Bank of China Ltd. Q2 FY2026 earnings call

• Global Network & Internationalization: BOC maintains a leadership position with presence in 64 countries/regions. Cross-border RMB business scale ranks number one globally. The bank serves 90% of Fortune 500 companies in China and has established itself as the first Chinese global custody bank, with cross-border custody assets growing over 16-19%.
• Tech Finance & Real Economy Support: Tech loans account for more than one-third of total corporate loans, serving 200,000 tech companies and 5,200 core AI companies. Green finance balance grew by 13.32%, and inclusive finance for micro/small enterprises grew by 10.6% in amount.
• Asset Quality & Risk Management: The NPL ratio stood at 1.22%, down 0.01 percentage point from last year, with the lowest NPL among peers. Provision coverage ratio is 208.5%. The bank emphasizes 'look-through' risk management and strict compliance across domestic and overseas institutions.
• Digital Transformation & AI: BOC deployed over 32,000 customers for its BOCAI large language models across 3,800 scenarios. Mobile banking MAU increased by 6.6%, and digital RMB consumption is among the top in the market. Delivery cycles for tech projects were reduced by 15%.
• Dividend Policy: To mark the 20th anniversary of its IPO, BOC proposed increasing the cash dividend payout ratio to 31% (from 30%) and declared a cash dividend of 1.19 yuan per share.

The Bank of China reported steady financial growth in the first half of 2026. Total operating revenue reached 357.1 billion yuan, an increase of 8.41% year-on-year. Profit before provision was 230.4 billion yuan, up 9.77%. Net profit attributable to shareholders grew by 4.67% (RMB) and 5.10% (USD). Non-interest income totaled 120.38 billion yuan, representing 33.71% of total income, driven by settlement, custody, and wealth management. Overseas operations contributed significantly, with overseas net profit reaching 6.4 billion USD, accounting for 27.21% of total group net profit.

• Net Interest Margin (NIM): Management expects NIM to stabilize further. In H1 2026, NIM improved by 1 basis point to 1.27%. They anticipate continued optimization through liability cost reduction (lowering high-cost deposits) and asset yield enhancement via high-yield businesses and foreign currency spreads.
• Loan Growth: Domestic RMB loan growth is expected to remain higher than the industry average, focusing on tech, green, and inclusive finance. Overseas commercial banking loans are projected to maintain double-digit growth, hitting a five-year high.
• Non-Interest Income: The bank aims to expand non-interest income sources, particularly in wealth management, custody, and settlement services, targeting a stable contribution rate above 33% despite low-interest environments.
• Strategic Direction: The Board adopted the '15th Five-Year Plan,' prioritizing high-quality development, globalization, and tech finance. No specific quantitative EPS or revenue targets for H2 were provided, but emphasis is placed on balancing volume and price synergy.

• Domestic Credit Risks: Potential pressure from domestic individual personal loans and corporate sectors. The bank is strengthening overdue and MPL (minority participation loans) management and forecasting risk developments for orderly resolution.
• Overseas Concentration Risks: Specific attention is paid to over-concentration of loan extension in certain overseas markets. The bank monitors key areas and sectors to ensure asset quality stability abroad.
• Interest Rate & FX Volatility: Uncertainty in US dollar interest rates and fluctuations in foreign exchange rates pose risks to overseas NIM and investment returns. However, the bank utilizes its global diversified currency allocation to hedge these risks.
• Systemic Financial Risks: The bank explicitly states its commitment to guarding the bottom line of 'no systemic financial risks ever happening,' implying vigilance against broader economic slowdowns and structural shifts.

Q: How does BOC balance domestic and overseas loan extension while maintaining asset quality under the 15th Five-Year Plan? / A: President Zhang explained that domestic loans will focus on five priorities (tech, green, manufacturing) with growth above industry averages, leveraging fiscal-monetary synergies like interest subsidies. Overseas loans aim for double-digit growth, supporting Chinese companies going global and RMB internationalization. The bank balances volume and price, optimizing asset-liability structures to ensure high-quality development without compromising risk standards.

Q: What are the primary drivers behind the stabilization and improvement of the Net Interest Margin (NIM)? / A: EVP Cai Zhao noted that NIM improved by 1bp to 1.27% due to controlled repricing of mature long-term RMB deposits and higher foreign currency yields. While RMB asset yields face pressure from slowing credit, liability costs are decreasing. Overseas institutions contribute positively due to higher foreign currency spreads and improved funding costs from current deposits, helping stabilize the group's overall NIM.

Q: Can you detail the growth drivers for non-interest income and future prospects? / A: EVP Huang highlighted that non-interest income rose 5.04% to 120.38 billion yuan, driven by settlement clearing, agency sales, and financial markets. Key growth came from cross-border settlements (+20%), custody fees (+13.09% for cross-border), and wealth management. Future strategies include expanding payment/settlement leadership, enhancing global custody and wealth management products, and active bond trading to sustain fee income amid low rates.

Q: How is BOC leveraging its global network to turn globalization into profitability during the 15th Five-Year Plan? / A: Management emphasized that overseas net profit contributed 27.21% of the total. Strategies include optimizing cross-border asset-liability allocation to exploit RMB-FX spread differences, leveraging the extensive global clearing and custody infrastructure, and driving synergies between domestic branches and overseas institutions. The goal is to make overseas profit contribution break new records by providing comprehensive services to companies expanding globally.