Chailease Holding Company Limited ($5871)

Welcome to the Chailease First Quarter 2016 Earnings Release Conference Call. [Operator Instructions] Now I would like to turn the call over to Vic Wang, Vice President of the Chiles Holding. Mr. Wang, please begin.

Hi. Good evening, everyone. This is Vic. I would like to welcome everyone to Chailease Holdings First Quarter 2026 Earnings Conference Call. With me this evening is Ms. Sharon Fan, Head of IR, and she will open to your questions in Q&A period. I will walk you through this quarter's earnings presentation, which is available for download on our corporate website under the IR section. As a reminder, please refer to the disclaimer regarding forward-looking statements at the front of the presentation. The agenda we are going to cover for today on Slide 3 includes management highlights, first quarter 2026 consolidated performance review, followed by the segment review for our Taiwan, China and ASEAN operation. Without further ado, I would like to start the presentation from Slide 4. Highlights for overview of our first quarter 2026 operation results. First, the summary table here shows the credit portfolio growth for the quarter. On a year-over-year basis, Taiwan, China and ASEAN credit portfolio decreased 1%, decreased 5% and grew 1%, respectively. On the consolidated level, we realized 1% year-over-year credit portfolio decrease. This lower-than-expected portfolio growth reflect the macroeconomic softening and challenging operating environment. As for sequential portfolio growth, Taiwan decreased 1%. China decreased 2%. Asset increased 1%, and portfolio was down 0.2% on a consolidated basis. The full year portfolio growth target for 2026, which was guided by management as single digit for both Taiwan and China, double-digit for ASEAN except Thailand remain unchanged as of now. Second, the gradual decrease in overall credit costs reflect ongoing product mix change for Taiwan and sustained it as a quality improvement for China and ASEAN. Moving on to Slide 6. Consolidated credit portfolio reached TWD 816 billion at first quarter end 2026 with 1% year-over-year decrease and was down 0.2% quarter-over-quarter, a scores momentum moderated for the quarter. The next slide, Slide 7, show you the trend of consolidated average loan yield and cost of funds for the past 3 years. In recent quarters, we see lower loan yield trend mainly due to product mix change for Taiwan. We will discuss the change of each operation region in the next section. Next slide, Slide 8. On the left-hand side, the consolidated revenue for the first 3 months of 2026 reached TWD 23.9 billion, representing a 3% decrease compared to the same period last year due to lower revenue for China. On the right-hand side, the first quarter 2026 consolidated revenue was down 1% from the previous quarter. Moving on to Slide 9. On the left-hand side, consolidated net profit for the first 3 months of 2026 totaled TWD 5.6 billion and earnings per share was TWD 3.26. The increase in net profit was mainly driven by reduced the expected credit loss and lower cost-to-income ratio. On the right-hand side, first quarter consolidated net profit was up 17% quarter-over-quarter as China tax rebate of RMB 205 million was received. Turning to Slide 10. This slide shows you our credit portfolio mix and net profit contribution in terms of operating region. On the left-hand side, we can see Taiwan credit portfolio still accounts more than half, which maintained a 56% grew total credit portfolio. China is about 28% and ASEAN remained at 15% the first quarter 2020. I -- on the right-hand side, Taiwan net profit contribution accounts for 52% and China was reduced to 39%. ASEAN's contributed 8% for the consolidated net profit. Moving on to Slide 11. The chart on the left-hand side, cost-to-income ratio was down from 30% to 29% for the first quarter of 2026 compared to the same period last year. The chart on the right-hand side, asset to equity decreased to 4.8x for the quarter as portfolio growth moderated. Slide 12, a -- the consolidated ROA on an annualized basis was 2.4% for the first quarter of 2026, slightly increased from 2.3% in the first quarter of 2025. The consolidated ROE on the right-hand side was 13%, slightly increased from the prior quarter. The calculation for our here excludes preferred shares. Next slide, Slide 13. The consolidated delinquency ratio on the left-hand side, the first quarter end 2026 was increased to 5.1% from 4.8% in prior quarter. Later in the presentation, I will talk about each region in more detail. Moving to the right-hand side, allowance to loan portfolio ratio was maintained at 3.1% compared to previous quarter. Moving on to the segment review. Let's look at our operation performance region by region. On Slide 15, Taiwan credit portfolio reached TWD 458 billion at first quarter in 2026, representing 1% year-over-year decrease and quarter-over-quarter was also down 1%. The impact of intentionally low sun of used car installment financing continued this year. But if we exclude used car installments financing through dealer. Taiwan portfolio grew 3% year-over-year. Slide 16. This slide shows the change of Taiwan solar asset growth solar assets are utilized starting from this quarter instead of net assets to better reflect underlying solar revenue. Taiwan solar growth as they reached TWD 74 billion at first quarter and 2026, representing 5% year-over-year increase and quarter-over-quarter was also up 1%. The growth was in line with the industry development. Next slide, Slide 17. This page presents trend of our Taiwan loan yield and funding costs. The continued decrease in loan yield for first quarter 2026 was impacted by change of product mix as we discontinued high loan yield used car financing through dealer business since 2025, April. Moving on to Slide 18. Revenue for our Taiwan operation for the first 3 months of 2026 reached TWD 12.8 billion, representing 1% year-over-year decrease due to the change of product mix and slower portfolio growth. The solar revenue accounts 14% of Taiwan revenue for the first quarter 2020. For the quarter comparison on the right-hand side, first quarter revenue was down 3% quarter-over-quarter mainly due to fewer calendar days in first quarter. Turning to next slide, Slide 19. Taiwan's profit for the first 3 months of 2026 increased by 10% and -- compared with the same period of last year, mainly due to a decrease in expected credit loss and reduced cost-to-income ratio. The first quarter Taiwan, net profit was up 3% quarter-over-quarter, mainly reflecting lower expected credit loss sequentially. On Slide 20, on the left-hand side, Taiwan delinquency ratio at first quarter 2026 was up 0.5 percentage points to 4.1% for the quarter. mainly due to decreased loan portfolio and increased new delinquent formation increased the new delinquent for mentioned this quarter showed lower loss ratio and no signs of sector-specific concentration. On the right-hand side, post recovery from delinquency and write-offs were in normal range for the quarter. Next slide, Slide 21. Allowance to loan portfolio for Taiwan a 2.1% this quarter, as portfolio and allowance for decreased from prior quarter. Let's start China operation on Slide 22. China credit portfolio reached RMB 49.6 billion at first quarter and 2026, which decreased by 5% year-over-year and 2% decrease quarter-over-quarter, reflecting first quarter seasoning softening and lower risk appetite. Currently, we maintain our China loan portfolio growth target of single digit for 2026. Turning to Slide 23. This page as loan yield and cost of fund trend for our China operation, we managed to maintain stable spread over the quarters. The slightly lower funding costs reflect the continued refinement of funding structure. Next slide, Slide 24. China revenue for the first 3 months of 2026 totaled TWD 7 billion decreased 12%. On the right-hand side, first quarter revenue was up 0.2% quarter-over-quarter. Moving on to Slide 25. China for the first 3 months of 2026, net profit reached TWD 2.5 billion, decreased 7%. The decrease in profit was mainly driven by decreased revenue compared to the same period of last year. On the right-hand side, China's first quarter 2020 net profit was up 49% sequentially as tax rebate of RMB 205 million was received. Turning to next slide, Slide 26. On the left-hand side, China delinquency ratio in the first quarter was up 0.2 percentage points to 7%, mainly due to decreased loan portfolio. The new delinquent formation continued to show decreased trend for the quarter. On the right-hand side, right off amount slightly increased for the quarter. Next slide, Slide 27. China's allowance to portfolio ratio for the first quarter 2026 was slightly up 0.1 percentage points to 4.6% reflecting increase in delinquent amount for the quarter. Moving to ASEAN on Slide 28. The credit portfolio at first quarter and 2026 reached 123 billion, up 1% year-over-year and 1% sequentially. Malaysia and Cambodia contributed the most growth for ASM. Let's turn to next slide, Slide 29. The left-hand side, asset revenue for the first quarter 2026 totaled TWD 3.99 billion grew 9% compared to the same period last year. Malaysia and Cambodia grew double digit for the quarter. On the right-hand side, ASEAN first quarter revenue was also up 5% sequentially. Moving to Slide 3. After 3 months of 2026 net profit reached TWD 0.79 billion, increased by 18% primarily due to the less expect equity loss for Thailand this quarter. On the right-hand side, ASEAN first quarter 2026 net profit was down 3% sequentially. The last slide, Slide 31. On the left-hand side, ASEAN delinquency ratio of first quarter 2026 decreased 0.6 percentage points to 4.5% in mainly due to improvement from Thailand for the quarter. On the right-hand side, ASEAN's allowance to portfolio ratio for the first quarter 2026 was decreased to 3.7% in was delinquent amount decrease. And this also bring us to the end of my presentation for today. Thank you for your time and listening. Now I would like to turn the call to operator to open the line to questions. Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And our first question will be coming from Alex Leung.

So I have a few questions. So number one is on the new delinquency formation amount for Mainland China, so in RMB terms. So could you give us some color on how has that number to Q-on-Q. So my own estimate is maybe down by low teen economy just want to check whether that is correct. Second question is regarding your April earnings release year-to-date. So it seems like the Taiwan region has seen a bit of softening in terms of top line momentum. My own estimate suggests maybe it has declined by like low teens year-on-year for April for Taiwan region. So just wondering what was the reason for the certain sizable decline for Taiwan top line? Third question is, so we have seen your Taiwan loan yield continue to be under some pressure due to the ongoing product mix change. So just wondering, how much longer do you expect this to continue? And let's assume that OA China used car financing is fully resolved by some time maybe by the end of the year. So by that time, do you have an estimate of what's going to be the normalized loan yield we should expect after this drug is fully settled. And last question is regarding your OpEx number for this year. So it seems Q1, you have done pretty good in cost control, showing a high single-digit decline in OpEx and then employee costs I'm referring to. So last year was roughly flat. So I'm just wondering -- do you have any target or demand in terms of the full year OpEx growth that you want to control.

Let's answer your question one by one. First question regarding the China new delinquency formation I think for the reason 2 quarters -- 2 or 3 quarters trend, we observed that the new delinquency for machine actually has been steadily decreased, like by 12%, 13%. So it's roughly in line with your estimate. I think we are quite confident this should be an ongoing trend. And so that it's very likely that we will have some savings for the credit cost for our China operation this year. . And the second question, the Taiwan April earnings revenues. I think it's down by like 2%. Yes, accumulated for April to -- January to April. So I think this is quite acceptable. Although -- yes, I think we're a little bit behind our full year target like low single digit for the whole year growth of the portfolio, but -- because this is the first quarter, and I think as management mentioned in this -- in our previous earning call that we -- as of now, we still want to maintain -- keep our full year plan. So I think 2% of the accumulated revenue decrease is still quite manageable. I think we can catch up later. And the third question about the product mix. I think regarding the used car financing the OA that channel. I think the impact already gradually decrease. And you can see the Taiwan spread or yield has been very stabilized now. For the recent 2, 3 quarters and the negative impact, I think, already gradually subside. And I think the remaining it still has some long-tail effect. So probably for this year, there's still some impact. And probably for the next year, but I believe the impact will be really, really small going forward. And for the last question, the OpEx because for our OpEx most mostly related to the headcount-related expense. And because the slower growth, it will decrease the bonus and so incentives so as for the sales team from my team. So I think we should be maintained similar OpEx ratio throughout the year. Yes.

If I can follow up a bit on the April numbers. So yes, so the revenue was down 2% cumulatively. I was actually referring to earnings, it was down 4% cumulatively from Taiwan, right? So in Q1, it was up in first 4 months was up 4%. So it seems in April, there's some sizable decline. So I'm wondering, is that due to more provisioning could it cost higher in April for Taiwan?

No. The provision expense -- credit cost wise actually remain quite stable. So I can -- we can look into detail because there's no special provision for this month. I think, yes.

Next, we have Jemmy Huang, JPMorgan.

So the first 1 is following the rising new delinquent formation in Taiwan. I think although you explained that the expected loss ratio should be very low because of the collateral coverage, but are we seeing any signs? Because rising telecom ratio is still signaling some asset quality deterioration. Is that any underlying then you are looking at that should be very flat in recent quarters? And. The second question is, I think, for Asia, if I do a calculation based on your guidance on Taiwan Criticos and China credit costs both declined quarter-on-quarter it sounds to me that ASEAN credit cost actually pick up against the declining delinquent ratio. So how do we reconcile the discrepancy in ASEAN. The third question, just to reconfirm, I think in the Chinese session, the Chairman mentioned about China portfolio growth in April showing positive growth. Just trying to confirm it's a month-on-month growth over -- it's actually -- the April portfolio is actually showing positive growth compared to end of 2025.

Okay. Let's answer your last question. Because this is for the portfolio balance, so it -- I think it is increased. Chairman is mentioned to compare with the previous month. So probably, we haven't reached to the beginning of the year balance yet. This is for your third question. And the first question, the new delinquency formation increase for Taiwan in this quarter, which drives out the delinquency ratio up quite significantly. And I think probably we should separate 2 factors. One factor is regarding the new delinquency formation. The other is the slower perform -- the decrease of portfolio balance. . So if we take out the decrease of the portfolio balance impact, the denominator factor, I think probably it's not just -- the scale is not like the ratio increased so significantly. And we do see, as the management mentioned in the managing session that we do see some new delinquency, new 3, 4 cases across the board. There's no concentration. And -- but this time, we have more -- for those new 4 cases, we have more collateral. So actually, the estimated loss is lower. That's the reason why we didn't increase the provision too much. And so it won't impact our overall credit cost. Actually, you can see our overall credit cost for Taiwan this quarter actually improved a little bit from the last year. And that's about the asset quality for Taiwan. And your second question about the ASEAN credit cost, I think it's only for Vietnam. We see increased credit cost. And actually, for the other, like Thailand, Cambodia and Malaysia all showing improved credit cost. For Vietnam, I think this quarter, we also see some special provision for the delinquent cases. But again because for this quarter, both interest expense and the credit cost increase. So that had some negative impact to the overall as performance. However, because the other region actually performed very well, especially for Cambodia and Malaysia, which accounts for more than like 30% together of our ASEAN profit. So -- yes, I think -- yes. So it's only been -- yes, probably we see some change of the asset quality performance. But for the other actually, just as we mentioned, we see very sustainable asset quality improvement.

Okay. There are clearly no questions at the moment. And thank you.

Yes, Jason, we can end the call. Thank you.

Thank you. And ladies and gentlemen, we thank you for your participation in Chailease conference. You may now disconnect. Thank you again. Goodbye. .