Good afternoon, ladies and gentlemen. Welcome to the Bank of China's 2011 interim results presentation. My name is Zhang Bingxun. Secretary of Bank of China, and this presentation by our senior management is made in Beijing, and will be video linked to our Hong Kong venue to ensure that the Hong Kong analysts have equal access to our public disclosures. First of all, before the presentation, please do take note of the disclaimer on this slide. This presentation, together with our 2011 interim report, is now available on our website for downloading for your reference. First of all, please allow me to introduce our senior management team here with us today, who is Mr. Li Lihui, President of Bank of China; Mr. Chen Siqing, Executive Vice President; and Mr. Yue Yi, Executive Vice President.
All the financials in our presentation here are prepared according to IFRS, unless otherwise stated. There will be a Q&A session at the end of the presentation, and during which, we will allocate time between Beijing and Hong Kong. I would like to turn the presentation over to President Li.
Good afternoon, analysts. Let me briefly introduce on the interim report for the first half of this year. First of all, after optimization, we have also maintaining its traditional business advantage. The bank continues to optimize the structure of its asset and liability and the revenue structure. As the end of June 2011, the proportions of RMB denominated assets and liabilities reach 76.6%, 17.9%, up to 20 percentage points and 12 percentage points respectively.
Compared with the end of 2006, profit before income tax of domestic operation represent 79.7% of the group's profit of the year, up 17 percentage points compared in 2006 year. The proportion of non-interest income to operating income reached 33.6%, increase of 15 percentage compared with 2006. Since IPO, the bank's key financial indicators continue to improve. After-tax profit of 2010, it was recorded CNY 109.7 billion, representing 2.3 x that of 2017. In the first half of 2011, the bank recorded an after-tax profit and a profit attributable to equity holders of the bank of CNY 70.13 billion and CNY 66.511 billion, increase of 29% and 27.9% in the first half of 2011. Return on average equity and return on average total assets stood at 19.86% and 1.82%, up 6.45% and 0.33 percentage points. Asset quality kept improving, and NPL coverage ratio continues to increase in the past years.
At the end of June, the bank's NPL ratio dropped by 3.04%, covering 121 percentage points to 217.3%. I have to say that for the domestic provision coverage, it's even higher. The capital adequacy rate further increased to 12.95%, up 0.37% with the previous year. Since the beginning of 2011, the bank's domestic operation reported a steady growth in all business units. As the end of June, domestic RMB denominated deposits and loans increased by 6.9% and 7.5% respectively, amounting to CNY 200.1 billion or 6.9% compared with the previous year of the corporate loans. Through product innovation and business charges, SME developed rapidly. By the end of June, the number of SMEs custom reach almost 200,000, increase of 50% from the year end.
The bank's outstanding extended small size increased by 35.4%, and the newly granted loans for small size enterprises accounted for 35.6% of the total newly granted corporate loans. The asset quality improved ratio within the segment was 2.01%, a decrease of 0.78%. In the first half of 2011, the volume of the bank's international settlement business totaled $1.18 trillion, up 40.9% in maintaining its global leading position. The domestic branches conducted 31.5% of the RMB settlement business on the cross-border. For the personal finance, it was also optimized. At the end of June, the balance of domestic personal loans increased by CNY 108 billion or 8.9% compared with the previous year. The personal loan housing loans reached CNY 104.6 billion, accounting for 42.3% of all newly granted personal loans, with an average interest rate of 6.81%, up 105 basis points compared with last year.
The average interest rate of newly granted housing loans increased by 129 basis points to 6.11%. The bank also accelerated the optimization transformation business network, and enhanced the service capacity and proactively expanded its personal loan. At the end of June, the domestic RMB personal loans totaled CNY 2.81 trillion, up 5.2%. In the first half of this year, the bank accelerated and established a three tier wealth management channel. Number of the wealth management centers increased to 1,912, 118, and 117 respectively, with $6.24 million up 57%. The bank's card business maintained rapid growth with CNY 28.06 billion, up 29%, with the volume RMB card merchant acquiring transactions reached CNY 801 billion, an increase of 62%.
In the first half of this year, the bank's investment structure was further optimized, and at the end of June, the bank held investment securities of CNY 1.94 trillion, slightly decreased from the previous year, and its average yield reached 2.87%, up 14 basis points. The bank enjoyed significant market advantage in trading business, and the bank obtained the largest market share in customer accounts for exchanges and ranked top among peers for transaction volumes on the Shanghai Gold Exchange. The debt underwriting business of banks was amounted to CNY 104.1 billion, up 114%. The custody business developed, and at the end of June, the number of the custody products offered by the bank increased 44% to 1,024 compared to previous, and the bank's assets under custody by domestic also increased to CNY 1.26 trillion.
First half of the year, the bank made also great efforts to expand overseas business, and the operation recorded $2.82 billion, up 43% comparing the same period, and profit contribution steadily increased. At the end of June, the total loans of overseas operation amounted to CNY 1.15 trillion, an increase of CNY 252 billion, up 27.9%. The overseas operation amounted to CNY 1.31 trillion, an increase of CNY 161.9 billion or 14.1% compared to same year. The bank newly raised CD of $9.7 billion. The bank continued to dominate the cross-border RMB settlement market in the first half of this year. BOC (Hong Kong) and other overseas operations separately conducted CNY 271.8 billion and CNY 264 billion of the cross-border RMB. Based on the product innovation and integrated domestic overseas operation, we will further devise strategies to strengthen the leading position of cross-border RMB business and overseas RMB business.
I would like to share with you some of the potential in the net interest margin. We believe that it is a good potential. Up to this first half of the year, the net interest margin was 0.11%, with 0.77 basis points. The net interest margin of the bank's domestic RMB business and net interest margin stood at 2.35% and 1.59%, increased by 0.12 basis points and 0.44 basis points. The major factors helping the improvement of the bank's net interest margin and the proportion RMB denominated asset and domestic demand deposits further increase, the interest rate of newly granted domestic RMB and U.S. dollars loans increase, the outstanding loans were also gradually repriced, and the yield of the investment securities increased alongside with the hike of RMB benchmark increased interest rate, market also interest rate. The next step is to improve several steps of our net interest margin.
To improve NIM, the banks will optimize with expanded FX business, optimize its currency structure by expanding domestic overseas RMB businesses. We will also further enhance the pricing power. For the first half of this year, the average interest rate of newly granted domestic RMB corporate loans was 6.17%, up 94 basis points over 2010. The average interest rate of the newly granted domestic U.S. dollars corporate loans were 3.42%, which was 296 basis points. The average interest rate for the newly granted domestic mortgage loans was 6.11%, up 129 basis points over 2010. We believe firmly that the upward trend will continue in the second half of this year for the pricing. We believe that the net interest margin will follow a very stable and improving trend in the second half of this year.
Since the beginning of the year, the bank has also leveraged its strength as a provider of diversified financial service to drive the rapid growth of non-interest income. So in the first half, the diversified business platform reported before tax of CNY 8.44 billion, up 85.1% compared with the same year. The bank reported a non-interest income of CNY 55.8 billion, a year-on-year increase of 36%. In the first half of the year, the bank earned net fee and commission income of CNY 35 billion, a year-on-year increase of 23.6%, among the total income from settlement agency and credit commitment recorded. Fast growth and will further enhance comprehensive business operations and fully take advantage of the diversified business platform to drive a faster sustainable growth of non-interest income.
Since the beginning of this year, we understand that the economy and financial development in line with macro expectations, but nevertheless, it will be confronted with a complex environment and uncertainties and risk factors that have negative impact on the economy. Facing tightening domestic liquidity and a complicated volatile international environment, the bank is committed to making its risk management and internal functions more systematic, effective, forward-looking, comprehensively improve its risk management system, with a focus on integration, sophisticated, and professionalism. While adhering to our centralized measurement principle approval, assessment, and classification of risk assets, we proactively will exit from high risk, non-NPL corporate loans in response to the macroeconomic changes, increase the support to China's key fundamental industries, important areas, and key customers. The bank also checked the risk of LGFV loan and organized stress test on real estate loans.
In the meantime, the bank will also continue to enhance market risk management in a manner of centralized comprehensive, timely manner. The bank also continued to improve the securities investment structure. As a result, the percentage of our EU and U.S. securities investment decreased to 4% from last year. The bank also integrated operational risk into a comprehensive risk management system, and through coordinated implementation of Basel II and also company basic rules, international control standard. The bank established a comprehensive and reliable internal control and market risk management system. We also brought country risk into our comprehensive risk management system to provide foundation and support for our cross-border business development.
We have also continued improving the new Basel Accord in a steady approach and improve our risk management techniques and methodology to enforce our risk management capacity, and also the Basel II, Basel III, and survey implementation of advanced approach to Basel II. In the first half of this year, the bank's asset quality was further improved and the ratio of allowance for loan impairment losses to the NPL and the loan also has reached 2.5%. In the future, the bank will also maintain close watch on the changes of macroeconomy financial environment, as well as changes to regulatory requirements, and control the asset management on a reasonable level by deepening structural investments and tightening the management of the credit process. For the local government, the LGF loans were also done a lot of works and probably, this is a high concern on the analysts.
Let me introduce a little bit about the situation here. Up to the end of June this year, the total balance of LGFV loan was CNY 530 billion, mainly caused by the statistical caliber changes. According to the comparable statistic caliber, both the balance and the proportion of the LGFV loans was slightly lower than that of the end of last year, and the NPL was almost the same as that of the previous year. The NPL ratio was less than 0.17%, much far less than the average. In terms of the cash flow coverage, the loans was fully or nearly fully covered, exceeded 90% of the total LGFV loans. Those with cash flow coverage was below 30% accounted for less than 5%.
All these indicators basically were quite balanced, or even a little bit. In terms of the repayment schedule, the LGFV loans with durations below two years accounted for 17.6%, which was much lesser than the NAO, 24 percentage points. In other words, in this kind of repayment, ratio is quite low, which will be beneficial for the general arrangement and also the cash flow and also the sources of repayment. For those duration, about five years was accounted for 58.2%, which was 28 percentage points higher than that of the NAO. In other words, we are quite favorable in terms of the mid-term ratio.
If we look at LGFV loans granted to provincial level and city level, they accounted for more than 90%, 20 percentage points higher than that disclosed by NAO, and the loans granted to county level was below 7%. That is the general situation for different level LGFVs. Two-thirds of the loans were extended to developed eastern areas, 15 percentage points higher than that disclosed by NAO. Besides the provisions raised through DCF and MM methods, we charge special impairment allowance from ministry perspective. By the end of June, the allowance for loan impairment losses to non-performing loans reached 1,486%, and provision to loan ratio reached 3.86%, much higher than the average of the bank. Both the balance and the proportion of the bank's real estate loans were lower than our peers, and asset quality was sound.
By the end of June, corporate loans of real estate sector amounted to CNY 330.8 billion , representing 8.9% of domestic corporate loans. Impaired loan ratio was 0.58%, down by 0.43 percentage point compared to the previous year, which is better than the average. Proportion of loans granted to key customers was high. At the end of June, the loans to head office and provision branch key customers was 61.7% of total domestic corporate loans. Loans of headquarter key customers was 42.2%. Contract duration was short. Average contract duration of property developer loans was 2.66 years. The actual duration was even shorter. LTV of property developer loans was low, remaining at approximately 50%. We feel that BOC's loans for developers is well under control. We have made steady progress in channel development. Traditional outlets and electronic channels were developed in a coordinated manner.
In the first half, efficiency of the bank's outlets was further enhanced. Renminbi deposit per outlet reached CNY 696 million at the end of June, up 9.1% compared with the end of last year. We also invested heavily in self-service facilities. At the end of June, ATMs and self-service banks reached 28,000 and 8,100, an increase of 14.2% and 6% respectively. In terms of online banking system, it developed rapidly. Concerning new agricultural banking modes, so far, 10 village banks were successfully launched. In the next years, we'll take a series of measures to consolidate our outlet construction. In the coming five years, we have one very important system. Right now, with our new core banking system implemented, 32 branches have been updated to version 3.0. In a few months' time, we can complete all the IT blueprint projects.
This new system is a customer-centric and transaction-driven business processing system. It took centralized and unified processing and management model of clients' accounts and transactions. It is truly customer-centric, and it optimizes the business process, makes it more efficient in terms of risk control. We can be more devoted to product innovation and improve our data quality. In the first half, in light of a medium to long-term capital plan, we actively intensified internal capital management and prudently advanced capital replenishment project. We have successfully issued CNY 32 billion subordinated bonds in the first half. At the end of June, our capital adequacy ratio was 12.95%. Core capital adequacy ratio 10.01%.
We'll promote capital efficient development model through multiple measures, such as enhancing performance evaluation mechanism of capital management, strengthening capital constraint, optimizing asset structure, and off the balance sheet. On and off the balance sheet, and enhance our capital efficiency, improve our implementation of the ICAAP. In the coming months, we see that the international financial market will continue to be very fluctuating and unstable. The Chinese government will continue to adopt macroeconomic policies of continuity and stability. We will be more directional, flexible, and forward-looking. The government will strive to maintain balance among steady and rapid economic growth, economic structural adjustment, and management of inflationary expectations to consolidate China's strong economic development momentum.
Confronted with a more complex environment, we'll continue to push forward our development strategy in the spirit of innovation, transformation, and cross-border development to achieve our strategic goal of building a large multinational banking group with a diversified and integrated cross-border business platform. We'll focus on improving the efficiency of our business outlets and enhance competitiveness, profitability, and sustainable development. We'll further strengthen asset liability management and comprehensive risk management, striving rapid and sustainable progress in all business lines, so as to welcome the bank's 100th anniversary with remarkable achievements and to repay our investors for your concern and support. That's the end for me. Thank you very much.
Thank you, Mr. Li. We'll now move on to Q&A. First, I will take a question from Beijing.
Thank you very much, members of our management. I'm from Macquarie. My name is [Wang Yaping]. My questions are, first, beginning from your listing work in 2006, BOC has faced a lot of changes, rapid changes, in the international financial market. For domestic and overseas market expansion, we see a big gap. We see that the increase in your business overseas may be growing more rapidly. Compared to ICBC or other peers concerning M&A abroad, not much has been done by BOC. In the interim, concerning our domestic and overseas resources.
Previously, we have seen that rapid growth may lead to rapid consumption of the resources of the bank. Compared to our peers, the ROA may be lower than your peers, like the ICBC. In theory, the expansion speed of the balance sheet and also CAR may be different from our peers. You are going to launch a new CAR calculation method. Actually, BOC (Hong Kong) has already adopted a new agreement. In the coming time, in terms of replenishment of capital or using this new agreement, how will it affect the CAR level?
I will take the second question first. We have done some calculations according to the new capital requirements. We calculate the CAR levels. We believe that there will be greater limitations on the capital level. In terms of operational risk, there were no requirements for the capital level to be recorded, and now this is a new requirement. Combining the two, in March, we have done some initial calculations and we have some figures. The impact on our CAR level would be 0.26 percentage points, a drop of 0.26 percentage points. We feel that this change, it is not substantial. We can soldier it.
But in the future, we will continue to follow the authority's requirements to do our work properly. Compared to other banks, yes, there is a gap. And there is one major important, that is because of our asset structure, the geographical asset structure. For overseas asset, 22%-24%, that is the level. We have seen rapid growth, and right now it is staying between 22% and 24%. Our overseas business, in fact, we focus on some low-risk business. So our overseas segment is following the market situation. When the risk level is low, the return, of course, cannot be too high. That is a rule in the market. Concerning NIM, overseas business may be around 1.1%, way below our domestic NIM. So that reduces our income. For example, BOC (Hong Kong), the return is lower.
Our target is to construct a multinational banking group with businesses around the world providing world-class services. So our overseas segment taking up this ratio is necessary to the bank, to our nation. We have more and more clients, corporate and individual clients. They need the help of a Chinese bank to bring them overseas. So we will continue to expand our business presence overseas. We believe the ratio will continue to be around 22%. In terms of regional breakdown, other than existing regions, we will focus more on Asia, Eastern Europe, Central Europe, and developing areas and countries where other Chinese banks are moving into. We will set up branches and subsidiaries to expand our structure. So using this method to expand our overseas business network has lower cost with higher return or output. But of course, if there are appropriate M&A opportunities, we will definitely consider them.
Overall speaking, we want to achieve balanced development of our overseas segment. We will also consider risk management adjustments. Right now, we focus on low-risk segments. Maybe we will move on to low to medium risk level businesses to increase our overseas return.
Thank you very much.
Next question.
Thank you. I am from Goldman Sachs. In the first half of the year, developments of certain projects have been very rapid, bringing very good income. But we have seen some regulatory adjustments. So for the second half, what will be the development trend of your products? Concerning wealth management products, what will be the volume? And is there going to be new types of products? Would they be incorporated into the balance sheet? And Mr. Li, can you tell us, last year, there has been some collaboration items. I want to know the outstanding balance.
And you can actually tell and find also the statistics. But currently, the so-called structural deposits with some of the wealth management, we are talking about CNY 400 billion, a little bit more than that. The other one is the so-called the finance outside. It is approximately CNY 130 billion. And this sum of the large figures, as you can see, according to the regulatories, at the end of this year, they will be also books, the total of which will be approximately CNY 110 billion, which is also like 50% being into the book. So this is very less stress because we are much less than the numbers. In terms of the wealth management development, I believe this kind of wealth management, in fact, is a kind of very important product in the financial market, and which is also a very popular product with the customers.
For the bank, the wealth management will take some of the features. One is that we will, on the compliance, according to the regulatories, regardless of another book for the wealth management. While doing the wealth management business, the features of which is that we will accurately and comprehensively remind to the customer some of the products, some of the existing factors and risks, also selling the product to the appropriate qualified customers. First one is compliance. Secondly, talking about the wealth management, personally, there has to be a kind of continuity and also the sustainability. In other words, it's not only too many of those fluctuations in terms of the amount. For the overall financial products, according to the structure, will have to be a continuity. Naturally, different products.
Among them, there will be some transition period, but for the overall products, including all those structured and also non-structured, all the various products will have to be kept or aligned structure. For this part, that will also motivate our income. For the first half of the year, the wealth management products, if I remember correctly, will be about CNY 2.2 billion comparing to last year, was about 3x than last year. So in this half, other than providing a good service, we also increase our income. This is for the second part. Number three, as you mentioned earlier about the trust operations and also all the products offered by the regulatories, Bank of China, in this aspect, is much less than the peers in the future according to a new regulation.
After that, we are not able to operate, so that will be much less impact for the overall operation business. To sum up, we will further develop the wealth management products, and we believe when facing the customer, these are a very important type of the product we offer.
Thank you. I'm from [inaudible] . I have two questions that I would like to ask. One is that lately we've seen in the media some of the difficulties in the corporations, and I try to understand from our bank's actual operation, what about the actual operations of those companies, what kind of industry, what kind of potential risks, and how you feel about them in the future in terms of the asset quality, also on the risks, what are the major focus on the various industries?
Second question is that the Ministry of Finance has also the social housing in each of the provinces, in each of the cities. There has to be a finance platform on the LGFV. So in terms of the real estate event, have you already tied up with each of the provinces to have some individual collaborations? In terms of the size and operation and also the outlook, what kind of plan do you have?
I will ask Mr. Chen to answer for the question number one, and if Mr. Yi can also make some comments, but I will answer your second question. Currently, what we're talking about the social warehousing, 120 projects of which we're talking about CNY 21 billion . That is also a 21% increase for last year. We will also seriously choose some better cash flow projects on the social housing to operate on this field. I will ask Mr. Chen to answer the first question. Mr. Chen?
Thank you for your question. In terms of the bank's management, we are also focused closely on the changes of the industries. In terms of the industrial changes causing the quality of the assets of the bank, for the first half of this year, apparently, the overall economy or the industry development was quite favorable. Of course, there are some concerns in some of the industries. But for the overall six months of this year, for large state enterprises, their operation was quite favorable.
Some of the SMEs, small and medium enterprises, especially some of the operation short cycles, for example, less than three years operation cycles, indeed, it was quite serious, difficult. For the SME survey that we have done, some of the industries, first of all, the increase of the bank charges were also causing some of the reduction of our income. The second one is also on the labor cost. Whereas for the power and also for the cost of the raw materials, relatively on this issue, for the SMEs, part of them have encountered some difficulties. But overall, the state has also adopted some of the development on the small and medium enterprises reflecting in the industry. Coming to the asset quality, we don't see any kind of obvious change.
The state government is also supporting on the small and medium businesses. Whereas for the loans, we are also increasing our loans. For the current SMEs, especially on the small businesses, we have involved also like 35%. For the loan size, for the new loans, we talk about small businesses, but with a very tight control, including some of the new processes. We estimate that for the small amounts, we have a very small percentage of the NPL. But for the other industries, for the overcapacity industries, we have also had some kind of research, especially on the real estate, we also have some kind of stress test. Overall, for this kind of industries changes, we're not causing some kind of impact on our quality assets. But we do have some measures.
One is to have a very, very tight control on the loan, on the post-loan management. For example, the state government, because of the inflation, is also getting seriously increased, and the cost is also going up. There are also some transition period on the industrial structures, including the structural changes. For the post-loan management, we'll also increase some of the collaterals, but at the same time, we also control the risks and also on the combination of the quality loan. As Mr. Li just mentioned, reflecting to our balance sheet of the overall asset quality has also seen some improvement. Toward the end of this year, there will be also further improvement. But currently, of the overall macro industries in China, especially on the international financial market, will also definitely causing us a high focus and attention because we are also talking about the export-oriented business.
Also on the changes on the rates and fees, having a lot of changes towards the first half of the year. We are also, at the same time, maintaining our structural changes on the industries, many of the loans, and also we are focused on some of potential growth industries. For the SMEs, we will also have a very straight, also syndicate loans versus the market changes. It will be also a guarantee on the overall operation. Thank you.
We would like to invite at this time questions from Hong Kong.
Gentleman in the first row in gray jacket.
Thank you. I am from JPMorgan Chase. If I listen correctly, on the EUR and also on the USD, we have dropped 4% of the first half of the year. From your PowerPoints or the foreign exchange debt, it seems there is a 27.2% to the drop is because you have probably added some of the overseas loan. On the other hand, now that the world situation is quite volatile, will you further reduce also the ratio of this overseas debts? In terms of the increase, it was quite favorable for the first half of the year. Would you also compare to the local currency and also on the foreign currencies income and also on their periods? Thank you.
Mr. Yi will answer your first question.
From the Bank of China's group, apparently the overall on the bonds investment, we are talking about CNY 1,900 billion compared to last year, it was about 5.59% drop. Of the RMB, we talk about CNY 1,400 trillion, and with a drop of 6.33%, and the foreign exchange is about CNY 80 billion. Towards the end of last year was reduced to 1.34%. Currently, the bond, the total yield was about 2.87%, of which RMB investment was about 2.5 years on average, and the Forex was 2.3 years, and it was 2.1% at the end of last year. Talk about the foreign exchange on the average income, we are talking about 2.25% comparing to 43 basis points comparing to the end of last year because of the international situation, especially on the USD's Federal Reserve and also the European Central Bank's policies.
For the RMB bonds, we are talking about 2.98% comparing 21 basis points comparing to last year. In other words, the foreign exchange and RMB up. That is the general level.
Concerning your question, I would like to make some comments. One is that towards the first half of this year on the foreign exchange bonds, the ratio has dropped. The main reason is that the central bank has also adjusted the deposit ratio, and for some of the loans, we also are quite stable for the foreign exchange. The overall bonds has also dropped, but in the future, for the overall bonds investment, together with the amount, and also for the ratio, it will be determined on our saving increase and also depending on the reserve from the Central Bank, if there will be some changes. We are also having some kind of relative adjustment.
For the distribution of the bonds, we also pay attention that the sovereign debt has also a good income and also some kind of preferences. So in the future, for the domestic bond investment, we also pay attention. Whereas for the U.S. bonds, the treasury bills, we also have a certain number, but it is not so big, approximately $11.5 billion. Even if we have some kind of assessment for the U.S.A.'s credit rating. But for the sovereign level, we still believe that this is the best internationally bond investment tool. So we still believe that we will basically maintain this kind of amount for the investment.
The lady from the second line, second from left.
Thank you. I am Lucy. Just now, Mr. Li gave us a very detailed explanation about the LGFV. I have a question about BOC's response concerning some railway projects. What is the credit level for these projects? For the railway systems, what is the duration of the contracts? Is it going to expire this year, next year, or two years from now? What about the fundamental interest rate or benchmark interest rate? What about the return? Are you going to break even this year or next year?
These loans for the railway projects to the ministry or the relevant units. We are talking about CNY 80.7 billion and another CNY 1 billion odd for financing. So the level is 11.3%. You can try comparison with our peers. Our concentration level is lower than our peers. Concerning interest rate, we felt that the railway ministry loans are quality loans, and there is a lot of competition in the market. So we have readjusted the interest rate level. We have been liaising with the ministry, and basically, so far, we are talking about the benchmark interest rate and some with further downward adjustments.
Concerning repayment arrangements or durations, our overall arrangement is reasonably planned. We will focus on different industries and different segments. So for the railway ministry, this is a very well-balanced picture. According to our communication with the ministry, we believe that the repayment plan should be quite comfortable to them. There should be no difficulties.
Railway, expressway projects are green and highly efficient. They are very important parts of our infrastructure. We can see that railway transportation enjoys very good room for growth. The Ministry has adopted a number of measures to tackle existing problems. We believe that the level of safety and reliability, quality of services, and operation will all be enhanced according to these measures. All these measures are beneficial to the control of risk for the Ministry. We will continue to manage risk and set the price level at a reasonable level in offering loans to railway projects. We will also step up collaboration with the Ministry in terms of ticketing and other business collaboration. Thank you very much. I am not sure if you are happy with my answer.
Mr. Li, other members of the management. I am Tracy Yu from Deutsche Bank. First question, for the LGFV balance by the end of June, what is the figure? We have seen major banks who have already announced the results. We are seeing a rising trend compared to last year. Secondly, about the NIM. We have seen an increase of 2 basis points for our NIM. For overseas business, we have seen increase of 11 basis points, and the return is only 1.12%. How much of that is BOC (Hong Kong), and how much is for overseas countries other than BOC (Hong Kong) dragging us down? What will be the projection of the future trend?
I will take the question about the LGFV. The balance is CNY 531.5 billion, an increase of CNY 155.8 billion compared to last year. Basically, because of some loans offered to a number of units, and together with some changes in accounting methods. According to the caliber from last year or the current caliber, the LGFV balance is actually showing a downward moving trend. For our coverage, it is about 90%, fully covered 77%, only 5% with low coverage.
In terms of county level loans, 66%, 36 basis points higher than national average. 82% of the loans will go into infrastructural projects such as roads and bridges, land reserve, and security housing. Duration of contract, less than 10 years, 67%. This is a very good ratio. Asset quality, NPL 0.17%, coverage ratio, and also loan provision and total loan ratio, we have already covered that, so it will not be repeated. We have followed the requirements of the CBRC. Beginning from Q1, we have already followed the new risk calculation method, and that affects CAR level of 0.25%. The total figure is 12.95%. Without this factor, it should be more than 13%. These are the figures I would like to add for the LGFV.
The other question is about NIM. I can also give you some analysis for the first half, NIM compared to the same period last year, an increase of 7 basis points. Domestic segment, increase of 12 basis points. Within this segment, Renminbi-denominated segment, increase of 12 basis points. Foreign currency, increase of 44 basis points. The overseas segment NIM, only 1.11%, a drop of 24 basis points. Within this, there are two factors. First, interest rate element. The interest rate has been changing in the market, affecting 11 basis points. Another factor, Renminbi-denominated business has enjoyed very good growth.
For the overseas Renminbi business, the NIM is very narrow. For overseas NIM impact is 11 basis points. In fact, our income or revenue has been going up while the NIM level has been dropping. We are also concerned about overseas segment. For BOC (Hong Kong) together with other overseas branches, more or less the NIM level is the same, so I will not provide any further analysis on this point. On NIM, we know that the current level has been improved, although we are still lagging behind some of our peers for two major reasons. First, overseas portion is much higher than our peers. Overseas assets focus on low risk and low return business. Our client structure concerning large clients, they take up a higher portion.
In terms of risk control, that is a good point, but in terms of pricing, maybe it is not the optimal situation. This client structure is good when there are fluctuations in the market. The risk for us will remain low, but the NIM income will be affected. We are going to restructure our business. We have launched a number of strategies, and Mr. Chen has already taken you through some of them. In the next step, we are going to step up our business focusing on SMEs. Looking into the future, we feel that there is room for us to expand NIM. We can restructure our client makeup, and then there will be some impacts coming out later on. We will enhance the efficiency of our business network. We believe we can save more cost and enhance business efficiency.
You are also very concerned about development of overseas Renminbi business. There are a number of national policies launched facilitating overseas Renminbi business or offshore Renminbi business. The environment will be improved. With the implementation and execution of these policies, offshore Renminbi business NIM can also be improved, and also the revenue level can be improved. The overall enhancement of NIM for the group will, there will be a positive impact.
Please English speaker, for the sake of fair. The green tie gentleman in the second row.
If we could talk a bit about some of the other aspects that are going on with the internationalization of Renminbi. We have seen some recent announcements by the Ministry of Commerce to allow that foreign corporations as well as some domestic corporations may be able to use the Renminbi pool of liquidity that sits in Hong Kong, both for moving back into investments in mainland China, as well as having corporates access the bond market. How do you see that really impacting the speed at which you have been growing this international business, both through BOC's overseas operations as well as the BOCHK ?
Maybe I can take this question. On the 17th of August , the State Council of the People's Republic of China member attended a seminar in Hong Kong, and he announced that the central authority supports the development of Hong Kong in six areas. Our representative from Bank of China also talked about 10 details. On the 23rd of August , there was this announcement of expanding offshore Renminbi business. BOC , including our 11 branches inside mainland China, has taken steps right away to respond to the new measures.
Bank of China, when conducting the overseas RMB settlement, will also have advantage. From the two years trial period, we have seen that the amount was already a breakthrough of CNY 1.4 trillion. Currently on the domestic and also 24 overseas branches, altogether we have approximately more than CNY 1 trillion settlement. This business is much, much more than what we have done last year. Currently, in the cross-border RMB settlement, percentage is already more than 30%. In terms of the market, we have already a kind of a leading position. The central government also supports new policies in Hong Kong. There will be also a very good impact to the Bank of China. One, on the cross-border RMB settlement now is expanding to all over China, especially on the FDI.
Of the three categories in investment institutes and also on the backflow of the capital will be beneficial for the cross-border RMB settlement. There will be also a much better channel for further development. On the offshore RMB market, it is also rapidly developing, especially on the credit and also the bonds and also securities of the RMB are also facing a very good opportunity. In this way, Bank of China, for the current cross-border RMB settlement, as a major bank, will further develop BOC (Hong Kong) as in Hong Kong, the one and only settlement bank.
The third impact is that we will continuously enhance both interaction from home and abroad to effectively motivate also the overseas RMB settlement exchange and also on the cash transportation, and also deposit and loan development, because Bank of China has certain to have a transformation and innovation development and also to have an internationalization of the bank's business. At the same time, the new policy will support further banks in Hong Kong to develop in China to introduce Hong Kong ETFs. This will also support the Hong Kong banks in China to have a mutual development, including also insurance companies in Hong Kong with a strategic alliance to cooperate in the domestic market. This will also further be beneficial for the BOC to complete also our deployment of all kind of business, enhancing the concerted development for Hong Kong and China.
Thank you very much. Time is up. Once again, thank you, Mr. Li, and also Mr. Chen and Mr. Yi. Thank you very much. If you have any question, please contact us continuously. Thank you for your participation.