% over the previous year, and NPL ratio stood at 0.67%. The ratio of provision to loans is 3.15%, and the NPL coverage ratio is 467.08%.
For those sectors which received government attention and media attention, we controlled our outstanding loans. Also, a lot of our friends are interested in our internationalization strategy. We should say that in 2016, we further pushed forward our internationalization strategy, and we have improved our competitive edge in overseas businesses and diversified business platforms. Their contribution to profit has been improved. In the first half, the bank's overseas institution has a before-tax profit of $8.6 billion , up 84%, representing 43.2% of the group's total before-tax profit. Overseas deposit and loans grow steadily, respectively, increasing $15 billion and $20.5 billion from the previous year. Also, we have successfully implemented major strategic adjustment projects. First of all, we successfully concluded the deal to sell Nanyang Commercial Bank.
Which help to eliminate the overlapping of our businesses and effectively enhanced the capital efficiency. Also, we successfully completed the IPO of BOC Aviation on Hong Kong Stock Exchange. We have been operating BOC Aviation for more than 10 years, and then we spun it off and listed on Hong Kong Stock Exchange. This has enhanced our overall value and preserved and increased the state-owned assets. This has also strengthened our competitive edge. We have three listed companies under the group. One is BOC itself. It is a listed company, and the second is BOC Hong Kong. Today, we issued the interim results of the two companies today. The other listed company is BOC Aviation. Its code is two five two two in Hong Kong Stock Exchange. Today, the share price grew by 6.3%.
I think this is very good for our endeavor in terms of the IPO of BOC Aviation. Also, we have been promoting the rich construction of the ASEAN institutions. Bank of China (Hong Kong) has acquired Bank of China (Thai) Public Company Limited and Bank of China (Malaysia) Berhad. Also, we have successfully established a branch in Brunei Darussalam. Bank of China (Hong Kong) has been transformed from a city bank into a regional bank. Right now, we are merely targeted at ASEAN countries. Another aspect of further deepening the development of internationalization strategy is we have done two major initiatives. One is we speed up the construction of a financial artery for Belt and Road Initiative. In the first half of the year, we extended $17.4 billion of credit, and we followed up 392 major projects with a credit intention of $82.6 billion .
Also, we actively supported the Going Global initiative for the Chinese enterprises. The total lending amounted to $164.4 billion to 2,334 projects. Another thing we have done is to vigorously promoting the RMB internationalization so that we can maintain a leading position in cross-border RMB businesses. From this chart, you can see three figures. First of all, Bank of China accounts for half of the world's 20 authorized RMB clearing banks. Second, our cross-border RMB settlement volume reached CNY 2.04 trillion , number one in the global market. Thirdly, the cross-border RMB clearing volume reached CNY 150 trillion , leading the global peers. Through these initiatives, we have ensured that the Bank have played a very important role in RMB internationalization. We have also successfully issued the largest offshore RMB green bonds, achieving development for RMB internationalization.
Page eight of the PPT is about our key strategies in key regions. Our key strategies match the national strategies. We closely followed the national strategy and made great achievements in the key regions, including Beijing-Tianjin-Hebei area, Yangtze River Delta, and the Guangdong, Hong Kong, Macau. In the first half of the year in the three above-mentioned regions, we realized the operating income of CNY 149.4 billion , up 19%, and its percentage in the group's overall operating income increased to 57%. Also achieved after-tax profit of CNY 74.9 billion . The contribution to the group overall profit after tax increased to 70%. In the next few years, we will have even better performance in those projects. In the first half of the year, the Bank extended new loans of CNY 57.7 billion in Beijing-Tianjin-Hebei area with a balance of CNY 115.7 billion to support 206 linkage projects.
The analysts may know that Bank of China have two provincial branches which are not located in the provincial capital. One is Liaoning Branch. Liaoning Branch has its headquarter in Dalian. For the provincial branch of Shandong Province, it is located in Qingdao City. When the national government was promoting the development of foreign trade, this kind of layout was consistent with the national strategy because we want to focus on the foreign trade ports. But with the deepening of the reform and opening up, this kind of structure is no longer consistent with our strategy. So we made some adjustments. We removed the provincial branch head office of Shandong to Jinan City, and moved the head office of Liaoning Branch to Shenyang. At the same time, we want to develop the branch in Dalian and Qingdao with concerted efforts, so we have accomplished this arduous task.
I believe those branches will play a very important role in the future development of BOC. So this has enabled us to have clearer positions in Bohai Rim. Also we have made some breakthroughs in business transformation. First of all, RMB loans recorded modest growth. The domestic RMB loans grow CNY 459.4 billion from the beginning of the year, an increase of 7%. The personal lending also grow rapidly. In the past, it account for 43.2%, but this year the percentage grow to 65.3%. So the total amount of personal loans is huge. The total loans grow to CNY 299.9 billion . We also focus on some merger and acquisition endeavors in the global market. So we have seen that the percentage of loans to supported and selectively supported industries rose by 0.38%.
Our financial market businesses were further consolidated, our leading position were strengthened in both foreign exchange tradings against RMB bonds underwriting and distribution as well as the trading businesses. We accelerated the pace for developing the intelligent and the smart outlets. We also developed our e-finance business. So right now, the e-finance customer numbers grow by 78%, e-finance transaction amount grow by 56%. We simultaneously promoted the four product lines of payment transaction, asset management, and financing. Also we accelerated the development of smart outlets. This year, in the mainland of China, we have completed the upgrades for 4,112 domestic outlets out of about 10,000 outlets. 89.71% of transactions can be conducted online. We have realized the coordination of online and offline businesses.
We have continuously promoted the technology innovation and process optimization so as to increase the support of the back office to our services development. You all know that the banking industry are faced with a lot of challenges right now. Bank of China is no exception. In the first half of the year, we have met our expectations. We have achieved a steady progress. But we should also see that in the second half of the year, both domestically and internationally, there are a lot of uncertainties in the economic and financial market. You can see that U.S. Federal Reserve is considering raising the interest rate. There are a lot of fluctuations in the financial market in Europe. So the banking industry is facing with a complex and ever-changing environment.
For Bank of China, we have arduous task, we will have a lot of difficulties in our development. But still, there are great potentials for China's economic development. We are very resilient. Also right now we are in the process of deepening reform and opening up. This also presented a lot of opportunities. So when we are faced with both opportunities and challenges, we need to be calm and maintain confidence. In the second half of the year, we will continue to develop our overseas business and promote internationalization. Also we will focus on innovation so as to drive the development of e-finance. Thirdly, we want to insist on the strategies in the three key regions. Also we will accelerate the development of personal banking business.
Considering the increase of liquidity risk in the second half of the year, we need to increase the fundamental position of deposits so as to control the liquidity risk of BOC. Also we need to insist on income orientation. The asset business are faced with a lot of risks in the process of transformation. But we also feel that there are a lot of potentials for developing other businesses. For example, the wealth management. There are a lot of demands for wealth management. While helping them to earn more income, we can also develop our businesses. We should also stick to the bottom line of the risk. We need to turn distressed assets into good quality assets. Also, since BOC is a major bank, we need to pay attention to compliance and anti-money laundering.
We are fully confident about our internationalization road and about our development in the second half of the year. We are confident about implementation of the strategy of serving society and delivering excellence. Thank you.
Thank you, President Chen. Just now, President Chen gave you an update on the operating performance and the results in the first half of the year, and he introduced to you our development plan for the second half of the year. I believe many of you present today may have a lot of questions to ask the management. Let's move to the Q&A session. We have President Chen, Vice President Zhang, and Mr. Pan, and other senior management. I hope you can seize these opportunities to raise the questions. Based on their division of labor, I'll ask appropriate management to answer your questions. I'm sure they will give you a satisfactory response.
I'd like to remind our analyst friends to identify yourself before raising the questions. In the interest of time, we hope that every analyst only raise one question. We'd like to start from Beijing venue. If you have any questions, please raise your hand. This handsome gentleman.
Thank you for giving me this opportunity to raise this question. I'm from Morgan Stanley. First of all, I'd like to congratulate you on your good interim results against this bad situation. My question is about asset quality. We know that NPL ratio is stable and the provision coverage ratio improved. This is a good phenomenon. I'd like to ask you whether you feel that there is some reduction of the pressure in terms of the asset quality. Are there going to be a turning point this year? Can you talk about the NPL and the provision coverage ratio for the whole year?
Just now, President Chen has already given you an introduction of the asset quality, especially he mentioned that we focus on the NPL control and resolutions. Through control the new NPL and reduce the stock, we maintained a steady NPL ratio. Right now, it stands at 1.47%, growth of 4 BP, and the provision coverage ratio is raised to 155.1%, far higher than that stipulated by the regulator. We should say that we have been very effective in control the distressed assets. The NPL ratio of our bank is lower than the average of the commercial bank. It is relatively low compared to the major peers. First of all, this should be attributed to the optimization of the lending structure in overseas lending, its percentage is higher than the average.
The NPL ratio is only 0.2%, and the personal loans percentage is increasing rapidly, and the NPL ratio for that is less than 1%. At the same time, in the corporate loans, we constantly optimize its structure. This has ensured the steadiness of our asset quality has a good foundation. On the other hand, we continue to mitigate potential risks and resolve the distressed assets. In the first half of this year, we have resolved CNY 67.9 billion of credit, up by CNY 16.3 billion over the same period last year. This has reduced the newly increased distressed assets.
Although asset quality of the bank remained stable, NPL ratio and NPL amount are increasing. Special mention loan ratio are also increasing as compared to the end of last year. In the near future, we are facing relatively high pressure for asset quality. Just now, you ask whether this year we will see a turning point. To be prudent, it's difficult to make such a judgment because we need to see external economic environment and the internal risk control. However, for our bank, no matter what happens with external environment, we will do four works well in the latter half of the year. First is that we shall be more forward-looking in credit management. We shall put our credit in good area, optimize our loan structure.
Second, we will make exits from high risky areas, mitigate risk, and try to reduce the amount of potential NPL. Next, we will adopt the principle of coordination, risk categorization, multi measure co-usage, so as to resolve existing NPL. Also we will try to offset our shortcomings in terms of management and move risk management to the front office. We are confident and capable and have measures to maintain basic stability of asset quality. As to provision coverage ratio, we will continuously pay attention to regulatory requirements for provision coverage ratio. BOC shall try our best to meet regulatory requirements for provision coverage ratio. Thank you.
Thank you, Chief Risk Officer Pan. Now I would like to invite Beijing venue to ask the second question.
I'm from Haitong Securities, Analyst. My name is Lin Yuanyuan. Congratulations for such a good achievement. I want to ask an old question.
Many banks have started internationalization. However, internationally, we are facing a more complicated situation. So BOC is promoting internationalization and overseas development. What are the specific measures you have adopted? To ask about the most important strategy of the bank, that is internationalization. I would like to invite President Chen to answer this question.
You are from Haitong Securities? Oh, thank you. Thank you for your question. We can discuss this topic together. For BOC, international strategy of BOC have undergone several stages. To clearly identify internationalization as our priority was in the year 2013. After several years of efforts, internationalization progress has speeded up in Bank of China. You have said just now that many Chinese banks are talking about internationalization. We are happy that our peers are entering into international market. However, I want to say that internationalization does not suit all banks.
Internationalization can only happen with several big banks. While two big banks, for example, in U.S., there are large number of banks, but only a few of them can achieve internationalization. In Chinese banks, when we talk about internationalization, we mean three aspects. First, whether it is necessary for Chinese banks to be internationalized. That's the first question. The answer is yes, necessary. While the economic situation is backward in China, if you set up one institution in a foreign country, that does not mean internationalization. It just mean pilot in a foreign country. To achieve a developed level of internationalization, we have to achieve scale and profit. Domestically and internationally, we have one standard, that is, asset should be 30%-40% of the total asset. A foreign business should take up 30%- 40% of your business. It means that you are to a certain degree, internationalized.
Talking about the necessity of internationalization, Chinese economic scale is developed to a stage that some Chinese banks need to be internationalized. Looking at the whole process of economic development, to assess a country or a region, economic effects in the world or economic impact in the world, we assess several indicators. One is the GDP percentage. Second is trade percentage of the total trade, investment percentage of total investment. Third is that, within Fortune 500, how many percentage of those companies are from your country? Fourthly, whether your currency are accepted by foreign government and the central bank as a foreign reserve currency of that country. After that, if you achieve this, it means that your big banks have to invest abroad to support the economy. So China's economic scale is number two in the world. Trade scale, number one in the world. Investment scale is fastly increasing.
Among Fortune 500 companies, we have 110 of them from China, and it is achieving internationalization. So China have to say, Bank of China or to achieve internationalization. Now we look at the possibility of internationalization, which bank can be internationalized? First, this bank needs to have a long history. Our bank have a history of 104 years this year. Internationalization of BOC starts with Hong Kong. We established in Hong Kong 100 years ago, and in London, we established in 1929. After Opening up and reform, we develop into more countries. So our overseas assets take up 50% of the total overseas assets of the country. Foreign assets and foreign profit of our bank contribute to 29% of our total asset profit, not far away from 30% goal. So BOC have the necessity, possibility, and confidence to be internationalized. How should we go ahead with internationalization?
There are three visions or three steps. The first step is that in the near future, we want to achieve this 30% goal. That is, profit and asset take up 30% or so of the total asset and profit. Second, within a certain period of time, through merger and acquisition, through organic growth, we can achieve 40% goal. After that, after a longer period of time, income contribution, profit contribution, and asset contribution from overseas market take up 50% of the group total. Bank of China will take such a path as identified by Chairman Tian after repeated investigation. Internationalization is our brand. It's an important strategy of BOC. Internationalization of BOC is in line with the country's strategy of Belt and Road strategy. For this Belt and Road, 64 countries, and we were in 18 countries already.
After our efforts, by the end of the year, it is expected that we will enter 50 countries, but not all of them are Belt and Road countries. We are not far away from this 30% goal. Second, we are integrated with the RMB internationalization strategy of the country. In RMB clearing, we take up 10 clearing centers among 20 clearing centers. So BOC is establishing such a clearing network. Certainly, Chinese companies are investing outbound and have merger and acquisitions cross-borderly. Many domestic businesses are going into other countries. This will help with BOC's internationalization. We have a strong plan for internationalization. To save time, I will not go into details. My answer should not be very long. Thank you. That's all for my answer.
Thank you, President Chen. Just now, President Chen talked about the necessity, possibility, and our path of internationalization.
I hope that answers your question. I think we should give some opportunity to Hong Kong venue, because we have a lot of analysts in Hong Kong. We have about 60 analysts in Hong Kong. I would like to give the floor to Hong Kong venue. Mr. Xie, my colleague at Hong Kong, please host the Hong Kong question and answer. Thank you.
This is Hong Kong venue. First, I want to report that in Hong Kong venue, we have many analyst friends. A full house. I want to thank Beijing management for arranging more questions for Hong Kong analysts. Now, I would like to give the floor to Hong Kong analysts. Beautiful lady sitting in the middle, in the first line.
Thank you, Mr. Xie, for giving me this opportunity. I am from JPMorgan, analyst. My name is Li Li.
The first question I want to ask is about NIM. NIM industry-wide is reducing. For BOC, I want to know, looking at the repricing trend of deposit and loan, do you say that in the latter half of the year, NIM will stabilize? BOC has advantage in foreign currency and overseas businesses. What is your expectation about NIM? Can you tell us about overseas NIM situation?
EVP Zhang, please answer this question. Thank you.
Thank you for your question. Net interest income contributes the lion share of our total income. So it is very important for analysts to focus on this question. President Chen, in his presentation, has explained the NIM changes. Now, I want to add some details and try to answer your questions. First, NIM lowering or reduction trend is a global situation.
In the global scene, negative interest rate, low interest rate environment is continuing. The People's BOC reduced interest rate by five times last year, which has a lingering effect on this year. BOC cannot overturn the industry trend. NIM in the first half of the year reduced by 22 basis points as compared to 2015. I want to explain why NIM shall narrow. First, the People's Bank of China cut interest rate by five times. It has some lingering effects. We make analysis about our repricing model. For RMB lending business, the repricing term is seven months, while for term deposit repricing period, it is 14 months. It means that newly matured loans are repriced very soon, while deposit will be repriced later. So this mismatch of repricing term means a release of the impact of NIM in the first half of the year.
The second reason is that interest rate liberalization does have impact on us. The People's Bank of China has a fully liberalized RMB deposit and lending rate floating range. We found out that deposit rates floated by a larger percentage, while lending rates are decreasing. That is the goal of the People's BOC's interest rate liberalization. For our customers, deposit and lending customer alike, they can do a better calculation to seek maximum profit and to get the best price for them. In the first half of the year, the RMB deposit floating ratio was 1.26. It means that our overall newly priced deposit interest rate was 26% higher than the benchmark rate, 0.05 percentage points higher than the same period last year.
For new RMB loans, the floating ratio was 1.01, a reduction of 0.06 percentage point, and the average interest rate for new loans was 4.6%, a reduction of 129 basis points, a sharp reduction. Domestic RMB deposit and lending is the most profitable business. However, this is a business mostly impacted by interest rate liberalization. The third reason is the business tax to VAT reform, which was implemented on May 1st. After two months, it has a big impact on NIM. Without business tax to VAT reform, the second quarter's NIM was 1.96, similar to first quarter's 1.97. That is the explanation for this 22 basis point cut of our NIM. We can make an overall judgment here, that is business tax to VAT reform impact will be normalized soon.
For deposit and lending repricing arrangement, this mismatch of repricing term in the latter half of the year will be reduced. Analysts have mentioned just now about our foreign asset, including domestic foreign currency asset and the foreign country foreign asset, which are mostly denominated in U.S dollar. Just now, President Chen mentioned that around December, Federal Reserve are expected to increase interest rate. If there is an interest rate hike, it is a good thing for us. We take note that last Friday, Chairman Yellen's presentation actually lifted up the market. Looking at the Asset and Liability Department gap analysis, U.S dollar interest rate hike has a positive impact on us. So we can make the basic judgment that in the latter half of the year, NIM narrowing will be continued, but it will be lessened. What are the countermeasures of the bank?
Just now, the analyst is very professional, mentioning that our foreign currency asset and overseas asset are the highest among peers. This is a special feature and advantage of BOC. Our foreign currency asset and overseas asset is acquired under fully liberalized market situation. It is different from the managed interest rate market. Our front office people and Asset and Liability Department people have experience of managing interest rate risk. Through our efforts, through our refined management, and through drawing upon peers' experience, I take note that Wells Fargo.
Under low interest rate environment and a decreasing interest rate, they improve the NIM. That is to increase the lending skill. So in President Chen's report, he talked about our loan expansion, especially for personal mortgage loan. This is important effort for maintaining and widening NIM. I should not mention Wells Fargo. I read this article from newspaper. We make comparison with U.S. peers, and we also have relatively high yield of bond investment. Chinese Treasury bond market and high-quality credit bond is worth the investment. This is good for us to maintain NIM. So various matters, we are trying very hard. Our goal is that NIM's performance can be better than peers.
Okay, EVP Zhang. Now I give the floor to Hong Kong venue to raise other questions.
My name is Fang Haizhou from Deutsche Bank. Thank you for giving me this opportunity.
My question is about lending practice. In the first half of the year, BOC recorded a relatively rapid growth of lending, but against the backdrop of economic slowing down and the private investment decline, we are concerned about the destination of those lendings. Could you share with us the situation? In the second half of the year, there is still great pressure for macroeconomic growth. In July, the banking sector lending growth is lower than expected. How do you look at the lending growth in the second half of the year? What is your target for the whole year for the lending growth?
I would like to give the floor to EVP Liu to answer the question.
In the first half of the year, for the group, the total lending grew CNY 592.4 billion , and we have recorded a 7% growth of domestic RMB lending. I would like to focus on the domestic lending, because President Chen had talked about the overseas lending. After all, the domestic lending accounts for the biggest proportion of the total. First of all, in terms of the type of clients, domestically, we have seen the rapid growth in the personal lending. It represents about 65% of the growth of the total lending. As for the corporate lending, in terms of the sector and industry, in the strategic emerging industry, we have seen a rapid growth, a double-digit growth of the lending. While for those industries, President Chen talked about in page five of the PPT, that is the industries with over capacity, we have seen a reduction of the lending.
In terms of the geographical distribution of the corporate lending, it is mainly located in Beijing, Tianjin, and Hebei, and also Yangtze River Delta and also Pearl River Delta. That is the destination for the lending in the first half of the year. Just now you talked about you are interested in the second half of the year. In July, the lending growth declined in the banking industry, so there are a lot of negative comments in the market and a lot of pessimism in the market. For me, as a practitioner in the banking industry, we need to look at the issue from many different dimensions. The first is we need to see the comparison with the same period last year. In July last year, the domestic RMB grew by about CNY 580 billion , and this year it is lower.
You should see that last July, there have been major changes in the capital market in China. We can see that non-banking and the non-deposit business grows a lot. If you deduct all of those factors, you can see that the performance of the lending growth in July this year is better than that of last July. July is only one month of the year. We need to look at the issue from a longer term perspective. Thirdly, in addition to looking at the lending, we need to also look at the corporate profits and the stock amount.
In spite of the fact that we are faced with the downward pressure of economic growth, at the national level, from a long-term perspective, if we consider the fact that we are promoting the supply side reform, and also we are promoting the demand side increase, we are very confident about the lending growth in the second half of the year. For the MPA assessment of the central bank, and also based on the decisions made by the board of directors in the beginning of this year, we want to ensure that domestic RMB lending grow by 12%. Right now, we are heading towards meeting that target. Thank you for your question.
Thank you, EVP Liu.
Now I'd like to ask the Hong Kong venue to continue to raise questions. The analyst sitting in the middle.
Thank you. My name is Huang Jie. I'm from CICC. You are very confident about the outlook for the second half of the year. We know that non-interest income of the BOC is very good compared with the major peers, and in the first half of the year, the growth is rapid, but the fee income has declined. I'd like to ask about the reasons for that, and what is your outlook for the second half of the year?
This is an issue related to the financial problems. EVP Zhang, just now I talk about NIM, and now I'd like to talk about the non-interest income. Just now, President Chen emphasized the advantages of BOC internationalization. Another advantage is diversification. This is our differentiated competitive advantage compared with our peers. This is closely related with non-interest income.
Our advantage is that the non-interest income lead the domestic major peers. This has given us a major room of maneuver for responding to the interest rate liberalization. In the first half of the year, the non-interest income grow by 43%. We acknowledge the fact that this has something to do with the sales of Nanyang Commercial Bank. Since you are all the experts, you see the impact on that. But our purpose is not to get the proceed from the sale. This is part of our overall strategy adjustment. But the result is that we have got a very good investment return. What I want to say is that our transaction ability and transaction income is very good. Historically, transaction capability is our prominent advantages and a unique feature. It has net transaction income as reflected in the financial statement.
For example, we have the biggest market share in the foreign exchange market. In the first half of the year, we grow the business by 1.61 percentage point. This shows our strong ability of transaction in serving our customers. While acknowledging our advantages, we do not want to circumvent the fact that we have seen some decline in the fee and commission income in the first half of the year. I want to say that BOC want to show our social responsibilities. For the clients and customers, we want to give them more benefits. We have reduced and exempted some of the fees for qualified customers. For some of our businesses which we enjoy advantages, we can see the external environment. For example, foreign trade, import and export, and the stock market. Those markets are not so good.
This has affected our commission and fee income. This has also reduced our income from international settlement and selling bonds on agency agreement. We have realized this issue. President Chen has chaired three important meetings, so we have clarified our targets and identified clear measures. Also we make analysis on a daily basis and making assessment on monthly basis. We pay more attention to the process management so that we can increase our fee and the commission income in this year. At least, we need to reduce its reduction.
Talking about future, I believe that we will make use of our advantage to speed up the business conversion. Analysts often use one indicator, that is non-interest income to total income ratio, as an important indicator of optimization of income structure. We hope banks will have capital light and to take up a less risk-weighted asset. We hope that to assume less risk through our surveys, assume less risk and get continued revenue. We will try to meet the requirements of the customer, try to provide more services, and provide more transactions to the customers. We will take matters step by step so as to increase non-interest income and increase fee and commissions. Thank you.
Thank you, EVP Zhang. Now we would like the Hong Kong venue to ask one final question. This final question is given to this lady analyst.
Thank you for giving me this opportunity.
My name is Chen Shujin from DBS. My question is related to non-performing loan resolution. Non-performing loan resolution is very important for Chinese banking industry. In the first half of the year, BOC issued the first non-performing asset securitized product. I want to know the progress of non-performing loan resolution. In the latter half of the year, what is the goal of non-performing loan resolution for BOC? What is the plan for issuing of securities based on non-performing asset? I want to know whether there are new progress related to debt to equity swap.
CIO Pan, please answer this question.
I want to thank DBS analyst for your question. NPL resolution for asset management control, it is an important methodology.
In the first half of the year, BOC resolved CNY 36.8 billion in total, arriving at 61% of last year and reaching almost the level of 2014, which was CNY 71.6 billion. We have effective resolution of NPL. For resolution of NPL, we adopt cash recovery, batch disposal, and also write-off payment in kind and other method. BOC does enjoy some special ways of resolution. In terms of cash recovery, for those companies in temporary difficulty of operation with a quality asset and with market value, we reduce the interest of the company so as to reduce their financial burden and help them to introduce a strategic investor. Asset restructuring, we can help the customer to save themselves and help the companies to weather through this temporary difficulty. Our asset can be protected. In May, we successfully issued this corporate non-performing asset securitization product.
The pooled asset is CNY 1.254 billion, issued amount CNY 301 million. For the premium tranche, the subscription rate was 3.07, and the subordinate tranche was issued at a premium. The market reaction was rather good. Non-performing asset securitization is an important channel for disposing non-performing asset, and it can help us to increase the efficiency of disposal of non-performing asset, and satisfy investors' requirements for different investment and return combination, and can help the subordinate investors to reduce their capital or fund charge. Based on the successful experience in May, we are promoting the second tranche of corporate non-performing asset securitization. Hopefully, it can be promoted to launch by the end of this year. For personal loan and credit card non-performing asset securitization, we are starting the work now. As to debt to equity swap, policy-wise, there is no such policy yet.
In the past, we held equities of companies through court judgment or restructuring arrangement. However, for those high-quality asset with good market potential, which run into a temporary operation difficulty because of macroeconomic situation, because of market reasons, and because of high leverage ratio, maybe a better method is to have a debt to equity swap so as to help the bank to resolve non-performing asset and help the company to reduce the burden, and to achieve win-win situation between banks and companies. However, debt to equity swap will take a capital charge of a commercial bank and put enormous challenge to our operation and management capability. We will follow closely regulatory policy changes, and in compliance with laws and regulations, we will conduct this business in line with commercial principles.
Now we turn back to Beijing Venue.
I would like the Beijing venue to ask the final question for this meeting. Any analyst want to ask this question? There is a beautiful lady.
I want to thank the management to save this last opportunity to me.
I am from Guotai Junan, analyst Zhou Xinguo. I want to ask the management, at the beginning of the year, the bank mentioned that it wants to focus on retail finance or personal finance. After half a year, you have made a lot of achievements. Could you share with us what is your development strategy and goal for personal financing? Personal mortgage loans are growing rather fast. I want to know the risk profile of those personal mortgage loan.
I want EVP Liu to answer this final question.
For retail banking businesses, this is the priority of the bank, and we have made many achievements this year, which is known to you. At the end of last year and the beginning of this year, BOC issued a three-year plan for speeding up personal finance businesses of the ban . The retail customers have changing financing needs, and their consumption patterns are changing. We focus on providing consumption services and wealth management services and cross-border services. This is in line with the changes in the personal banking market or retail banking market. The first half achievements were gratifying, and we are not only looking at personal loans and deposit. One important data is from customer dimension, and in first half, personal customers increased by 4%, while high-end customers increased by 7.6%. Their financial asset in BOC increased by 22%.
It means that in the near future, we will try to implement this three-year plan for retail banking, and we shall enhance our IT support for retail banking. We shall optimize the scenario development, promote a new product launch, further satisfy individual customers' need for financial services. Retail banking businesses will be turned into our pillar industry, pillar business. We hope that the analysts here can make use of our product. Thank you.
Thank you, EVP Liu, and I also want to thank President Chen and other EVPs for your answer of these questions. I want to thank analysts at Beijing and Hong Kong for asking questions. We cannot answer all questions because of a time limit. I hope that analysts can pay continuous attention to BOC. Please contact the board secretary and the investor relation team for further questions. Thank you. That is the end of the announcement.
Wish you happy work and a smooth life. Thank you.