Core Viewpoint - The asset quality of the Bank of Communications continues to improve, with effective measures implemented for risk management and control [1] Group 1: Asset Quality Performance - As of the end of September, the group's non-performing loan balance was 114.6 billion yuan, a decrease of 0.5 billion yuan compared to the end of June [1] - The non-performing loan ratio stood at 1.26%, down 0.05 percentage points from the end of last year and down 0.02 percentage points from the end of June [1] - The group's provision coverage ratio was 209.97% at the end of September, an increase of 8.03 percentage points from the end of last year, indicating a reasonable and adequate provision level [1] Group 2: Risk Management Measures - The company has enhanced analysis and precise measures to improve the level of risk management, focusing on refining management mechanisms and optimizing asset quality forecasting and control [1] - There is a strong emphasis on risk prevention in key areas, with coordinated support for local debt reduction and platform transformation in key provinces [1] - The company is advancing the development of its real estate business while managing associated risks and has launched tools for credit sales and risk assessment for small enterprises to target high-risk products and customer segments [1]

Financial Data and Key Metrics Changes - The company reported a core EPS of $1.40, core return on assets of 1.40%, and core return on tangible common equity of 18.7%, all showing improvement compared to the second quarter [3] - Year-over-year, core net income increased by 21%, core PP&R grew by 6%, and core earnings per share rose by 30% [3] - Tangible book value per share increased by 12% [4] - Net interest margin expanded by two basis points to 3.91% quarter over quarter [4] Business Line Data and Key Metrics Changes - The wealth and trust business grew by 13% year over year [5] - Core fee revenue was flat quarter over quarter but grew by 5% when excluding strategic exits [4] - Client deposits increased by 1% linked quarter and grew by 5% year over year, with non-interest deposits up by 12% year over year [5] - Loans decreased by 1% linked quarter, but residential mortgage and WSFS-originated consumer loan portfolios saw increases of 5% and 3%, respectively [5][6] Market Data and Key Metrics Changes - The commercial pipeline increased to approximately $300 million, indicating strong demand [6] - Total net credit costs were $8.4 million, down $5.9 million compared to the prior quarter, with net charge-offs at 30 bps [6] Company Strategy and Development Direction - The company plans to maintain elevated buybacks while adjusting the pace based on macroeconomic conditions and business performance [7] - Management emphasized a focus on organic growth and potential acquisitions in both depositories and fee verticals to achieve medium-term CET1 targets [12][14] - The wealth and trust business is expected to continue growing, with a focus on new accounts and transaction activity [25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage margins through deposit repricing and hedging strategies amid uncertain rate cuts [8][50] - The company plans to provide a full-year 2026 outlook in January, indicating a commitment to high performance [8] Other Important Information - The company returned $56.3 million of capital, including $46.8 million in buybacks, representing 1.5% of outstanding shares [7] - The company has a CET1 ratio of 14.39%, well above the medium-term target of 12% [7] Q&A Session Summary Question: What is the base case scenario for achieving the CET1 target? - Management indicated that they are currently buying back approximately 100% of net income and have the capacity to continue this for the next two to three years, depending on balance sheet dynamics and investment opportunities [12][14] Question: How are reserve levels being managed amid macro volatility? - Management noted that while there is capacity to release some reserves, they are maintaining conservative levels due to potential macroeconomic volatility [16][18] Question: What is the outlook for the wealth and trust business? - The wealth business is seeing growth in new accounts and transactions, with institutional services up 30% and The Bryn Mawr Trust Company of Delaware up 20% year over year [26][28] Question: How does the Cash Connect business forecast profitability amid rate changes? - Management confirmed that while fee revenue may decrease with rate cuts, expenses would also reduce, leading to overall profitability benefits [34][36] Question: What is the expected pace of consumer loan portfolio runoff? - The company expects the Spring EQ portfolio runoff to continue at a pace of $15 million to $17 million per month, while home lending is expected to grow positively [40][41]

Core Insights - The "Interim Measures for the Supervision and Administration of Microfinance Companies" aims to enhance the regulatory framework for the microfinance industry, emphasizing risk management and compliance [2][18] - The measures maintain the principle of small and dispersed loans, promoting inclusive finance while setting stricter operational guidelines for microfinance companies [2][18] Group 1: Impact on Asset-Backed Securities (ABS) - The new regulations raise the entry threshold for microfinance companies to issue ABS, requiring approval from provincial financial regulatory bodies and emphasizing good corporate governance and risk management [4][5] - The measures continue to enforce leverage ratios, limiting the amount of funds raised through non-standard financing methods to no more than the company's net assets from the previous year [5][4] Group 2: Business Operations and Regional Restrictions - The measures reinforce the small and dispersed loan principle, specifying that online microfinance loans for consumption and production should not exceed RMB 200,000 and RMB 10 million respectively [6][7] - The geographical expansion of microfinance companies is allowed but remains limited to inter-city operations as defined by provincial financial regulatory bodies, maintaining a regional characteristic [6][7] Group 3: Prohibition of Certain Business Practices - The measures prohibit microfinance companies from engaging in "assisted lending" and set a minimum contribution ratio for joint loans, which may impact the scale and structure of joint loan ABS issuance [9][10] - Microfinance companies must not outsource core functions such as credit assessment and risk control, ensuring that they maintain direct responsibility for these critical areas [10][9] Group 4: Strengthening Compliance and Risk Management - The measures require microfinance companies to implement a standardized asset classification system and risk reserve management, enhancing asset quality management and compliance [13][14] - A clear definition of non-performing loans is established, which will improve cash flow recovery processes and enhance the monitoring of underlying asset quality for ABS [13][14] Group 5: Expanded Business Scope - The measures allow microfinance companies to engage in commercial bill acceptance and discounting, broadening their revenue sources and providing new channels for bill transactions [16][17] - Microfinance companies are prohibited from issuing or selling wealth management products, ensuring a focus on core lending activities [17][16] Group 6: Overall Industry Development - The "Interim Measures" are expected to lead to a more competitive and regulated microfinance market, enhancing the overall development of the industry [18][19] - As a key issuer of ABS, microfinance companies are positioned to maintain a significant role in the ABS market, benefiting from improved regulatory standards and operational practices [18][19]