Thank you for your introduction. Now we are going to the Q&A session. Since there are many participants today, so everyone should raise only one question each time, and we will have two questions raised by on-site and one from online. Please state your name and the institution that you represent before your question. Now, we will have the first one.
Thank you very much for giving me this opportunity. I'm Richard from Morgan Stanley. My question is for Mr. Wang, and this is also a question I'm very interested in. As you just said, now we are facing quite a complex, overall economy, and the pricing of the loans is a little bit complex, a very mixed situation, and some pricing are very low.
So if we look at other countries, like in the United States before 2008, many banks, they don't have any expansion of balance sheet. So for the banks who are reluctant to expand in a hard time, actually enjoy quite a brighter future when the economy bounce back. So what is your strategy towards that?
Thank you very much for your question. And you have noticed that from the loan growth for the banking industry in the first half is around CNY 16 trillion. It's quite a fast speed, and it's a historical high level. But it's true that there are some irrational competition in it, and it's a kind of a chaos. Some of the loan pricing is even lower than the deposit rate. So the NIM of banks is coming down rapidly, and a contraction of NIM is very obvious.
For CMB, in the first half of the year for asset origination, we actually have done quite well. We have loan growth over CNY 300 billion, and we invest more into debt investments, and it's up around CNY 200 billion. Our feeling in the first half year is very obviously, namely, asset decides liability. This is the rule. It's becoming more determinant currently.
In the first half of the year, we have a deposit growth grown over CNY 800 billion. It's higher than the loan growth, so which means that assets growth should decide the deposit growth. The other thing we are feeling very obviously in the first half of the year is that how a bank can manage its asset and liability structure is becoming even more important. For loans is an important part of the asset allocation.
So when we are getting the deposit, how should we allocate into different asset classes and have a better yield is very important. So actually, for the liability side, we are having multiple channels, including deposit, financial money market funding, and also from financial institutions, so as to keep a balance of the cost of the liability.
In terms of the asset side, we are still focusing on retail loans, but for mortgage, still negative growth. That is why we are making more efforts in terms of microloan and also consumption loans. For corporate loans in the first half of the year is around CNY 200 billion growth for the first half. But we are optimizing our allocation in terms of regions and also customers when we are making more efforts in inclusive financing and also green financing.
This is what we have done in loans to more effectively manage our loan portfolio, so as to both ensure the asset quality as well as the loan yield. Secondly, very importantly, is to stick to a optimized asset allocation. Thirdly, very importantly, is we think that commercialized and market-oriented is a very important principle.
Only growth in asset size does not have any meaning for us. We still need to bear in mind the risk and also the pricing of the underlying loans, namely, the loans we create should create value for the bank, should cover the funding cost, the operational cost, the capital cost, and also the risk cost. Since we are trying to be very rational in terms of the asset pricing, which means that many assets doesn't meet our criteria.
That is why you are seeing that we have strong growth in corporate loan in first quarter, but slow down in second quarter. But still, I think we need to stick to this commercialized and market-oriented principle. Risk and reward principle is the right path for us. Just now, you mentioned whether we need to consider a relatively rational growth rate of corporate loan.
Yes, I do think for us, most important thing, we should prioritize asset quality and also proper and reasonable growth size of asset size, and also we need to pay attention to the pricing. Next question, please.
Thank you for giving me this opportunity. I'm May from UBS. My question is regarding asset quality. First, congratulations on the midterm results and the solid results you have in the mid-run.
I know that many are very interested in asset quality. The first one is real estate developer loan. Just now, Mr. Wang said that in a presentation that your exposure for real estate is coming down, but actually, we are continuing to have risk coming out from the property developers. So when do you think your provision will peak for developer, especially such as Country Garden?
Like in 2021, I heard that CMB has around CNY 30 billion exposure in Country Garden. And secondly, how do you classify the underlying assets, whether it's already been classified as NPL or is still in the normal loans? And also for other developers like Fuli and other privately owned property loans, what is the asset classification for them? And my second question is about the risk of retail loans.
You have quite a rapid growth of consumption loan, whether you will have potential risk inside that. I know that your credit card business is doing very well, and it's kind of de-risking in these consecutive two years. And another consumption loan is from the China Consumption Company. They are also doing consumption loan, whether there will be potential risk. And thirdly, my question is regarding local government financing vehicles. Are you seeing any projects relating to LGFV? Are they going to roll over and also cut interest rate that they pay to the bank? Sorry for that, there are so many questions.
Yeah, Mr. Zhu will answer the question.
Thank you for your question. The first one is risk relating to real estate. Our view is that from policy side, as you can see, as for the Politburo conference, they have a new statement, namely, in order to be in line with the new circumstances, we need to readjust our policy in real estate. Namely, I think the central government is sending a more positive signal to the market.
But from the launch of policy to the recovery of confidence, and also in return to the recovery of the buying power in the market, it takes time. And in the first half of the year, if you look at the sales volume, it's down by 5.3%. And in July, sequentially, and also year-on-year, it's falling down, both from these two aspects. So from this year, I think that there are more new default entities, just as you mentioned, some big developers default.
So we think that at WC, there is continuous diversification of these entities, developers. In the first half of the year, we have new NPL, around CNY 4.8 billion. It's much less than the same period of last year. And in the second half of the year, we think that the new NPL formation, the amount will be larger than the first half of the year, but compared to the same period of last year will be less than the same period of last year. So overall speaking, our NPL formation for real estate this year will be smaller than that of last year. And if you look at the NPL, by the end of mid-year, it's over 5%. It's slightly up. This is mainly because we have a slower disposal of NPL process, so it's also within our judgment at the beginning of the year.
Overall speaking, our peak of NPL formation is in 2022. I think I can make this judgment. For NPL ratio, it's affected by multiple factors. If we take a more optimistic view, I think our NPL ratio, we are going to see the turning point within this year. Secondly, for Country Garden. As for Country Garden, our exposure to Country Garden, we have cooperation with Country Garden. We didn't disclose the exact amount in our midterm report. So what I can say is that the amount that we are cooperating with Country Garden is equivalent to CMB's market status among our peers. If we look at the structure, 87% of our cooperation is concentrated in the bank, namely from the loans from the bank.
And the coverage ratio of our loans to the underlying to the collateral coverage ratio is around 1.5 x. For overseas investment in Country Garden is around 5% of the total. It's clean loan, so if there's a default, then these will be more at risk compared to the ones that we have in domestically. And we also have one trust products, that is, agency sales from our private banking, and it will be settled within this year. And another part, around 4%, goes to the underlying assets of CMB Wealth Management, and the risk is already affected by fair value in the products. Overall speaking, for real estate, for the whole property sector, our allowance to loan ratio is around 15%.
It's two times over our average corporate allowance to loan ratio, and by the end of the midyear, it's continued to rise. As for how we classify the assets, our principle is as follows: First one, we need to look at the corporate entity itself, whether it's default in a market. Secondly, we need to look at the underlying collateral, whether it has a more better coverage over our loan. And thirdly, we need to look at whether the project is overdue or not. Fourth, we also need to look at whether the company is facing other litigations. By combining all these factors, we will consider how can we classify these assets relating to property. And I think that the amount that has not been reclassified as NPL is around CNY 7.3 billion.
Secondly, around the risk for consumption loan, and we are concentrated in collateral retail loans. This is our main strategy. Among our, our retail loan, collateral loan is over 80%, and the asset quality of our retail loan is overall stable, including credit card. Our amount of NPL and also NPL ratio are all coming down. And for consumption loan, we do have a more rapid growth this year. This is mainly because, one, the consumption is recovering, and secondly, mortgage is coming down. So compared to us, our—we ourselves, the consumption loan growth is quite rapid, but compared to the whole market, it's not a rapid growth. And the asset quality of our consumption loan is also stable. Our NPL and special mention loan ratio are all coming down slightly on a year-on-year basis.
So why we need to increase the proportion of our consumption loan in our overall retail loan portfolio? This is mainly because we are confident of the asset quality. Firstly, we think what decides the risk is not only this, risk is not only decided by the underlying collateral, rather, it's more decided by the customer. Sometimes, the clean loan with better customer have a better asset quality than the assets with collateral even with a collateral.
Secondly, very important, is we highly emphasize on high-quality customer, which means coming from high, good industries and have a good career, and also have assets with CMB. Thirdly, risk pricing is very important. Namely, with a higher proportion of clean loan, we will have a higher yield as well. If we look at the risk reward, namely, ROIC perspective, consumption loan is higher.
The ROIC is higher than mortgage. At the same time, we have a risk measure. In these overall very complex risk circumstances, we are able to maintain the risk stable. Even within the COVID times, we have maintained solid asset quality and have already undergone these volatile times. So based on this, we are confident that we have the, we have the confidence to do, better, to have maintained risk, the, the asset quality.
But currently, doesn't mean that we need to lower down our guard against risk. We will continue to choose the better customer quality. We will not lower down our criteria for customer onboarding, and to improve our risk model for this consumption loan, and to better identify the potential risk.
Finally, I would like to say that in growing—for outgrowing our assets, for the impossible triangle, quality, volume, and also pricing, the top priority is always risk. And thirdly, I would like to continue with the risk for local government financing vehicles. By the end of the mid-year, the NPL of LGFV is 0.14%, the same of the last year.
Special mention loan ratio is 0.63%, slightly up compared to the period of last year, but still at a very low level. And that is why I want to say the risk is under control. And second, if you look at the structure of our business relating to LGFV for high-risky regions, the balance, the proportion of exposure to high-risk regions is less than 10% of the total balance. And it's mainly in the transportation and also public utilities for industries.
So our principle for doing business in this area is to select better regions. We have differentiated regional policies. Secondly, we choose the LGFVs, choose the better ones. Namely, we emphasize on transportation and public utilities. Thirdly, compliance is an important, very important thing for us. All business should be compliant. Namely, we, we will not touch the hidden debt business. Fourthly, commercialized principle is the top priority for us for doing this business in local government financing vehicles. So overall speaking, risk is under control. And definitely, we will continue to do risk management in this area, especially for risk relating to high-risk regions.
Next, we will have a question from an online participant. Now is the online Q&A session. Please press the More button if you're joining from mobi-mobile end. Please press the Participant button if you're joining from a PC. Please open your mic and camera before you raise your question. We will have the question from Guotai Junan Securities, Mr. Jun Zhu , for his question.
Can you hear me? Thank you for giving me this opportunity. I'm Jun Zhu from Guotai Junan Securities Asset Management. I have a question for the strategy. Around two years ago, in around the 2020 annual report, we proposed the major direction of our strategy, and I have noticed that in the recent two years, under such economic and political environment, we see a lot of changes. I would like to learn from the senior management in the future development of CMB.
Combining the two years' changes, do you have any new thoughts? And are there any possible changes, directions for the future development? Thank you.
Thank you for your question. As you said, two years ago, CMB has proposed our 14th Five-Year Plan. Our position is to build a model leading bank with distinctive features and a bank with value creation. This is our strategic objectives, and we will follow our direction to build a value creation bank to the extent our business operation. The strategy remained unchanged. We will maintain our strategic determination. In terms of strategy, we will closely follow the changes in the external environment and adjust accordingly to further implement our strategy. As we stick to our strategy objective, this is our core value, also our philosophy for the whole bank.
So this objective is also in line with our future development trend, so as to realize the high quality growth for the bank. In realizing the strategy of value creation bank, we need to act accordingly to the macroeconomic situation and according to the development phase of the bank, to conduct further optimization and to implement new counter measures.
In last year's result announcement, I think we have mentioned that the strategy is constructed based on our previous retail banking and light operation bank strategy. We will further consolidate our advantages in retail banking strategy. In our current phase, retail banking strategies will be further innovated in terms of our service model, business model, so as to maintain our market position. This is our mindset.
That is to guarantee our systematic strengths in retail finance business, to transform our strengths, to better respond to the changes in the macroeconomic situation. Secondly, the light operation banking strategy, we have previously summarized it, as it is one of the major solution, that is to leverage the utilization of capital light business to realize capital endogenous solutions.
And leveraging on this, we have, in 10 years, not raised external capital to increase our internal capital growth. And therefore, in terms of our operation and business positioning, we will stick to an operation manner of low capital consumption to bring better returns to our shareholders. So in current stage, these two above-mentioned strategies previously used, the new strategy is proposed based on these two.
In the following page, combining the external environment, we propose to deepen the regional-based development strategy, to especially focus on Yangtze River Delta, Pearl River Delta, Chengdu-Chongqing, Western Strait region, and other developed provinces and cities to enhance our core competitiveness, to bring more value to CMB. Since last year, we have extended such kind of strategy, although it has not been long, but we have still seen fruitful outcomes. Secondly, we will further promote the CMB strengths and develop in the niche markets, in segmented businesses, and to build up our strengths. In key products such as credit card, wealth management, asset custody, private banking, these are all our competitive strengths among our peers. What about the next step? How to accumulate our strengths?
We need to study further on the market changes and act accordingly, combining our own strengths and forge a new competitive strengths. In Fintech, green finance, auto finance, pension finance, and digitalization of Fintech capability, how could we further innovate and build up our competitiveness in above-mentioned field, and outperform our peers and maintain our strengths? So in the head office level, we have specially established teams to understand, to learn better, and to cultivate the strengths mentioned earlier, to lay a solid foundation of our future development and to build up our new capability. This is what also proposed by Chairman Miao, to combine, capital light. Capital heavy business is the foundation, and capital light and capital heavy business shall be combined together. We need to build the new Malik curve of growth. The new growth pole is extensive wealth management business.
It is a capital light business with low capital consumption, with high potential of growth, and will bring better contribution to CMB as well. This is what we need to cultivate in building our new growth pole. We have large market space, we have the strengths, we have the capability to find a new growth area. We need to make enough investment in such fields to realize us as a bank with leading model, distinctive features and value creation. This is what we will do according to the external environment, and make flexible adjustments accordingly, and realize our strategic objectives.
Thank you, President Wang. And now we will have the next question from an on-site participant. The gentleman, please.
Thank you for giving me this opportunity. I am Zhang Shuai from CICC. I would like to have a question for Ms. Wang . As you have taken in charge of the retail business for quite a period of time, it's also my first time to meet you. I understand that retail finance is the advantage strengths business of CMB. Also, where the market's valuation are coming from. Currently, the asset business, the wealth business, are influenced by the economic and market cycle, and we are seeing insufficient demands in the market under such backdrop. What do you see about the future development of this business? Where is the future efforts in the retail business in CMB, and how will it grow in the future? Thank you.
Thank you for your question. I've paid notice to the articles you published.
And the question you ask is quite a big question. I will try to divide it into two aspects to address it briefly. The first layer is that the future efforts of the retail business growth is that to see from retail business itself, we have taken careful consideration that CMB's retail business developing into today's results with such leading advantages is because under such a system, we have developed actually leading advantages in each sub-segments. Retail, PB, retail credit, credit card, regarding AUM, MAU. These all aspects are all leading, and together they construct our overall strengths. Therefore, the future efforts, the future growth poll of retail finance, is not a single growth point, but a growth of overall. These aspects are all what we need to consolidate and intensify.
For emerging areas, pension, wealth management, buy side, consultory, companion service, family trust business, these are new areas we need to pay attention to. Why are we doing so? I'd like to answer this question from two aspects. On one hand, retail is a system-based operation. Strengths in one single point cannot support a systematic development. Only by an overall strength can we support the retail finance to be a strong business. Sunflower level and above clients nurture diamond-level customers, and level by level, these clients support with each other.
Another consideration is that, on the other hand, in the future, probably long from present, as we are strong enough in retail finance, we might have selected based operation. We might have specific focus on specific areas, one or two or three areas, but not an overall development in today's stage.
However, regardless of CMB or other banks, regardless of different business segments in retail banking, they are all in an early stage of development. We have no reason to give up any sector under retail finance. It is only little strengths that we accumulate today. Retail in retail finance, credit card in retail finance, and retail credit in retail finance, they are all making just little steps, little progress. They are just the beginning of our development. We might even fall behind in the traditional payment business. So therefore, we need to correctly value what we have achieved in these segmented business, and we have to act accordingly to President Wang's requirement. To have a three to five-year plan, we need to carefully evaluate what we have achieved in these niche markets and to carefully evaluate the progress we made in the market.
I believe that they have a different path of development, different standard of, of criteria in the retail business segments. We will further consolidate the foundation of quantity. That is referring to three aspects. Customer base. To expand our customer base, 190 million. We have only 444 million customer for clients holding our wealth products. APP clients, just 111 million. These are all opportunities with large growing space. We have a large number of RMs covering hundreds of thousands levels of of clients. We have over 350 asset managers to form our open wealth platform. This is what we called about quantity. We need to further consolidate the platform. In increasing the quality, we will continue to construct our four systems and one support.
Due to time limit, I won't illustrate too much on that. The product, the asset allocation, the human plus digitalization, and the outlets plus online service, and the RM covering customer service groups system. This is the full system I mentioned. I would like to pay special attention and specially mention the fintech capability, the support that is fintech. CMB's retail business development or CMB's development history is relying on fintech. We could call it a history of fintech. Every leap we made, every development we have, is based on fintech, our leverage of fintech. The All-in-One Card, the segmented and classified service system, the All-in-One Net, the CMB application and CMB Life application, these are all because of the fintech capability we have. Our AI lab is now utilizing one of the top-tiered companies and universities.
We are leveraging these intellectuals to promote our AI capability. I believe this is the foundation where we can promote the development of retail finance. This is to see from internally, what we need to grow in the retail finance sector. Secondly, we aim not just to deliver efforts from inside of the retail finance, but also outside from the finance, retail finance. We need to strike a balance between development of different business segments. In the past practice, where we can see good performances. In the top level of financial institutions, we need to see a flywheel, a coordinated development between corporate finance, asset management, asset custody, and et cetera. And all of these segments will work together to further promote the development of retail finance business. To see from the two perspectives, this is what we want to address your question regarding retail finance.
So frankly speaking, your summary or your analysis of current situation is quite precise. Currently, we see a downward trending of the economic situation. It is also casting influence to CMB, to CMB's AUM, especially for CMB's feature of light capital operation. As we see retail finance developing in today, it's an adjustment period under such rather unfavorable environment. I don't think it's a bad thing. In the past, we see very progressive development, and I think during this special period of time, we can be quiet, which can also let us to think deeply to see what is our future development path. We see difficulties in the market condition, but our aim, our trend, and our development objectives to expand and to strengthen our retail banking business, we will continue to investment resources into this business segment.
For us, our requirement in the total volume, we wish that we could develop our retail finance business, the total asset, the total revenue contribution, the net non-interest income contribution, could be increased from 50% + to over 60% +. We can also expect higher contribution from retail finance to the group's total revenue, total interest income, and total net non-interest income. So for CMB, just as President Wang has mentioned, retail finance is the foundation and the main position of our strategic position, and let retail finance become the platform of our ecology, the cornerstone of our asset business, and the leader of our value creation. In doing retail finance business in CMB, we have both honor and responsibility. Me and my team, among 100,000 CMBers, 60% of them are coming from the retail finance business line.
We will strive our best effort to promote this development. I think doing retail banking business in CMB is quite different from that in other banking, in other banks. We believe it is a bank that every employees could talk about, could introduce, could present, could introduce such retail solutions to our clients. This is the essence within the banking culture. It is a proactive measure taken by every employee that they could, they want to, and they have the capability to conduct retail banking business marketing. At the present, we are quite clear about our strengths and our disadvantages. We have clear understanding, and we have in-depth analysis, and we have very good preparation.
I hope that our dear analysts and investors, at the same time, when you're analyzing our individual financial capitals, we can also work together to see from CMB's in terms of our overall performance, and we will prove ourselves. Thank you.
Thank you. Next question, please?
Thank you for giving me this question. I'm Catherine from, from JP Morgan. My question regarding NIM. We noticed that in second quarter, we are seeing the, the contraction of NIM is bigger than the first quarter. So what is your expectation for the NIM performance in the second half of the year? And second question is for Mr. Zhong, for corporate banking. For deposit, especially in NIM, the term deposit rate is up compared to, compared to last year. So what will be the trend for term deposit in corporate banking? And for corporate banking, many banks are saying they are-- they were emphasizing on developing, manufacturing or green financing. It seems that everyone is moving into the same direction. And what is CMB's strategy in terms of pricing?
How do you make a balance among risk and reward, and also customer strategy? Thank you.
The first question will be answered by Mr. Peng, and second one for Mr. Zhong.
Last year, banking in China facing NIM contraction. Every time when we are discussing the performance of CMB, I always say that the NIM is always under pressure. In first quarter, I said that we are facing a contraction in the second quarter. As we can see now, not only CMB, but also other banks, according to the information disclosed, that is, quite obvious that NIM is under pressure. In second quarter, our NIM is 2.23%. We definitely have seen a very obvious contraction, sequentially down by 13 basis points to 2.16%, and the level of the contraction is quite big.
So I would like to make my view on that. And also, I would like to analyze the reason behind that. There are some common reasons, but some are unique for CMB. Firstly, for the factors affecting NIM, one is structural factor, the second one is pricing. NIM is decided by both structural and pricing. And structurally, we can see from asset side, CMB has a unique feature, namely, we have a higher credit card proportion and also mortgage. In the past, they are contributing a lot to the whole asset structure. In the first and second quarter, they are facing greater pressure for mortgages, down by 0.76%. Even though it's decreasing, but still we are maintaining our market share. But for CMB, we have a larger proportion for mortgage compared to other banks. Second one is credit card.
Credit cards will have a higher yield. But for CMB, even though we have the highest growth volume in the market, but for existing amount, it's only up by CNY 20 billion, and the growth rate is only a little bit above 2%. So the slower growth rate of credit card and also negative growth of mortgage, definitely have a very negative impact on our NIM structurally. Second, if you look at the liability side, you can see the proportion of our demand deposit. This change, yeah, definitely many banks are seeing the trend, namely, demand deposit proportion is coming down. But it's more devastating for CMB, 'cause we have a higher liability coming from the retail side. And some of the deposits can also be regarded as, also as wealth products.
That is why the cost for our savings deposit is coming down, 'cause many customers are choosing to place deposit with us as one of the choice for wealth management. And for common reasons, I think if you look at the second half of the year, the LPR decline, continuous decline of LPR, will lead to a decline in the loan rate. Secondly, for supply and demand, now we are still lack of efficient assets. When everyone is chasing for the same asset, definitely will lead to a lower price. So that is quite obvious in corporate side. And secondly, for retail, the risk is, the price is also coming down sharply, like as credit card, like the micro and also consumption loan, and also mortgage, they are all coming down. Some are macro reasons, but some are due to supply and demand.
So the pricing of assets have also negative impact on NIM side. Overall speaking, I think that many of you are interested in the sequential changes. We lay high emphasis on analyzing sequential changes in NIM, because it shows some trend. I know you have noticed the difference of our sequential change compared to our peers. The first one is, it's quite of our peak for loan growth in first quarter. So last year, at the end of last year, we will step up efforts to prepare for loan allocation, loan growth in this year, so a very strong momentum in first quarter. But in second quarter, the growth pace is coming down. Secondly, sequentially speaking, the liability continued to rise sequentially. It's quite obvious in second quarter, we have even more term deposit, and the demand deposit proportion continued to decline in second quarter.
But it's not unique for CMB this year, but for, if you look at the past years, quite the same. And if you look at the first quarter, NIM, first quarter year-on-year base is down by 22%. But if you look at the first half, it's down by year-on-year, 21 basis points. So which means that last year's second quarter is also down by 14 basis points sequentially compared to first quarter. So the bigger contraction of the NIM in second quarter is both our unique... It's kind of a unique thing for CMB. And if you look at the-- I prefer that you can also... I suggest you can look at the NII growth. So for the banks who have disclosed the midterm reports, well, as you can see, we are the only one that have positive growth in NII, up by 1.12%.
For NIM, it's down by 21 bps. We are one of the largest declines. But what is the reason behind the positive growth of NII? Our RWA growth is 6.8% compared to last year. It's down by around 1% compared to last year. So which means that our growth in NII is not coming from lowering down the risk and bluntly expanding asset size. 'Cause you can see our RWA is also declining compared to the same period of last year. We are bearing in mind the external environment and not to blindly expand our balance sheet. So these are, I would like also to elaborate on things that you may interesting, such as the rise of the funding cost, deposit cost. I think one of our advantage is we enjoy quite a lower deposit cost.
So deposit cost is something that we're always paying attention to, but from the first half of the year, it's coming up, it's rising year-on-year basis. If we take another angle to analyze it, we can see that for corporate and retail, it's mainly because the retail deposit cost is rising. But if you look at the term and also demand side, term deposit cost is coming down, but demand deposit cost is coming up, it's rising. Thirdly, if you look at RMB and also foreign currencies. For RMB-denominated deposit cost is coming down, but the foreign currency cost is coming up. So foreign currency deposit is also another reason that has shown up the deposit cost.
But I don't think we need to emphasize on the foreign currency side, 'cause you are also gaining more yield on the U.S. dollar-denominated assets, which can offset the cost. So I think overall speaking, cost rise is mainly coming from the retail side. And one thing is because of the rise of the cost of demand, retail demand deposit, and also at the same time, we have more term deposit from retail, from retail side. These are the main two reasons for the rise of the deposit cost. I know there are many reasons and also phenomenons, like the... We can see that our customers' risk appetite now is still low and very prudent. That is why they choose more deposit over other financial products. Just now, Ms. Wang said everyone in China know we are emphasizing on retail banking.
For I, as a CFO, it's also a choice for me, whether we want to maintain stable growth of customer base. If we choose to do so, sometimes we need to sacrifice some financial. We need to have some financial cost. So this rise of the retail deposit cost is still within our budget and within our expectation. This is something that we have already judged at the beginning of the year. And according to our internal arrangement, we want to keep a balance among the customer demand and also the deposit cost, so as to maintain a stable growth of customer base and also our AUM. And for the rise of cost for demand deposit, you may know that some other banks' cost is coming down, but CMB is rising contrary in there.
So the reason is for the cash management, wealth management products, we are the first bank to regulate our cash management, wealth management products. So we have offered more time deposit products to make sure that the customer's demand should be satisfied. So it's a temporary thing for us, and we still have a very strict regulation on demand deposit cost, and it's within our expectation. Thank you. And secondly, about the trend of NIM. Overall speaking, I think that we are still facing great pressure in NIM. One reason is because the quite a complex external environment. And secondly, from policy side, there is still room for LPR to continue to come down. And secondly, for the existing adjustment, for the adjustment of the existing mortgage rate, it's highly possible that the rate for existing mortgages will be downward adjusted.
So with the interest rate liberalization against this backdrop, the NIM for Chinese banks definitely will be coming down. Now we are facing a very low yield on asset side. I think that the banking self-disciplinary mechanism will take more active moves to maintain a reasonable deposit cost for banks. Thirdly, I would like to respond to another thing that you are very interested in. If you look at the policy side, we can see that PBOC is guiding banks to adjust the existing mortgage rate. It's very highly possible. For CMB, we have made plans for that, but it's not finalized yet. 'Cause we need to consider many factors, such as for different policies for different cities, and also how to be fair for different policies among different cities.
And thirdly, whether our system can support these different policies. It's a very complex thing. I think with the guidance of the PBOC, we will do under the market principle and also law-based principle. And actually, for our internal analysis, we have three scenarios, from the better one, and also mediocre one, and also the worst one, but I think the overall impact is within control. But it's not only have negative impact on bank, but also have some positive things. Why the policy side want to adjust the existing mortgage rate? This is mainly they are seeing a very big flow of the early repayment. So if the existing amount, rate of the mortgage has been adjusted, then we will have less early repayment.
And also, at the same time, it will help us to maintain our relationship with our customer. I think that we also need to look at the long-term benefit from the reduction of the existing mortgage rate. Yeah, definitely, pressure is big, but we will try our best to balance the risk, volume, size, and also the pricing side. Hope that our NIM and our deposit cost can maintain our leading position in the market. Thank you.
I will answer your second question. The first one is about the term deposit trend of corporate side. It's quite obvious. The reason is quite obvious. This is mainly because the economy in the first half of the year is quite weak, so investment and also operation for some enterprises, the activity is lower or smaller.
So some enterprises choose to place with a bank as a term deposit. It's highly related to a bank's operation, and also highly related to the overall economy. If we look at the second half year's trend, the central government has many policies to stimulate the economy. When the policies are taking effect, I think next phase, this trend can be improved or mitigated. For CMB, for corporate business, we highly emphasize on customers' settlement business, namely, we call us to be a primary bank for corporates. So our demand deposit proportion is higher, is the highest among our peers. And next, we will making efforts for fintech. And I think that the demand deposit proportion of, of our corporate deposit will continue to rise, which will strengthen our advantage in corporate side. This is for your question regarding term deposit.
Second, your question is quite big. As for the competition among the banks in corporate banking or what is our strategy, namely, peers are doing the same thing for corporate banking business. I think there are mainly two reasons behind that. The first one, commercial banking's corporate banking business is quite the same for all the banks. Yes, it's true that all the commercial banks are doing the same thing in the corporate banking. Because when we look at the national economy, we are seeing the same trend in the industry's growth momentum. So it's reasonable for every bank to choose the same industry that enjoy a better momentum. And for CMB, we do have our own positioning and our strategy.
As Mr. Wang Liang said that we need to build our advantage in niche market, such as for in corporate banking business, we need to strengthen our capabilities in some niche markets, and find our differentiated way. At the beginning of the year, we said we need to have seven financial capabilities, five financial areas. I think there are mainly two directions. The first one, seven financial areas means represents the main trend or direction or the areas that may enjoy a better momentum in the future. And secondly, it's also based on the existing advantage we have, such as... I will not elaborate all the seven financial areas, but I would like to choose two. The first one is digitalized and intelligent service, namely to based on the enterprise's digitalization, how our financial service can engage with them. And this is a specialized thing, a direction we have.
Secondly, is another advantage that we have accumulated for many years. Around 15 years ago, we started to do cash management business for enterprises, namely, cross-bank cash management for enterprises. I think for the years past, we have accumulated more experience and knowledge in these areas. That is why we have launched our—this kind of, digitalized cash management business for our corporate customers. Secondly is for technology finance. It's also 10 years ago, we have a small enterprise program, namely, Thousand Eagle Flights. This program to help these technology firms to go IPO, to go public. And this, we have built up our strength also in this year, in this area. We serviced over 1,000, over 1,000, these kind of companies in the past three years. And 85% of the tech companies that went public have already opened primary account with CMB.
So against this national backdrop, how we can choose a diversified way to develop our business and to maintain our advantage and to build up the advantage in niche market is really key for us. Thank you.
Thank you. Next question. We're having a question from an online participant. The next question is coming from an individual investor, Datou Huzidi.
Can you hear me? Yes. Thank you. Thank you, senior management, for giving me this opportunity. My question is regarding President Wang. As you have taken management of CMB for over one year, for CMB's operation in the short run, within this year or within one year from now, what is your most focused problem? In the middle round, from three years to five years, what is your most focused question?
Regarding these questions, what measures are you gonna taken to tackle?
Thank you for your question. I've also learned in-depth regarding the article you published, we released online. It is very accurate and precise, in your opinion. As for your question, in the short run and in the long run, as for in the short run, I believe that you have pointed out many of our disadvantages, and that is also what we will put under careful consideration. In our first monthly, quarterly report, you mentioned that there are no excuses, and please do not emphasize on objective reasons. This is all comments that make us to think thoroughly to impress our results, impress our performance, to cultivate and to bring better returns to our shareholders.
So in the middle run, we pay much attention to maintain CMB stability, to work further, and cannot cause risks in the short run that could influence our overall development and our overall stability. Well, as I consider the first question, as we are faced with this macroeconomic situation, CMB as a micro entity, how to balance the relationship remains to be a question. The interest rate downward, this is a trending change. But as a commercial bank, CMB must maintain certain profitability. This is another necessity we need to guarantee. So there is a kind of, like, contradiction between them, and how can we balance the two factors? So based on these insufficient credit demand, and to maintain sufficient liquidity and to satisfy our customer demand, these will all lead to the narrower NIM and downward interest rates in the market.
These are all challenges that banks need to face. To guarantee a reasonable level of profitability of the bank, it is very reasonable, which is also recognized by the central government, to guarantee a bank's capital endogenous capability so as to provide better service to the real economy. And secondly, to maintain a reasonable level of NIM for the commercial banks could contribute to further mitigation of risks and to further offset relevant risks coming from real estate sector, coming from the local government financing platform. And these risks all rely banks to further dissolve, to further mitigate. And for the third aspect, commercial bank need to maintain a reasonable level of operation to further consolidate the strength, confidence of the depositors that they are willing to place deposits with these banks. They would not like to deposit in a bank with poor performance, with loss.
That is why we need to further consolidate our cornerstone of our development. So under such backdrop of low profitability, of narrower NIM, of low market interest rates, we need to face these challenges, and how can we respond to these challenges? And as for us, if a bank, if we position us well, if we operate well, if we can maintain a reasonable level of profitability, even under narrower NIM, some banks that can realize the above-mentioned conditions can survive in these challenges. And I believe that with what we have done, we can be the batch of banks that can survive this kind of, like, situation. And some banks might not survive in that kind of deteriorating external environment.
So we aim to continue our development path and to make us the one of the batch of bank that could survive, that could live up with the current economic external environment. And secondly, real estate, a gray rhino, we might call it, we need to see the risk fully exposed and to fully mitigate the risks. That is a question where we would like to see the risks of such risk rhino, a gray rhino, to fully exposed or to mitigate. We believe that we have already seen the peak of such risks, and for many commercial banks, including CMB, we have the capability, we have the strength to mitigate, to digest the risks coming from this sector. So therefore, I think as we still have relevant NIM, as we still have our profitability, we must act accordingly to accelerate, to digest such risks, to mitigate such risks.
This is what CMB, since the outbreak of the 2021 real estate risks, the default of some private real estate companies through the two years of development, we have dissolved, digest, and mitigate many risks coming from this sector. And therefore, just now, Mr. Zhong has mentioned that we have already seen the peak of the real estate risks, and we aim to maintain the trend to be overall stable and trending towards the positive direction, and to generally digest and mitigate the negative influence brought by the real estate sector. On one hand, risks coming from the on-balance sheet, and on the other hand, financial investment over some real estate companies, some securitized products, and some agency sales products, trust schemes, represented by some PB products. Many of these risks are trending towards an closing phase.
I believe that by mitigating such risk can make us develop even more healthily. The inspiration we learn from it is that we cannot repeat the mistakes happening in the real estate sector. If there are further gray rhinos happening in other sectors, we need to act fast, respond fast, and to mitigate and dissolve the risk accordingly to make us live and carry through those phases. The second question is, for CMB, for the first half of this year, the overall operation of CMB remains stable and healthy. After we mitigate the risks, we maintain our profitability to be positive, with a little negative growth in terms of our general revenue, mainly because of some external market adjustments. So the fundamental feature of CMB's operation remain unchanged. We have a very solid foundation of operation and development.
So the fundamental development landscape for CMB is that we have a very strong capital endogenous capability. We have a strong allowance coverage ratio. With that foundation, make us very confident to cope with all kinds of challenges and uncertainties in the future. With such confidence, with such solid foundation, I believe that in the mid to long run, for CMB, we can continue to guarantee our our stability, our development landscape.
To guarantee such landscape, we need to ensure that firstly, our high ROE level, and secondly, to guarantee our high-risk compensation capability, and thirdly, to guarantee our capital endogenous capability, and fourthly, to guarantee our low, low NPL ratio and maintain good asset quality, and fifthly, to guarantee good asset structure, business structure, to take retail finance as the mainstay and the non-interest income with a leading contribution of the total revenue and low cost funding. By guaranteeing all these aspects, can we maintain our development foundation stable and solid? And at the same time, of guaranteeing the above-mentioned aspects, we need to also share our benefits to our shareholders to guarantee the dividend payout to our shareholders, to our investors, to be proactive enough and reward to the market. I have also mentioned earlier in my response that on one hand, we need to maintain good management.
Extensive management is not enough for today's operation, and today, we need to emphasize on intensive and refined management to control cost, to control all kinds of business, to control risks, so as to obtain the management to lead us to success. Secondly, to use fintech to empower our business. Thirdly, innovation-driven development. In our previous development in different phases, we maintain innovation as our feature. It is also a feature that guarantee to win a leading position in the market. We see many disadvantages in the external environment, and we can rely on innovative-driven solution to discover new growth poles at countermeasures. Fourthly, a regional-based strategy. Fifth, to build our new competitiveness in niche markets.
These areas are what we need to pay much attention to, and by doing so, could we realize a high dividend payout and create returns to our shareholders. Thank you for your question.
Thank you, President Wang. Now we're coming back to on-site. This gentleman, please.
Thank you, Mr. Xia. I am Ma Kunp eng from China Securities. We understand there are many pressures for the banks in the operating environment, and we can feel that in your interim results. We also see a fast growth of your customer base. You also accelerate the pace of clearing your NPL. And at the same time, we can see from income indicators that you are not rather proactive, and you rather take a cautious and a defensive mechanism towards this unfavorable environment. But I believe that it might not be a long-term strategy. So if there are any changes happening in the external environment for the banking industry, what kind of positive factors or changes begin to show, will you also shift your mindset towards the operating philosophy? Thank you.
Thank you for your question. To see from the changes of external environment, I think it's about the Chinese economy. As major market players, the Chinese economy's development is now changing from the previous high-speed growth to a moderate high-quality development. While entering into the high-quality growth, the growth speed might slow down. The GDP growth rate is forecasted as around 5%. To see from the central government level, the growth rate will not be a major evaluation indicator. Under such backdrop, to see from the growth rate, the GDP growth rate-oriented growth will now transformed into a quality-oriented growth, which will bring changes in the economic structure, industry structure, and also bring changes to the financial industry, and how are we gonna leverage the changes to better serve the real economy, so that we can better adapt to the trends and seize opportunities.
One of the major changes is that real estate platform plus finance, this model is now changing. Previously, many of the resources and the funds are invested in the real estate sector, and now we see a new model of tech, industry, and finance. Bank's credit funds, as mentioned in questions from JP Morgan analyst, Li Li, that the funds are centered into some areas, into green manufacturing, new growth engine, and et cetera, which bring us new opportunities for banks. But all these, for many of the banking peers, those are also changes in the structure of business, of customer, of their funds, which is quite different from the previous model that requires intensive capital. It is a requirement posed by the environment that the banks should develop in line, align with the external environment.
New economy, new growth engine, new energy, these industries, including high-end manufacturing, tech-driven enterprises, as mentioned by Mr. Zhong, these will be the sectors that we will allocate more resources into. But we cannot rely solely on long-term, large-scale cost. We should avoid fierce competition. We should still follow commercial sustainability principle. Also, at the same time, we need to consider deliver solutions that integrate IB and CB to the clients to leverage investment by financing. Many PE funds, many investment funds, has worked together to seek opportunities through investments. And, the bank could provide integrated solutions of investment banking and commercial banking to clients. This is where we can nurture new important clients, and also a major field of our transformation. And secondly, we have proposed the new model of industry plus industrial park plus financial service.
This model is very commonly seen in Pearl River Delta and et cetera. Through the construction of industrial park, we see the industry concentration phenomenon and the model of the industrial chain arising from this new business model. And there arise the new requirements on the ecological financial services. And thirdly, the 1+N supply chain financing services. We form a services across the industrial chain, which could extend from the core business to the SMEs along the business chain. This is from the changes of the perspective of industries, promoting the bank to follow the development path. And thirdly, we see accelerated changes in the regional base economic development. Six top-tier province and cities such as Guangdong, Jiangsu, Zhejiang, Jiangsu, Shandong, and et cetera.
These top-tier provinces and cities, through our investments into these above-mentioned province and cities, could also guarantee one of our major development path. By doing so, could we grow even stronger in aligning with these measures? Well, are we going to get any kind of, like, preparation work to receive the explorative growth in certain industries? We need to be focused and get well prepared for industries with huge growth potential. Could we obtain results from our investments and benefits from these industries? For CMB, our focus on these regions or these industries, we will enhance our investments and resources allocated to these key regions and areas. We have also act accordingly to increase the insource, the resource allocated to the branches, sub-branches, human resources. For instance, the corporate, our relationship managers allocated to these key regions and areas and industries.
We have also established specific teams targeted at researching and understanding these key industries, to form a better understanding and in-depth research over these key industries, so as to develop a characterized CMB solutions. As for retail finance, we will work unremittingly to build our competitive edge in wealth management business, to give full play of its advantages and to drive the growth of wealth management, private banking as a custody, and so on. Retail segment is still having huge potential and having huge space of growth. As long as we do a good job, we could still have a large space to grow further in this area.
Thank you, President Wang. We're now having another participant from on-site.
Thank you for giving me this opportunity. I would like to learn from the senior management that you have always maintained a good capital adequacy ratio, and how do you maintain the capital endogenous capability? Another question is about the new regulation over the capital. I would like to understand what is its influence over the bank, especially.
This question goes to Mr. Peng.
Thank you for your question. As for the endogenous growth of capital, for many years, it's one of the major goal to maintain endogenous growth. And, we have realized and have reached this goal for the past years, no matter it's in a high growth period or in this, downturn. Whether we can continue to do so, depends on how we manage our capital. So one of the major thing when we are doing capital is the capital return.
It doesn't mean we need to look at the return on capital. If the return cannot cover the risk, it's very hard to maintain endogenous growth. So no matter what is the speed, but in priority is to have a sustainable growth. ROIC means that the risk-adjusted return on capital, just as Mr. Wang said, one of our culture is to have a coordinated development amount, asset quality, efficiency, and also scale. If you have too much rapid growth in scale, but you may lose your asset quality, and to that end, you cannot make a reasonable growth or endogenous capital growth.
So this is, our goal and how we do the endogenous growth of capital. And as for the new rules on capital, it's, I think it's, postponing. There might be some technical difficulties. For CMB, we have prepared for that, and now we are only waiting for the policy announcement. And according to our judgment, we think might be in the, at the beginning of next year. So it may be later than the beginning of next year, but already we have done full preparation for that. And as for the impact on the new rules on CMB, new capital rules on CMB, actually, we don't have the final official version.
There might be some minor changes, but for the existing consultation paper, we have done the internal calculation and judgments. There are positive ones and some short-term negative factors as well. From positive ones, we do see some structural changes, such as the lower down of the floor of the RWA, and it's beneficial for banks who have adopted the IRB approach. But definitely some short-term negative ones, such as the CCF for RMBL, for LC, and also for retail credit line, and also for you, how you go through to the underlying assets of the investments you made. These will have some short-term negative impact, but this will be temporary. So after the publication of the new policies, I think the banks will do their own adjustments. That is why I say it's a temporary impact.
I think that the impact, overall speaking, is neutral for banks. They will not co-cause some big fluctuation or volatility for banks capital, and it will be helpful for the prudential or long-run management of the banks, not only for CMB, but also for other banks. So my judgment is neutral. Some banks might be neutral and more positive, some might neutral to negative, but even it's a negative one, it's a short term. In the long run, it's all beneficial to banks. Thank you.
Next question is coming from HSBC, Gary.
Thank you for giving me this opportunity. Just now, Mr. Wang said, talked about the prospect of extensive wealth management, and some trust companies have some liquidity problems and have some cause, some concern. So will that affect your prospect for trust companies? And secondly, for the decline of the management fee for funds, what will be the impact on your fee-based income? And what is the prospect for insurance growth? What is your forecast for that? Thank you.
This will be answered by Mr. Wang Liang.
As for trust companies, there are media reports. Some individual trust companies have some risk impact, and CMB followed that very closely. We are taking a very prudential attitude. Oh, we don't have the cooperation with the ones that has been according to the media. And after the media report, we have reviewed our trust companies.
For trust companies, after the new rules on asset management, according to new regulations, we have already changes our business strategy from the non-standardized ones to already standardized business. So the news will not have negative impact on CMB. Secondly, as for insurance, our judgment is that sequentially, the growth rate will slow down. But year on year, we are still have very strong growth. In the first half of the year, we are seeing very good insurance sales for all the banks. One is the customers are having a more prudent risk appetite. And secondly, customer thinks that the 3.5% guaranteed product will come to an end and will have some facing some adjustment, so people are rushing into these kind of products. So in the first half of the...
We are seeing a very rapid growth in fee income. But in August, now we are seeing slower, slowing down our insurance income growth because the some major, the very popular products sales for is already, has been already adjusted. But still depends on the how the market performs, and customers' risk appetite and manufacturers. For insurance, we lay high emphasis on that, and it takes up around 8% of our AUM. We think the proportion should continue to increase. And compared to other markets in Europe or in the U.S., Chinese insurance market is still lagging behind, and especially for the pension insurance, and also for insurance that is guaranteeing people's health or life, is still lagging behind. So we think that in the future, insurance will more to concentrating on the protection type rather than investment type. But for CMB, we have advantage than that.
At the very beginning, we choose to emphasize on the periodic payment insurance and also protection type insurance. So we are confident to maintain our advantage and our market share in this area. Thank you. And the third question regarding the decline of the fee rate for mutual funds. From the financial impact for CMB is affected by two parts. One is the custodian, the other one is for mutual funds. But I think that the impact is within expectation, it is under control, and also we will have some product adjustment, and also in terms of the increase of the volume, we will, the impact will be under control.
Okay, the last question, please.
Thank you. Thank you for giving me this opportunity. I'm Zhang Xiaofei from Citi. My question regarding is a midterm question regarding two to three years. One is our investment banking.
Investment last year, I think that CMB has more allocation in investments, in securities, in bonds. So what is our strategy on that? And secondly, as Mr. Wang said, that you will emphasize on retail banking, but corporate banking is a very important thing to support retail. So what is the core advantage you want to have in corporate banking, whether it's asset origination or product innovation or risk-reward balance?
Thank you for your question. The first one is for the, for the balance sheets investment allocation in investments. For these past two or three years, there's a lack of effective demand, and bond yield is quite attractive, so that is why we have more allocation to investment. And you have seen a higher rapid growth for investment. And another reason is because we are seeing very rapid growth in deposit.
Last year, it's over CNY 1 trillion, and this year, over CNY 700 billion. But the demand for loan is quite low, and also mortgage, which used to be one of our pillar for asset growth, now is already negative growth. That is why, in terms of asset portfolio management, we stayed up investments in bonds and have achieved quite good return. Because in the interest rate declining cycle, we have already achieved quite good return on that, and some of the bonds we invest in is tax-free, so the overall yield is higher than loans. Next, I think we should continue to stay up our efforts in the bond investment. Also, just now, you see our other fee income, other non-interest income from other items. One is that we also benefited from the bond investment.
Secondly, regarding the advantage in corporate banking. In 2004, we launched the retail banking strategy. This is mainly because we are very limited and constrained by capital. We can only rely on retail banking, which has less capital consumption, to make breakthrough improvements in the... At that time in the market. But now, if we still can only rely on retail, or retail cannot develop, only rely on itself, the efficiency and speed is under constraint. So we need to also improve our business, our business relating to corporates, so as to support our business relating to retail customer. That is why I say we need to have a balanced development among retail, corporate investment banking, and also financial markets and wealth management and asset management, so as to have a flywheel effect, so as to improve the fee-based income.
And finally, have a light capital consumption business model and create better value for shareholders. So corporate banking is, that is why corporate banking is the area we also want to make efforts for. But corporate banking doesn't mean slow expansion.... First one is to onboard quality customer. Now, we have a total corporate bank customer around 2.56 million. Customer acquisition is very important, and the cornerstone of our corporate banking business, a key indicator that we are looking at. With a corporate, as long as the corporate is with us, we have the potential to grow our payroll business, to grow our wealth management business, to acquire new retail customers. Secondly, why we emphasize on the new industries, the new tech industries, and... Because these new industries is in a growing momentum.
Today, they might be small, but finally, they will grow into big, big ones. Like the platform companies, 20 years ago, they were just set up, but after 20 years, they are now already the leading platforms, internet platforms in the market. So we want to nurture the customers from small ones, and with this service capability improved, that will help us to improve our corporate banking business, our retail banking business. So our core advantage for us is to how we acquire new customers and maintain the customer with us. Second core competitiveness for us is our knowledge for certain industries. As long as you can know better about the industries, you can have better resources allocation, including loan resources allocation, to be more precise. And to have new growth point in the future.
So secondly, our bank competitiveness edge is to have our know-how and knowledge in certain industries. Thirdly, is to have classified and differentiated service to corporate customers. These corporate customers are in different size, and they have different demands. Some are cross-border, cross-national, some are national, some are small. That is why we have head office, strategic customer, branch level, strategic customer, and also smaller customers group. So it's a categorized one, a differentiated service system. Fourthly, digitalization, very importantly. In the past, digitalization, we are more applied to retail banking, like our APP. But now we have already finished our own cloud process. Now we have the manpower and also the capital in place to invest in the digitalization of our corporate banking. So all these are to improve our internal product and also service capability. This is also a core competitiveness edge of CMB.
As long as we are strengthening these areas, I think we can have a deeper cooperation with corporate clients, and creating value for corporates, and more clients will be attracted to CMB, have a win-win situation. And by doing this, better corporate banking, we will also promote other business units grow, and having a flywheel effect.
Thank you, Mr. Wang. Due to time constraint, now we are going to conclude today's conference, and thank you very much for joining us today. And if you have more questions, please contact our IR team. And thank you very much for take time to join today's meeting. And I also would like to thank you for your long-term support and investment in CMB, and we will do our best to continue to create value for our shareholders and also for the society. Thank you!