Dear investors, analysts, good morning. CMB 2022 interim results conference will now begin. I am CMB Securities Affairs Representative, Head of the Office of BOD, Xia Yangfang.
First of all, I'd like to introduce the conference attendees of CMB. They are CEO and President, Mr. Wang Liang. Executive Vice President, Mr. Wang Jianzhong. Executive Vice President, Mr. Li Delin. Executive Vice President, Mr. Zhu Jiangtao. Executive Assistant President, Mr. Zhong Desheng, and also relevant department head from the CMB head office.
On behalf of CMB, I'd like to extend a warm welcome to your participation and thank you for your long support and investment in CMB. Today's meeting includes two sessions.
Firstly, Mr. Wang will briefly introduce CMB 2021 interim results, which takes around 25 minutes. The second is the Q&A session, takes around 1 hour and 25 minutes.
The meeting is provided with simultaneous interpretation from Chinese to English. Now let's give the floor to Mr. Wang Liang on his introduction of CMB 2022 interim result. Please, Mr. Wang.
Good morning. Welcome to CMB 2022 interim result presentation.
Today's presentation will be divided into three parts. First will be an overview of our first half performance, and second will be specific operational information.
Finally, we will briefly introduce the next phase outlook and strategy for the second half of 2022.
Despite the increasingly complex and severe domestic and international situation in the first half, the group has adhered to the concept of dynamic and balanced development of quality, efficiency, and scale, and continue to implement the strategic direction of Light-operation Bank and strategic positioning of One Body with Two Wings, and has taken flexible countermeasures to keep the overall operations and performance stable and achieve stable growth while making further progress in accordance with the requirements on ensuring stabilities on four fronts. Namely, ensuring stability on strategy, mechanism, operations, and teams in the following five aspects.
Firstly, operating income growth demonstrated resilience with operation efficiency in line with expectations. In the first half, net operating income increased by 6% year-on-year to CNY 179.08 billion. Net profits attributable to our shareholders was CNY 69.4 billion, up by 13.52%.
ROAA and ROAE respectively was 1.46% and 18.07% respectively, up by 0.04 and 0.01 percentage points year-on-year, respectively. Amid the external environment where interest rate spread quickly narrowed, we continued to improve the management of our asset and liability structure and maintain our core advantage of low funding costs.
For the first half, our NIM was 2.44%, down by five basis points, continued to lead the industry. Among which, the cost ratio of our interest-bearing liability was only up by one basis point year-on-year, offsetting the pressure from the declining yield of interest earning assets. Net interest income realized RMB 7.69 billion, increased by 8.41% year-on-year.
Thanks to the optimized cost management, the cost-to-income ratio declined by 0.19 percentage point year-on-year to 27.76%.
All capital adequacy ratios slightly declined from the end of last year. CET1 capital adequacy ratio, Tier 1 capital adequacy ratio, and capital adequacy ratio under the advanced approach was 12.32%, 14.46%, and 16.8% respectively, down by 0.34, 0.48, 0.68 percentage point from the end of last year. Under the weighted approach, the CET1 ratio, the Tier 1 capital adequacy ratio, and capital adequacy ratio was 10.73%, 12.6%, and 14.03% respectively, down by 0.744, 0.58, and 0.68 percentage point from the end of last year.
If the influence of dividend factors is secluded, the core Tier 1 capital adequacy ratio, Tier 1 capital's adequacy ratio under the two approach still maintain positive growth. Secondly, extensive wealth management business developed steady.
Net non-interest income proportion maintaining high. Balance of AUM from retail clients increased by 8.91% to CNY 11.72 trillion, among which AUM from Sunflower level and above customers increased by 8.32% to CNY 9.57 trillion. AUM from private banking customer increased by 7% to CNY 3.65 trillion. The balance of FPA to corporate clients was CNY 5.15 trillion, an increase of 8.7% year-on-year.
Total AUM of asset management business was RMB 4.6 trillion, increased by 6.73%. Balance of asset under custody increased by 5.76% to RMB 20.58 trillion, ranking number one in the industry in terms of scale. Net non-interest income increased by 2.73% year-on-year to RMB 71.39 billion. Fees and commission income from wealth management decreased by 8.13% due to exacerbated volatility in the capital market and the relatively high base of the same period in the previous year.
The business was increased by 33.84%, and commission income from the custody business increased by 6%. Income from extensive wealth management business was RMB 28.26 billion, increased by 0.3% year-on-year.
Thirdly, overall asset quality remains stable with sufficient risk provisioning and compensation capabilities. Due to the risk rising from real estate clients and shock from regional pandemic situations, both NPL balance and ratio slightly increased, but the overall risks were still under control, among which NPL ratio 0.95%, up 0.04 percentage point from the end of last year.
Allowance coverage ratio was 454.06%. Although down by 29.81 percentage point from the end of last year, but the balance of allowance for impairment loss on loans amount to RMB 256.02 billion, representing an increase of RMB 9.9 billion as compared with the end of the previous year. Annualized credit cost ratio 0.79%, up by 0.23 percentage point year-on-year.
We will continue to heighten asset classification standards and fully expose risks and step up efforts to dispose non-performing assets. Ratio of NPL to the loans overdue for more than 60 days was 1.27. Annualized NPL formation ratio 1.13%, up by 0.18 percentage point year-on-year.
We disposed a total of RMB 27.13 billion NPLs in the first half of the year, among which RMB 11.11 billion were written off and RMB 7.78 billion were securitized, and RMB 6.15 billion were recovered by collection. Fourthly, sound liability structure upheld with flexible adjustment to asset allocation.
By the end of June, total liability was RMB 8.83 trillion, up by 5.32%, among which total deposits from customers was RMB 7.04 trillion, increased by 10.87%. Influenced by economic downturn and capital market fluctuations, the trend towards time deposits is emerging, and the company continued to take the growth of core deposits as the main task, and the average daily balance of core deposits increased by 12.64% to RMB 5.6 trillion, accounting for 87% of the total.
Average daily balance of demand deposits remain at a high level of RMB 4.05 trillion, up by 8.868%, accounting for 62% of the total average balance of the deposits.
In response to the relatively sufficient liquidity and insufficient demand of effective credit in the first half of the year, we have proactively and flexibly adjusted asset allocation strategy to enhance the efficiency of asset allocation by increasing the proportion of bond and bills investment.
By the end of June, the total asset was CNY 9.72 trillion, increased by 5.15%, among which total loans and advances to customers, CNY 5.93 trillion, increased by 6.49%. Total bond investment increased by 16% to CNY 2.2 trillion, and bill discounting balance increased by 25.28% to CNY 540.35 billion. In terms of retail loans, under the premise of risk control, we increased supply of microfinance loans and consumer loans.
The balance of retail loans increased by 3.4% to RMB 3.04 trillion. In response to shock from the pandemics and sharp decline in real estate market transaction, we enhanced the organization of residential mortgage assets, and mortgage loans realized positive growth, increased by 1.01% from the end of last year.
We seized opportunities from consumption recovery post-pandemic to increase the balance of credit card loans by 1.69% from the end of last year. Microfinance loans and consumer loans increased by 8.54% and 17.85% respectively from the end of last year. In terms of corporate loans, we increased the credit of corporate loans and optimized customer mix and industry mix in light of insufficient demand for retail credit among the pandemic.
Corporate loans increased by 7.45% to RMB 2.02 trillion. Balance of corporate real estate loans keep stable. Balance of loans to strategic emerging industries increased by 16.27%, with the proportion in the total corporate loans increased by 0.96 percentage points. Fifthly, the group's flywheel integrated faster with continuous strengthening synergy. Subsidiaries totally contribute RMB 2.61 trillion in AUM balance and FPA contribution to the company was RMB 745.62 billion. The balance of products of CMB Wealth Management reached RMB 2.88 trillion, which ranked first among peers.
The scale of non-monetary funds of China Merchants Fund reached RMB 586.8 billion, ranking up by 7.01% compared with the end of last year and ranking among the top five in the industry for the first time.
Total asset and net profit of CMB Financial Leasing increased by 23% and 24% respectively. Growth of leasing assets and net profits were leading in the industry. Net profits of MU CFC increased by 25% and kept leading in the industry in key business metrics. This is a recap of our performance in the first half of 2022, and next, we will introduce the group's operational information. Firstly, we strengthen strategy implementation in the retail finance segment. We further push ahead with the Original Aspiration Plan to enhance the capability of allocating complex products, deepen customer convenience, and investor education.
Retail client base continued to grow against headwinds. Total number of retail clients was 178 million, increased by 2.89%. Among them, the number of clients who held wealth products was 40.75 million, representing an increase of 7.84%. Number of medium and high-end customers continued to grow from a high base in a faster pace. The number of Sunflower level and above customers increased to 4.02 million by 9.58%. The number of private banking customers was 130,000, increased by 6.35%. Number of active credit card users was 70.48 million, increased by 1.07%. We launched the upgraded free asset allocation system.
Number of customers who carried out asset allocation under the system grew steadily to 7.97 million. A total of nine wealth management subsidiary of our peer banks were introduced to the retail product system.
A total of 126 asset managers were introduced to the Zhaocai Hao open platform, providing services to customers for more than 221 million times. Scale of management of family office and family trust both exceed RMB 100 billion. With new management scale of family trust in the first half of the year exceeding that of the previous year. We further strengthened our asset origination of our retail credit business amid shrinking demand in the whole industry.
Retail loans increased by RMB 100.07 billion in the first half of the year, remaining to lead the industry with higher market share. Credit card business, we strive to cover the impact of pandemic, and credit card transaction volume amounted to RMB 2.39 trillion, rank number one among peers, increased by 4.88% year-over-year, the highest growth in the industry.
Secondly, we deepen the transformation of the wholesale finance business. We leverage the customer service model with the integration of IB+CB+PB+TB to improve customer experience, achieve professional industry operation and integrated customer service. Total number of corporate customer was 2.41 million, increased by 4.01%, among which 181.3K were newly acquired corporate customers, up by 0.55%.
Number of core customers served under the model of the one-point access model of our supply chain business increased by 8.93% year-over-year, with services extended to 19,305 small and medium-sized enterprises. Number of corporate clients for withholding transaction was 944.8K, with transaction amount increasing by 21% year-over-year. The company had 110.2K customers of bill business. For the transaction banking business, the CBS+ open service platform serves 4,154 group customers with 160.4K companies under management, representing an increase of 10.7%.
The bonds underwritten by the company as the lead underwriter amounted to CNY 343.1 billion, ranked third in the industry in terms of the size of debt financing instruments. M&A business value increased by 15.72% year-on-year. Entrusted occupational annuity and the enterprise annuity services covered 27 provinces, regions and municipalities and 7,708 enterprises nationwide. The entrusted enterprises and occupational annuities amount to CNY 153 billion, up by 10%. International settlement in respect of corporate customer increased by 21% year-on-year. For financial market business, the trading volume of transaction services to the customer increased by 14% year-on-year. Thirdly, we continue to enhance our fintech capabilities.
The information technology expenses amount to RMB 5.36 billion in the first half of the year, up by 6.03% year-on-year and representing 3.26% of the company's net operating income.
Overall, cloud migration rate exceeded 90%, and retail customers complete no-trouble migration to cloud, leading the company to fully enter the area of cloud service. We push ahead the transformation of our talent mix. Number of R&D personnel reached 10,392, up by 3.48%, accounting for 10% of the group's total employees. We follow the technology-enabled strategy to build a digital CMB by focusing on online data intelligence platform, and ecosystem.
In terms of online transformation, 98% of the non-cash business of retail clients could be handled through the CMB application, and 96% of the basic service of corporate customers were available online.
In terms of data-enabled transformation, the company has access to an aggregate of 300 external data sources which have been widely used in various business sectors such as retail, wholesale, and risks. In terms of intelligentization, smart AI customer service, Conch RPA and other intelligent service achieved the replacements of over 10,000 staff. The Libra platform helped lower the percentage of fraud and account takeover amounts by non-cardholders to 0.4 in 10 million. In terms of platform-based transformation, the company opened 2,078 API interfaces to corporate customers, representing an increase of 63% and serve 12,000 corporate clients in total.
In terms of ecosystem construction, the company has leveraged technology to build an ecosystem of extensive wealth management, facilitating the integration of financial services of clients' work, life, and business. Fourthly, we effectively manage our major business risks. Asset quality of retail loans remain stable. NPL ratio slightly fluctuate at low levels. Non-performing ratio of retail loan was 0.82%, up by 0.01 percentage point, and that of credit card loan was 1.67%, up by 0.02 percentage point.
Ratio of the special mention retail loan, 1.19% increased by 0.07 percentage point, mainly due to the influence of the pandemic and the increase in loans that are not overdue but affected by external risk signals. The downgrade rate of special mention loans into non-performing loans kept trending down.
The non-performing ratio of corporate loan increased by 0.11 percentage point to 1.35%, mainly due to the risk exposure of individual risk real estate enterprises. We attach high attention to risk management and control on our real estate business with measures such as formulating risk management measures based on different policy for each client, focusing on high-quality customers and projects, and proactively address the demand from first-time home buyers and home upgraders.
Total balance of the group's real estate business was CNY 810 billion, including business of which the group assumed credit risk amounted to CNY 493 billion. Balance of corporate real estate loan was CNY 355 billion, accounting for 6.35% of the company's total loans. Approximately 80% of them are located in the first-tier and second-tier cities.
The company's NPL ratio of corporate real estate loans was 2.95%, increasing. Although increasing by 1.56 percentage points as compared with the end of last year, but the risks are generally controllable. For residential mortgage loans, newly granted were 88.44% in the first-tier and second-tier cities, up by 4.22 percentage points.
Residential mortgage loans in the first-tier and second-tier cities accounting for 86% of the total, up by 0.25 percentage points. The weighted average LTV ratio of the residential mortgage loans was 33.28%, further decreased by 1.1 percentage points from the end of last year. Fifthly, we actively implement the concept of ESG and effectively support the real economy. The balance of green loans increased by 18.32%.
It was 10.87 percentage points higher than that of the total corporate loans. We assisted 13 enterprises in issuing 19 green bonds with a total issuance size of RMB 42.54 billion. Among which the company underwrote RMB 19.31 billion as the lead underwriter, which strongly fortifies the direct financing of green and low carbon enterprises.
The company completed the agency sales of 53 new energy and photovoltaic funds. The balance of investment by CMB Wealth Management in green bonds was RMB 24.6 billion. China Merchants Fund had six existing ESG-related products with a total size of RMB 2.67 billion. Balance of loans to manufacturing industry increased by 13%, whose proportion in the total corporate loan was 17.98%, up by 0.98 percentage points.
Balance of inclusive finance loans to SMEs increased by 8.27%, which is 1.73 percentage point higher than that of the overall loans. The numbers of accounts with SME finance loan balance were 1.06 billion, representing an increase of 148K as compared with the end of last year.
We enhanced financial support to customers heavily hit by the pandemic, and the total amount of loan principal and interest repayment deferred by the company for customer suffered in the difficulties were RMB 15.53 billion. It is expected that most borrowers may repay the principal and interest normally in the future, and the effect on asset quality is overall controllable. I'll briefly introduce our outlook for the next half of 2022.
Looking into the next half, the internal and external circumstances of China will remain complicated and challenging. The company will stick to the three unchanged principle, which are the president assuming full responsibility under the leadership of the board of directors, the market-oriented incentive and restraint mechanism, and the stability of the cadre team and talent.
Adhere to the core value of being customer-centric and create value for customers, and follow the goal of income increasing, revenue increasing, efficiency increasing, and value increasing for commercial banks. We will comprehensively strengthen management and promote strategy implementation to accelerate the establishment of the Malik growth curve of CMB. First, we will adhere to established strategy and continue to build a 3.0 model of extensive wealth management.
We will stick to the differentiated development strategy and continue to build a 3.0 business model with the cyclical extensive wealth management value chain at the core. Guided by our values, we will be more determined to strengthen strategy implementation and hold unremittingly to existing strategies without being subject to workflow changes.
Secondly, we will improve overall internal management to ensure high-quality development. We will rigorously enhance overall internal management by following refined standards. In line with CMB culture, we will step up efforts to strengthen our workforce, improve incentive and constraint mechanism with the six-can-do mechanism as the core, and enhance employees' capability and energize the talents. Thirdly, we will facilitate faster development in key regions and create new growth engines for high-quality development. We will formulate differentiated development strategies based on characteristics of economic structures in regions where our branches are located.
We will further strengthen branches in central cities among the Yangtze River Delta, Pearl River Delta, and Chengdu-Chongqing region, and enhance the development momentum of branches in key regions, and especially for tier two branches. Fourthly, we will leverage on fintech to accelerate the establishment of digital CMB. Leveraging fintech, we will comprehensively promote the digital reshaping of the financial infrastructure and capacity system, customers and channels, business and products, management and decision making by focusing on the five attributes, namely online data, intelligence, platform, and ecosystem.
Fifthly, we will build a fortress-style risk compliance management system to remain a stable asset quality. We will promote business departments to strengthen risk management, emphasize the main responsibility of risk management of the first line of defense, and pay attention to compliance risks.
We will step up efforts to prevent and mitigate risks in key areas such as real estate, wealth management, and agency distribution, optimize asset allocation structure, and promote the sound development of business.
Thank you. Now is the Q&A session.
Thank you, Ms. Wang. Please raise your question according to the instructions given by the operator. Please introduce yourself, represent the agency you represent before you raise the question.
Now we will have the first question. Q&A session will now begin. Please press the raise hand button for the mobile end. Please press the participant button for the PC end. Please open your camera and also state your institution and your name.
First question is coming from UBS, Ms. Yan Meiju.
Thank you very much for giving me the opportunity. I'm Yan Meiju from UBS. Actually, I have two questions today for the management.
Currently, we're in a very complicated environment and CMB has reached a profit growth of double-digit. It's very difficult to reach such a good results. Now the market is not very optimistic about the macro.
May I know what is the management's judgment for the macro picture? Also at the same time, banks are facing challenges and there is no sufficient effective demand. As we can see in the first half, the retail loan of CMB is growing quite slow. What is your forecast into the second half? Is it possible that CMB will become a bank that have a higher proportion of corporate loan? This is the first question. Second one is for the wealth management income.
As this is the future goal of CMB, where you are making efforts for, but currently affected by the macro situation, your fee income for wealth management is seeing some negative growth. What is your forward-looking judgment for this part? At the same time, the real estate market is coming down, and it will deal quite a big blow to your wealth management as well. What is your strategy for that to tackle this problem?
Thank you. Thank you for the question.
As for the macro picture, I would like to give you some supplementary information.
Just now when I gave you the brief introduction about our first half year's results.
I just stated that as many other banks, we are facing very complicated external environment. The biggest blow or challenge is coming from the COVID-19, especially in Q2. COVID-19 has been spread out in Shanghai, which also have a big challenge and difficulty to the bank's daily operation. In order to offset the decline in the overall economy, we can see that the liquidity in the market is quite ample and we are having a quite ample or looser monetary policy.
Banks are facing insufficient effective demand, and also the interest rate is coming down. Also at the same time, the risk from the real estate is surfacing and is raising up. These are all the challenges coming together for CMB and pose quite a unprecedented challenges and difficulty to the banks operation.
Under these circumstances, actually we are implementing our strategy and also in order to ensure the stability of our business, ensure the stability of our mechanism and our staff team. We have achieved quite a result, as you have seen. It's quite a hard-earned results for the first half. We have already reached our goal as has been designed at the beginning of the year.
All the business has been running in a stable manner. When you look. When we are judging or saying about what we have achieved in the first half, we think that there are three major characteristics I would like to share with you. Three major characteristics of our operation. The first one is we have maintained stable operation and also stable financial data. As you can see.
First one, you can see for the profit growth, 13.52%, double-digit growth. ROA and ROAE is keeping quite a high level and also have a slight increase compared to what we have at the end of last year. As you can see, the profitability of the bank is still in a sound level and also keeping a good momentum. Secondly, after what we have experienced, a very difficult environment, as you can see, the bank's business is quite resilient, which can be shown in the following aspect.
The first one is retail. You can see the rapid growth of retail from customer group, from the AUM. Even though for the retail loans has been quite negatively affected by the market, such as mortgages is facing quite big difficulties, but still we lead the way and among our peers.
This is for retail. After 20 years of following the retail strategy, it has become the major business of CMB and also the business that helps CMB to counter the cycles. Especially in these difficult situations, retail still play the pivotal role in the bank's business.
Thirdly, for the past years, we have implemented very strict asset classification and also have maintained a high level of coverage ratio, which means that we are more capable to buffer the risks that we are facing now. Since our asset quality is solid and we have ample coverage in place, this negative environment will not pose a big difference to the provision of the bank. Also at the same time, you can see for these years, we are making efforts in terms of expanding our non-interest income for the past years.
You can see the proportion of the non-interest income in our total operational income is at a very high level. Since we have a high rapid growth in a higher proportion of non-interest income, we can generate capital indigenously through profit growth. If we do not consider the impact coming from the dividend payout, you can see that the CAR ratio or COI ratio are all growing respectively.
These all shows the resilience of the business. In the third aspect is you can see we have strengthened our management structure. Facing this difficult situation, we are strengthening our internal management, including strategy management, risk management, cost management and other aspects.
We are trying to make efforts to strengthen our management to improve our three capabilities, namely for wealth management, for risk management, and also for fintech, so that we can counter the current cycle and also to buffer the difficulties posed by the macro picture and maintain stable growth. These are the supplementary information I would like to share with you for our first half performance.
Also in the, considering your question for the second half, we think that the macro picture will continue to be difficult. Major factors are, first one, the biggest one is coming from the COVID effect impact. It has posed a big uncertainties to the operation of business. Even though we can see from the policy side is that the central government want to keep a balance between COVID control and also business development.
Some local governments, they want to control the COVID first and then come for the economy, which means that economic development is in a second place after COVID control. This will pose a big pressure on the economy. From the central government, its policy is to ensure stable growth, ensure employment, but pressure will be very high.
Our goal for 5.5% growth rate, it will be very difficult or mounting pressure to reach this goal. Also pressure from stabilizing economy and also stabilizing employment will be very high. That is why monetary policy and fiscal policy more strengthened or stronger than before. You can see ample monetary policy very liquid in the market. Different measures will be launched out to ensure that the economy will be stable, such as the decline in LPR.
This will also pose bigger pressure on banks' business. We think that we have followed the retail strategy for the past 20 years, and we are strengthening our capability to buffer or counter the external risk.
We are confident that we can stabilize the macro, stabilize the operation. You just asked whether you will have a slow growth in retail side and have more corporate loans to complement the shortfall coming from the retail or whether CMB will become a bank that have a higher proportion of corporate loan. I think that we will insist on retail banking, not only the wealth management from retail, but also to expand our allocation to retail loans. We will try to maintain a higher proportion of retail loan, namely the proportion will be higher than 60%.
This year, we are facing contractions both on mortgage side and credit card side. In the first half year, we haven't met our plan for retail loan. Our budget for the whole year is for RMB 100 billion, but now it's only the budget completion is only 13% of retail in the first half of year. That doesn't change our strategy, namely to invest more into retail and have a higher proportion of retail loan.
This is the first question. Secondly, for wealth management, I would like to invite Mr. Wang to respond to your second question. Thank you for your question. Just now, you asked a question that in the first half of the year, the relationship between CMB's retail wealth management with real estate market.
Overall speaking, I think that CMB's wealth management is moving forward according to our plan and have reached good results. Why it seems that the income for wealth management have some volatility in the first half of the year? I think this is highly related to our ability of CMB, but it's not wholly relevant to CMB's capability in wealth management side.
You know, every bank is doing wealth management. As a bank, how can you do it well? The core, what is the key to that? I think firstly, what is your aspiration, original aspiration? Namely, are you working for your customer? Are you working in the interest of your customer? Or are you creating value for the customer? I think this is the original aspiration or original purpose from our business.
That is why last year we have launched a series of program regarding back to our original purpose. For wealth management of CMB or for other business, we need to place customers' interest at the forefront. It's moving forward quite smoothly. In order to reach this goal in head office and among our branches, we have kind of adjusted our evaluation system for our relationship managers.
Secondly is to improve our ability to create value for our customers. In the head office and also in our branches. We are strengthening our middle office, namely to deliver the products or capability to our relationship managers to improve their capability, RMs capability to service their customer. Thirdly, we have integrated retail and also other business line, especially corporate line. I think the integration is even better.
As you can see, we are doing the integration between corporate and also retail together. Integration of the end to the customer's end. Based on our corporate customers demand, and also to get into or get back to the customers, the retail kind of behind the corporates. The promotion or the marketing will be more precise.
Fourthly, we have integrated online and offline service. As you can see on our APP platform, we have proprietary marketing or customer origination capability online, such as we have a cash management product called Zhaozhaobao. We have originated customer around 20 million, and the balance of this customer is over CNY 200 billion. It's a huge amount. As you can see, the wealth management's capability is a systemic one. From our value proposition to product delivery to service delivery, it's a system, holistic system.
Very importantly, we have the capable team to support this system. We think that we have achieved quite good results in this regard. From the product side, the wealth management products, what is the difference from the current product to the past products? As you can see that now all the products are NAV-based. It's hard to imagine in the past that the trust companies are facing large problems or difficulties now. Banks definitely are facing pressure from media and from our customer. When you are doing asset allocation for your customer, the products that you offer are very much different from years before.
In the past, the trust products, our relationship managers call it, attractive product, which means that, when they are providing the trust product to their customers, the customers are very thankful that you give them this kind of product and will transfer most of their assets to the bank who can provide them these kind of trust product. Because in the past, these kind of products has a guaranteed high yield. Nowadays, the logic is totally different. Nowadays, even now, our wealth management products are all NAV-based.
The wealth management allocation system today is all designed or tailor-made based on our customer's risk appetite, based on their customer's capability. Namely, we need to analyze customer's risk appetite and customer's capability so as to allocate the relevant or applicable products to the customer. We need to reduce the volatility of our customer's portfolio.
That is why we emphasize on asset allocation. In the first half of the year, even why we say we are facing pressure in terms of from the income side, 'cause it's very highly related to the capital market.
When we are doing asset allocation in the first half of the year, we need to look back into the past. Last year, in the Q4, we have recommend our customer to exit some of the equity products. We know it's a choice of choosing the timing, and it's a difficult job to do. But in the Q4 of last year, we actually dare to do so to help our customer to choose the timing. In the first half of the year, we have our discipline. Actually, it has been launched in the second half of last year.
Namely, we do not want to issue the very hard product in the market, 'cause the equity market was very hard last year. We want to recommend our customer to exit. I think it's also a result of our active move to help our customer to allocate their assets. We are persuading them to more cash management products, to more wealth management products than major products that have a lower volatility.
If you look at the profit ratio, definitely these kind of low volatility products have a lower profitability ratio compared to the mutual funds. Definitely, I think it proves that CMB's capability is improving, which is demonstrated from our sales of our insurance products. Even though we don't.
We are not seeing a big increase in our total sales volume of in-insurance products, but we have seen the fee income for our insurance products is growing very rapid. This is mainly due to the different structure of our insurance products. Namely, we are providing more guarantee type insurance products to the customer.
The first one is, as you can see, we are improving our capability to reach out to our customer online, 'cause insurance products are not standard products. How you can reach out to your customer through online and to give a good explanation to your customer through online is a difficult thing to do. Our capability in this regard has been improved. Secondly, is for the professionalism of our relationship manager offline.
This professionalism capability has also been improved, and the increase in our income from insurance products shows our capability has improved as well. When we look into the second half of the year after June, you are saying that in equity products, we are kind of increasing our allocation into equity products.
It doesn't mean that we're seeing a low income and then we improve or increase our allocation through equity. It's totally based on our judgment on the macro side. That is why we have made these active arrangements. The foundation for that is we have more detailed classification of our retail customer. For our private banking customer, we have encouraged our private banking customer to allocate more to private funds products. All these are based on our knowledge about our customer.
Namely, know our customer base better, and then to more precise classification of our customer, and then to have tailor-made asset allocation solution for them. I think very importantly is what we are doing now and what we are trying to do in the future is that we need to put customer first. Customer's interest is our top priority.
I don't think you need to bother too much about the slowdown of our income in wealth management. The key is whether you need to look at whether CMB can keep a solid growth for the customer base. We are growing our customer base quite well. It's not an easy thing to do. Especially for the high-end customers who are quite well off, such as for our balance customers.
Every customer per balance of the private banking is growing as well. Secondly, the key is to observe that whether CMB is putting customers first and to improve or to create value for customer or service the customer and to provide more balanced asset allocation for customer. Now we have around 40 million customer who are holding the wealth management products with our bank. So when it reached a higher level, I think that CMB will have a stronger or even more solid capability for wealth management.
Your second question regarding the wealth management products for the real estate market. We haven't disclosed the real figures on that. So just now, I said that our high-end customers, they like these trust products which have a guaranteed high yield. So actually, from early on, we already made arrangement for products who can replace this kind of our products.
At the peak time, we have these kind of products at a peak time that was over CNY 100 billion. Now it has been at a very minimum level, a very small amount. This kind of product has re-reduced largely, and now we have a wider choice for our customer, including deposits, wealth management products, insurance products or different kinds of fund, including bond.
Fixed income fund or equity fund is a variety of our products. These kind of non-standardized asset products is at a very low level. We have already gone through this period, and our customer are not reliant on these trust products. For the problems that when the trust companies have difficulty to pay out the past products, we are trying very hard to collaborate with our trust companies to solve the problems.
Especially for many problematic products, we have made our best efforts to coordinate different parties to minimize the impact on our customers. Actually, the current balance is already at a very small level. I think that what happened in the real estate market.
The impact on the wealth management business of CMB is very minimal. Thank you. Next question, please.
Next question is from Feifei Xiao from CITIC Securities.
Thank you for giving me this opportunity to raise question. My question is regarding asset quality. I noticed that in the interim report, CMB's overdue special mention, non-performing loan formation ratio have all increased, especially for retail loans, overdue and special mention loan ratio. I'd like to understand the reason behind and what do the senior managements, so what do you look at, following asset management trend in the next phase?
The question will be taken by Mr. Zhu. Thank you for your question.
Regarding the bank's asset quality, we see for the first half, risk indeed increased. There are following influential indicators. First of all, the macroeconomic condition is going downward trend. At the same time, along with the impact brought by the COVID-19, the overall risk is also increasing.
The second reason is that based on our management need, we have enhanced our control over asset quality and applied strict standard on non-performing loan recognition. We have improved our recognizing standard from 90 days to overdue 60 days as non-performing loans. For credit card loans, we have also act according to regulatory requirements to move forward the recognizing time point.
For the retail loan asset quality, we have applied restricted and restraint mechanism on the asset quality control. The third reason is mainly due to the two areas of real estate industry and credit card risks. For the first half, we can see that the non-performing loan formation, special loan and overdue are basically coming from the following, the above mentioned three factors.
Generally from the retail's asset loan quality, the non-performing loan formation is 0.33%, special mention 0.54%, and overdue loan rate 0.55%, which is a relatively low level.
At the same time, we noticed that in the retail end, the early indicators such as the collection entry ratio, the general performance is quite benign. Therefore, our expectation to the year round asset quality indicators are confident and we expect it to remain stable. For the next half, our prediction is that the trend will continue in terms of the risks externally. This is my response to your question. The next question.
The next question is from Guotai Junan Asset Management, Mr. Zhu Chenxi.
Dear senior management, thank you for giving me this opportunity. I have two questions. The first question is about NIM. The second question is about corporate loan. I noticed that in Q2, the NIM is 2.37%, which is for the past 13 years, the lowest level for a single quarter. I have also noticed that the market interest rate have also reached a relatively low level, especially the bills rate.
Under such circumstances, in my personal opinion, looking into the future, there was not much room to decrease for NIM. I'd like to learn from the senior management about your prediction and view over the future trend of NIM. The second question is about corporate loan.
I noticed that you have mentioned that surrounding a new growth engine, green economy, quality manufacturing and regional characteristic industries, and you will enhance a loan extension to these industries.
I'd like to learn from CMB that what kind of preparation have you made to nurture this kind of capability required to extend loans to these new areas, for instance, your organizational structure, HR incentives and et cetera. Thank you for your question. About NIM, as you have mentioned, the Q2 NIM has decreased 14 basis points to 2.37%, which is sharp among years of CMB's operation. This is also relevant with the banking industry nationwide.
Currently the bank's interest rate is at the lowest level since PBOC have statistics. In order to ensure the safe stability of the economy and corporates are facing very big challenges. You can see that in May the LPR has been cut again by 10 basis points and also mortgage rate has been reduced or adjusted downwards by 20 basis points.
You have seen that 5-year LPR and also 1-year LPR has been further adjusted downward. By this declining in LPR the competition for quality assets will become more fierce. You have seen that the interest for these kind of quality assets is coming down.
As you can see, some irrational pricing in the market, such as for some quality enterprises, the loan rate for them is even lower than the deposit rate, and there is an arbitrage scenario in the market.
We think that the distortion or this kind of an irrational scenario will not last for long, so the market will adjust by itself. Facing these very adverse situations, CMB will definitely be affected by the monetary policy. That is why you see that not only for corporate loans but also for retail loans, you are seeing a declining trend for the asset yield. Secondly, you see that in the Q2, why we have such a big fall.
This is mainly due to the different structure of our loan portfolio, because in the past we have a higher proportion of higher yield assets such as from retail side. Compared to years before, the increase in the retail loan is around CNY 50 billion or less than CNY 50 billion compared, you know, with in the first half of last year.
You have seen a decline or a slower growth for mortgages and also for credit card, which are all the higher yield assets for CMB. We are dispersing or extending more loans to corporates and have more bill discounting business to make up the shortfall coming from the retail side. You know that the yield for corporate loan and for bills are much lower than for retail loans. That is why you have seen the pricing for them.
That is why NIM in the Q2 has come down very sharply. At the same time, we have seen an increase in our cost, deposit cost. Even though our liability cost has been up by only one bp, but if you look at the deposit cost has been up by 6%. Why the cost of our deposit is coming up, even though we are facing a very loose monetary policy and also we have a very high proportion of the core deposit?
The reason behind is that the structure of our liability structure has been changed in the first half of the year. Since we are facing very weak capital market, our customers will tend to buy more stocks or wealth management products.
They are trying to be more risk-averse and they want to buy deposits compared to those wealth management products. They want to have a term deposit with a bank and it's very popular that the three-year deposit, term deposit, very popular product in the market. As you can see, disclosed by PBOC, the savings deposit for the household sector has been increased by over CNY 2 trillion.
This all reflects that customers or investors, they are more risk-averse and want to place deposit with the bank rather than investing in financial products or investing in property. That is why we are kind of adjusting our structure according to the trend and have more term deposit products for our customer. This has to help drive the upside from the cost side.
By combining the deposit side and asset liability together, that is why in the NIM for the Q2. If you look at in the second half of the year, we need to look at the monetary policy. What will be the future pricing for LPR?
If the LPR continue to decline, that will pose definitely pressure on the asset yield side. If the monetary policy is going to maintain a reasonable ample monetary policy, this will definitely cause pressure also on assets, quality assets. We also need to look at the investment world. Currently you can see the infrastructure is growing rapidly, but retail or the, from the commercial property investment is declining very sharply.
If the demand for property investment is coming up or recovered, that will help us to restore the stability of our interest rate or pricing for the asset. How can CMB actively to counter the external environment? Firstly, I think that we need to keep a good momentum in credit card. Now we are seeing quite good momentum for the recovery of credit card. We think that we can meet our budget for credit card this year.
Secondly, we need to very actively control the deposit cost. 'Cause we have a very good momentum for deposit growth. Definitely, we have already made up our budget for deposit growth. Second half of the year is to optimize our deposit structure, so as to reduce the deposit cost and maintain a stable NIM.
Overall speaking, we think that in the second half of the year, the NIM, the decline of the NIM, I think might be marginally narrowed, will not be as sharp for us in the Q2. This is our judgment for that and also is where what we are trying to do or making efforts for. Secondly, for the corporate loan, I would like to invite Mr. Zhong to give you more explanation on that.
As for the asset origination for corporate loans, I would like to give you some introduction. We have a vast operation. Very important to look at its customer structure and look at its asset origination. Or in other words, that a vast customer base decides whether it will have the growth potential in the future, and also the quality of its assets.
Customer structure is the core or the base of the bank's operation. For CMB, for these years, we implemented the new development philosophy, where we follow very closely on industry upgrading, new trend of industries. In some major industries, we try to be more professionalized in some certain important industries to explore the way of how we can do risk management in certain key areas.
That is why we have launched the idea. For COVID-19, we are moving towards five directions and the new driving forces, intelligent manufacturing with loan or the specialized industry in certain areas, and also precise industries. I think we are following the whole nation's industry upgrading structure, and that is why we have defined these five areas or directions are where we are moving towards for.
At the same time, in the past year, after years of efforts, we have formed our own professionalism in this regard. These are the areas that we are kind of moving towards and where we try to originate more assets. After the efforts that we have made, we think that we have some good results in this area. Firstly, you can look at the customer growth.
For these five directions, after our analysis into the five directions, we have picked up a name list of quality customers in these areas. When you look at the account opening rate, over 50% of these, our target customers have opened accounts with CMB. These five directions are also where the capital markets are chasing for.
At the end of the first half of the year, for IPO fund collection, you can see for the accounts for IPO collection, 62% of the market share, they are with the bank, namely the newly IPO'd companies choose CMB to the prime bank that they work for. The proportion is over 62%. It can show that our capability is improving and is in the same trend with where the capital market is chasing for.
When you look at the deposit side, the deposit from these five directions is over 20%. Assets originated in these five directions are increased by 14%. Also NPL is very low. It's as low as low. Much lower than the average one. Whether you have the doubts that
May have the doubt on whether we have the capability to achieve results in these five directions. I think that our capabilities can be shown in two aspects. The first one is professionalism.
For these five directions, our knowledge into the industries and our product and service innovation for these industries as well as know-how about these industries are all improving. We're trying to provide a holistic solution to companies in these industries. These are the capabilities that we want to build in these five directions. It's not only a direction that CMB want to originate assets, but it's mainly from the front, middle, and back office are trying to build capabilities for. Secondly, if you look at our structure of our team, then we have tried to optimize our team, our staff or talent structure for this.
We have eight strategic departments, and to do the professional business with our different industries. Namely the top enterprises in the five directions has been concentrated or run by these professional strategic departments. It has been ten years, we have accumulated experience, and we have nurtured talents or professional talents in these areas.
Thirdly, in regional market. We have formed our teams to targeting at the advantage, advantageous industries. These are very strategic and also specialized team who are servicing these specialized industrial corporates. From the head office to our branches, we have specialized team to service corporates in these certain specific industries. Secondly, as for the capabilities we want to build is we have formed or integrated a holistic solution, including investment banking, commercial banking, private banking and also, fintech. This is the solution that we are building for.
Based on the different characteristics of different industries and customers. We are kind of a baby on the flywheel of a bank, and to form a holistic solution for the customer. Here I want to emphasize that five direction is a major direction that we want to upgrade of our customer structure. But it doesn't mean that we do not do other business outside the five directions.
It's only the relative direction, namely it's the area on a trend for the future. But we think that we need to keep a balance between the traditional industries together with the new industry. Even for the traditional industries after industry upgrading, after supply side reform, they are still very quality corporates that we can work with together. So it's a balance, a relative one structure.
We do believe that we will have a more balanced and more structured for our corporate customer, so as to support the high quality of the bank.
Next question is from Morgan Stanley, Ran Xu.
Thank you for this opportunity.
Thank you for your detailed illustration on the NIM question.
I have another question on the loan pricing. We see fierce market competition in the loan pricing and the policy also support banks to provide further beneficiary policies to support loan extension. I have a question on how CMB to balance between loan pricing and loan extension and pricing, and will you slow your pace of loan extension and to manage the balance between pricing and extension, and what's your strategic consideration in terms of this problem, and what is your outlook for the next half?
Thank you for your question. At current stage, real economy is encountering difficulties. The loan interest rate is indeed declining to support the development of real economy. We regard that many of the enterprises are overcoming pressure in terms of liability, and they are facing pressure in the repayment of interest and the principals.
Therefore, bank is following the national policy to provide more support on loan extension and policy, and pricing to the enterprises. The central government at their working conferences has mentioned that when financial development is stable, the economy will be stable, and the two are closely connected with each other and have mutual influence on each other. When economic development is facing difficulties, so is enterprises development, and it is necessary for banks to waive fees and conduct fee reduction for better and healthy development of enterprises.
As long as the enterprises are having good development, so will the banks having good development. There is an old saying that.
The skin and the fur are connected with each other, and the banks and the enterprises are reliant on each other in terms of healthy development. Therefore, we will indeed maintain a balanced development between the bank's internal coordination and to provide sufficient support for the enterprises or enterprises clients development.
It is also embedded within our actual practice to realize a coordinated balanced development between ourselves and providing support to real economy clients. We see many SME clients are under huge impact of the COVID-19. Some of them have already gone out of business, and there are also unemployment pressure within the market. For young people from ages 16 to 20, there are only 19% of the unemployment rate within the market. We see a lot of pressure in the market.
Faced with this condition, CMB will definitely provide our support to the society and strengthen our encouragement in terms of our recruitment for newly graduated students and providing more position for these, newly graduated students. We will closely and actively implement support and the policies provided by the regulator to lower our loan pricing level, to provide more support to the real economy and to survive this difficult time. It is definitely a temporary situation. Chinese economy will remain stable and healthy and high quality development.
We need to work closely and jointly to survive this difficult time. Under such circumstances, CMB will strive every effort to fulfill our social responsibility, lower financing costs. We will uphold the commercial principle to balance, our improvement along with our support to enterprises. First of all, we will maintain a stable asset quality.
We believe that along with this good asset quality, we can have future development, and we will not let the relationship between us and our client to break just because of not that benign asset quality during the recovery process. Secondly, we need to cultivate and nurture good relationship with our clients and enhance our comprehensive return as we can gain from our client. We will provide good service to our clients, win their trust and win their long-term support to CMB.
We aim to provide long-term service to our clients. In terms of long-term, the idea is that we can gain their support in the long run, and I believe it is a reasonable choice we can make. Last but not least, we need to control better on our cost management. Loan pricing, liability, these are all indicators we need to consider.
Tax, risk, operation, asset, cost, these are all variables we need to take into good consideration to strike a balance between making profit and providing low cost loans to our clients. It is also relying on how we can maintain a very good internal management. These are also measures that we can take to carry out our policies.
The target is that we can follow the guidance provided by the central government and can stick to our commercial principle to realize the increment in efficiency, revenue, value for our clients and create our cyclic chain of value. These are basically my answer. Thank you. Next question, please. The next question is Shuo Yang from HSBC. Dear senior management, thank you for your question. My question is about retail strategy. Just now you have mentioned that a lot of development directions.
During the economic downturn development phase, there will be more difficulties in the external environment. I see that retail has become the cornerstone of many foreign banks, and I'd like to know more about your development direction in retail finance and, for instance, your credit card business. For instance, your wealth management product layout and what about your agency sales distribution during your business development? This is basically my question. The question will be taken by Wang Ying.
Thank you for your question. In the economic downward pressure, retail development is basically still our mainstay of the bank's operating philosophy. We still take retail finance as our basis. As for the retail strategy, first of all, from the asset organization side, CMB's retail asset is the cornerstone of our total asset.
In terms of two aspects, credit card and retail loan. In the economic downward pressure, our strategy is that credit card business will remain stable and low volatile operating philosophy.
Two years ago, we have taken a strategy in credit card business, which is we have changed the client structure in credit card business. In terms of gaining more benefit in the credit card business, we have to pay more attention to the credit card's transaction volume, and this is the major resource of getting benefit. This is what we have done two years ago to change the client structure, the client base of our credit card business. We have enhanced our efforts in the branch development of credit card business in card issuance.
The card issuance on the online level and the branch level has around half-half proportion in terms of their issuance. For debit card referral to credit card and for credit card referral to debit card generally has been giving us very good performance compared with other channels of customer acquisition. For credit card assets, we understand that we are enlarging our client base of acquiring quality clients, which is demonstrating in the following aspects.
First of all, in terms of trading transaction, we are ranking among the top, the first in the market. The credit card logic is that it is connecting the dots between transaction to asset to client, and it is fitting within our logic of operation. Credit card asset remains stable because of what we have done for the previous years.
For the next half, we see asset growth in credit card business, which is mainly due to our low volatile and stable operating philosophy. That is basically the condition we have in credit card business. For retail loan business, we focus more on quality than quantity. In terms of residential mortgage loan, the scale is relatively large. For the first half, the growth rate fall behind our expectation.
It is closely related to the market condition, as you have also been clear about that. The real estate sales has declined sharply, so is the residential mortgage loan. It is closely related to the sales volume, so the increment is quite limited. The mortgage repayment due to our existing volume is still large. We have taken a lot of measures to cope with this condition, but one main thing is that we always put quality ahead of quantity.
For the next step, our strategy for residential mortgage loan, we will enhance our efforts in the second-hand housing. Previously, we have done a good job in the first-hand house, and customer responses are also very positive. The asset qualities are good, but we have not put enough efforts in developing second-hand house and therefore it will become our target for the next half. Second, as I said, for SME loans, we have CNY 600 billion existing volume and we see positive growth for the first half.
We have also prioritized quality in developing SME loan and follow the national policy guidance to keep providing more loans to SME clients. For consumption loan, for the first half, the increment of the first half is higher than before. The consumption loan is based on extensive wealth management, digital platform operation. Asset quality is very good.
Under such circumstances, we will continue. In the first half, we will continue to carry out our policy in the next half and strengthen our attention on asset quality, asset quality control. For consumer loan, we noticed that there are many quality clients in the platform, and we aim to cater to the needs of these quality clients so as to enlarge the quantity of these quality clients through acquisition and providing more services to these type of clients. Generally speaking, in terms of retail loans, we feel there is positive growth towards this development.
For wealth management business, during the economic downturn, the business structure has experienced changes. Generally speaking, our strategy will focus more to enlarge our client base. We have 167 million retail clients.
We have only a set of 40 million clients holding wealth management products with us. We aim to change those retail clients into our wealth management clients. The key is that how to improve our efficiency of delivering online operations and online services. We have very limited physical outlets. We have very limited relationship managers. How can we match these increasing demand from our clients? The key is to increase our efficiency of online service delivery.
That is also what we have been doing. From online to offline, how can we guarantee to our clients a very smooth experience from the online service center to our physical branches? How are we going to deliver a very integrated solution, a customer one-stop experience to our clients? This is what we have been doing and what we have been exploring these days.
How are we going to transfer more and more clients to our online operation to lower our costs, to improve our efficiency? This is what we have been exploring, and we are experiencing very smooth operation. This is about enlarging our client base. Secondly, it's about a tailor-made solution provided to our clients. How are we going to better understand our clients' risk appetite, their preference, and to make ourself a real financial consultant to our clients? Generally, we have applied a policy of low volatility philosophy.
From the head office to the branches, wealth management allocation capability is what we have attached great importance to, and we aim to improve our capability and system capability as well. We aim to strive a better middle office capability. This is also what we have been doing lately. For products we offering.
We offer to our clients. CMB has constructed an open platform to put on our shelves good products from the market. For instance, we have introduced many products from other banks of their quality wealth management products, and the quantity is very large. We have been striving efforts to select quality product from the market and put on our shelf to provide it to our clients.
During the economic downturn, we aim to provide to our clients solutions, offerings, catering more to their appetite. Major characteristics of the solutions we provide to clients are, of course, very low volatility. For some clients that are willing to bear risks or take more risks, we will also have abundant high risk and high return products for these type of clients.
Generally, low volatility is the mainstay of our products. Through wealth management, our client will be able to remain and add value to their assets during the whole process.
The next question is from Jatou Putiti, an individual investor.
Thank you, senior management, for giving me this opportunity. Mr. Wang, good morning.
As a long-term investor of CMB, you have mentioned that the deposit cost is relatively rigid in the banking industry. It is common sense. I've noticed that many banks have also relying on the gain of fair value gains from fair value change to pull up their revenue. From the interim report, I see from your balance sheet that the expansion of your asset is lower than the average of the industry.
You have enough capability in your liability. I'd like to know whether you have taken into consideration to increase the trading to financial assets held for trading to win more revenue from the changes of the bond. It is good, it is a good method to offset the risks coming from the revenue decrease. I have another question regarding derivatives and how are these derivatives offset the risks coming from the revenue decrease? Thank you for your question.
Thank you for your concern, attention for CMB. Thank you for your critical comment to our performance. I have paid much attention to your articles posted on the WeChat platform. I think your analysis is very accurate. You have just mentioned in your first question that for gains from fair value changes, will we consider to put a higher proportion? We have around CNY 300 billion assets in terms of investment assets.
In the beginning of this year, we have acted according to our asset allocation strategy, and we have felt certain pressures. We have strengthened the investment in terms of bond assets. It is relevant to three types of accounts. Which is for the first type of accounts, that amounts to CNY 160 billion. Which is accounts calculated at amortized costs.
It is tax-free, which is very good for our profit, especially for us to remain a relatively stable level of our return. The second aspect is that the gains from fair value change. For this type of account, we have an allocation of around CNY 90 billion.
You can see that for these kind of trading account and also accounts that should be accounted for the other comprehensive income, we don't have much allocation to that because we don't have much volatility to the whole operational income. 'Cause in the interest rate kind of declining period, you might see that the valuation of these assets may have caused a positive impact on the operational income. When the interest is coming up again, it will have a negative impact on that.
We want to reduce the volatility to our P&L, and we want to reduce the risk to kind of a to our book. It's kind of a balanced allocation of our allocation. You know, even though we have a lower bottom and total allocation to these kind of P&L accounts, the growth rate is quite high. It's around 20% growth for that P&L account, even though the total amount is not very much. We have taken into consideration of volatility into account, and also into the current market so as to maintain a balance among these three different accounts. We have invested in some interest rate bonds because we think it's more safe for China.
As for the derivatives in the market or marketization of interest rates, interest rate is becoming more volatile, so how to offset the decline or the volatility from interest rate. We have done a lot of measures.
Trading center together with our treasury, they are working together to more offset, to have the derivatives to offset the risk coming from exchange, from exchange or coming from. So to reduce the volatility which might be caused by the policies. In the past, we are looking to use fixed rate bonds so as to reduce the volatility coming from interest adjustment. So it might cause repricing risk to our bonds. So we think that interest rate risk especially in the realization of interest is also very important part of our risk management related instrument that we use to cover. Next question.
My question is, the assets that have the exposure to what is your NPL formation ratio trend, when it will peak? I know that local government say, and also the central government, that they need to ensure the delivery of houses. Whether CMB has adjusted your credit policy and whether you have involved in some kind of helping of the property company in the local level.
What is your coverage ratio for the property sector? Secondly, I know you have some business that is non-recourse business related to real estate. I know that you have squeezed down the total volume. I know many investors are still concerned.
If one face risk in this business, even though you don't need to assume any risk for that, but actually how you will deal with this kind of business? What is the actual impact on your business?
Thank you. This question will be answered by Mr. Zhu Jiangtao.
Thank you. Quite a lot of questioning.
I will answer your question one by one. First one about the formation rate of our real estate sector. In the first half of the year, our corporate real estate has formed potential for CNY 7.4 billion or 4.7 in the Q1 and 2.7 in the Q2. So you see that it's low and still continue to follow this trend. This is about the trend for our asset formation. Secondly, for our strategy for this real estate section.
For customers, we focus on main base, and we focus on our head office and branch level strategic customers. These accounted for 65% of our total finance. In regions, we will be more concentrated in first and second tier city, such as in first and second tier cities, it's already over 85% of our total asset. Thirdly, in terms of the business structure, we are optimizing continuously.
As of June, the business that is only in the green line is only 1.4%, which is a very small proportion. We are optimizing our structure. Also when you look at our provision level, the coverage level is almost twofold of our average coverage level of the corporate loan. It has been kept at a very high level of the LLR ratio.
You can see we have the ample buffer for that. We strengthened management for this real estate. Especially for the collateral value to the loan is over 1.5 fold. 70% of the projects have this kind of a higher coverage. '
The collateral value to loan value. Also at the same time, we have a close rate management for these projects. These are the 5 major practices we have. For the whole year, our judgment for the real estate sector, we think that in 2021, the peak time for our NP formation has already passed in 2022. In the future, the risk will become more stable. Lastly, about the business that we do not take any credit risk. We have done jobs in the three following aspects.
The first one is for risky projects. We strengthened cooperation and coordination with our product issuer to monitor them to perform their duty. Secondly, we cooperate with our product issuer and to ask them to coordinate with the other side, and to try to have the best solving schemes for our customer. Thirdly, to coordinate with our customers and try to get their loans back. Next question, please. Next question is from CICC, Judy Zhang.
Thank you, senior management, for giving me this opportunity. I am Judy Zhang from CICC. I have two questions for extensive wealth management. The first question is that you have. Well, the idea of rebuilding the extensive wealth management is admirable, and we see the comparison with international peers that you have relatively small volume of investment banking business. What is the role and future growth you face for your investment banking business? The second question is that you have very strong incentives
You have also brought up the idea of strengthening the capability of asset allocation. We see the launch of three series product solutions, and we are fully confident that this will contribute to your further competitive edge and to improve client experience. Could you please share your consideration behind your capacity construction progress and your outlook towards this aspect?
Thank you for your question. The second question will be taken by Mr. Wang.
The first question regarding the extensive wealth management model. It is a very important aspect we need to improve. For instance, J.P. Morgan is a good example. They are very comprehensive in terms of their general development, and that is what we need to learn from them. Influenced by the requirement from our regulator that we need to separate.
We are under the separate license management, which is not that realistic for us to conduct a holistic development across all fields in the financial sector. This is the idea. We need to make further improvement for the extensive wealth management business landscape. Investment banking, asset management, asset custody.
These are important areas that are mutually influenced with each other and closely linked to each other. They're integrated in one body, and we need to give full play of our feature as a commercial bank to develop further our investment banking business. We consider our bond underwriting business quite competitive in the market. Secondly, for the M&A business, based on our client base, our service capability as a commercial bank, we are able to realize commercial lending, M&A, and bond underwriting to our clients.
For private banking business, this is also a factor that can be connected with investment banking. For instance, PE investment management, and these, high-net-worth clients, demand are also relevant with the development of investment banking business. In the later period, we will closely coordinate with our PB departments to provide integrated service to our clients and at the same time bring more projects to the investment banking departments. These are all what we can do to further develop our investment banking business as a commercial bank.
Basically, under the policy environment we are faced, investment banking, commercial banking, fintech, our research and institutional departments, we have large room to grow. The second question will be answered by Mr. Wang. Thank you for your question. Last year, we have launched a new wealth management system in July.
By then, we consider the launch of the new system to enhance our general competitiveness in the market. Frankly speaking, doing wealth management business, the key is to find a good way to provide customer companionship, to follow the customer's journey and be a good companion to our clients during the whole process. How can we deliver better experience to our clients? It all starts from investor education to investment, to asset allocation, from single to mixed product, and to deliver a one-stop experience.
The key is to better understand your client, to educate, to provide guidance, to help them realize the reserve and the value of their assets. We believe we're doing well in the following four aspects. The management of cash, stable wealth management, aggressive management, and et cetera.
Basically, we divide clients' investment behavior into several categories, from their daily management of cash, from steady and healthy investment to a general investment solution, and then to aggressive investment management. It is closely related to customer companionship, our construction of our middle office, our system capacity building, and all the way to the assessment of our customers.
We have conducted a plan called Original Aspiration. Surrounding this plan, we uphold a philosophy of customer-centric. We have launched several marketing opportunities and activities to enlarge the customer base and generate a landscape of this tree system. All the way from the head office landscape design to the branches system setting, we have basically finished a process.
At the same time, we have built a new system for small and medium-sized branches. The head office will provide direct support to them based on an online platform. This new system, its establishment is also closely related to our planning that we need to increase our efficiency. How can we maximize our level of efficiency?
Only by increasing our level of efficiency can we truly realize our commitment to our clients and reaching our goal to providing aspirational service to our clients. The above-mentioned four aspects is beneficial to our direct online operation of the wealth management platform. Many of our clients, we figure, will not require the outreach from our relationship management. They're okay to follow the guidance provided online to self-operate, to self-manage its asset, which to some extent increase our operating efficiency, and we find the overall process to be quite smooth.
For CMB retail extensive wealth management, the integration of online and offline is very important to us. It's also our competitive edge in the market. Compared with the internet financial platform, they are in lack of the physical outlet. They are in lack of the companionship from our relationship manager to our clients. In this way, we are better than them. In terms of our online operational efficiency, we are performing better than our banking peers in terms of increasing efficiency and cutting costs.
This is what we are better than them. It is good for us to utilize less manpower and reach more and larger client base. This is the plan for our construction of the wealth management system. The third point is that, it's about the chain, the cyclic chain of value.
We have built up the chain from retail to investment banking, to asset management, to corporate banking, and these aspects have all linked together and have created synergy in product offering, in customer acquisition to the efficiency improvement, and these have all contribute to the integration of our development.
Thank you. The next question, please.
Next question is from Kunpeng Ma from China Securities.
Thank you for your opportunity.
I believe many of the question have been answered in the previous rounds of communication. Looking into long-term development, especially in the real estate sector. I believe that real estate assets has been one of your major category asset in your loan extension field.
It has been quality asset in terms of retail, in terms of corporate, and I'd like to understand the long-term trend from the senior management that whether it is going down in long run, and what about the excessive bonds you get that originally you would like to invest in real estate market, and then what other fields are you exploring?
I've noticed you have also mentioned new fields such as new growth engine, the green economy, the quality manufacturing, et cetera. I've noticed that these are all very competitive industries. Based on your very strong client base, you have a very good real estate portfolio. When you are making investment in other new industries, how are you going to maintain your previous competitive edge that you have realized in the real estate sector?
Basically, what is your understanding towards the pressure you are facing on the asset end? What is your outlook towards these pressures? Thank you for your question. Real estate financing indeed is a very important source of the bank's financing. It has high loan pricing and relatively low risk level, and is also a buyer's market.
The bank has a relatively strong position in the real estate mortgage loan market. I believe that in the following stage, as the real estate industry are experiencing a sluggish development, there is a turning point in sight. As you have mentioned earlier. Previously, real estate asset is a very important fraction of the bank's asset. For instance, the residential mortgage loan, developer's loan, and et cetera, and these are all experiencing a turning point.
What about the next stage plan, and how are we going to cope with these changes? The second perspective is that we are also faced with two major changes under the pandemic circumstances. Firstly, direct financing is replacing traditional financing. If the bank are still lagging behind, they stick to the traditional financing method, the shock will be huge.
We have talked a lot about financing disintermediation. We see a huge and a faster pace in the past half year in terms of direct financing replacing the traditional financing. The second perspective I see is that asset organization determines the resource of liability. We used to talk about the resource of capital determines the utilization of the capital, and now we consider liability organization would be harder than asset organization, and now it's not the case.
This is also a trend we see in the following stage, not just about real estate challenges brought to us. These two changes are also what we see as commercial bank, as CMB, need to take careful consideration and react actively. These changes are trend. We need to carefully select and make assessment that which kind of changes are trend, which changes are policy-based, and which trend are just cyclical changes. I believe a direct financing's major role will be a trend.
It's a necessity of economic development. Just like European countries, U.S. countries, direct financing is the major financing resource in the market, not traditional financing. As we are facing with such kind of changes, how are we going to enhance our capacity, our capability of providing direct financing actually determines our future development.
CMB has actually act in response to this trend by construction of the integration of ICPT development. The second perspective is that targeting at the real estate turning point. How are we going to cope with this situation? I believe it is both, trendly based and cyclical based. For European countries, U.S. countries, through a price hike in the real estate market and bubbles actually burst in the market, and the financial crisis actually consume and digest these bubbles, and we see a new round of real estate development.
It is very typical as we can see from the subprime debt crisis has gone. The real estate market actually thrive after that. For China's real estate market, through decades of fast development, Hainan, Beihai, Shenzhen has begin its price hike in the housing market since 1992. Deng Xiaoping's trip to the southern provinces.
The second round is that we see some price decline in housing market. Since the year 2008, we begin to see the bubble bursting after unhealthy development of the real estate market. After this adjustment, we consider the previous development is not sustainable. In the following phase, we believe the real estate market will enter into a new cycle of more healthy and more stable development.
The real estate companies are also differentiated from each other. The winners will be the king, and the strong enterprises will even become stronger, and the weak will be kicked out of the competition. For Yangtze River Delta and Pearl River Delta, these real estate markets in these regions will still be competitive and strong.
For places where supply is larger than the demand and the population is getting less and less, for these regions, the real estate market will enter into a sluggish development. For banks, we need to find our positioning in the market. Through this round of adjustment, we believe the real estate market in China will enter into a new era of healthy and stable development.
It is very important for banks to find the right region, to find the right project, and find the right customer base to provide service with. For the third characteristic, asset organization. Firstly, we will make good use of the capital resources, and it requires banks to enhance this capability of asset organization and risk management. Risk management capability is the core competence of a bank. This is what we need to face in our future operation.
To better serve our clients, to realize profits, to realize a stable margin. Without risk management capability, these are all empty talk. I believe CMB are equipped with these capabilities. On the one hand, we will continue to enhance our risk management capability, and it's the most urgent task. It can greatly promote our capability to organize assets, which can provide strong support for our future development and development of extensive wealth management.
The second aspect is that asset allocation capability. In the future, asset allocation capability requires refined management. Residential mortgage credit card loan cannot easily be served as a fraction of a solution of a portfolio. We will focus more on regional industry client pricing, term, risk. These factors add all together. There comes our asset allocation strategy. We will stick to the value return philosophy and maximize the value through appropriate asset allocation.
This is the key to our management. Currently, as we are faced with the insufficient asset supply, we need to solve the problem. We aim to increase our client base, increase the quantity of loan we invest, and make every effort to create asset, to find good assets for us to invest in. For instance, we need to focus more clients that are long tail, that are not top-level clients, but with very good management of our risks.
Second aspect is about pricing. We will take more consideration of customer's comprehensive return. It is a very important metric for us to calculate returns. What's more important is that we will always put asset quality in priority. The urgent task and for the following phase, we need to pay special attention to asset organization capability.
To respond to your question, these are basically what I consider.
Due to time limit, I know there are a lot of questions coming from investors, analysts.
We will save more communication for future communication, both in written forms and both in other forms of communication.
We will conclude today's meeting.
For more detail, please refer to our already released interim report online or further contact with the investor relations team of CMB.