CTBC Financial Holding Co., Ltd. (2891) Earnings Call Transcript & Summary

Welcome to CTBC Holding 2024 Q4 Earnings Conference. Today's meeting will be chaired by Rachael Kao, President of CTBC Holding; also present are Megan Hsu, CFO of CTBC Holding; Pai-Hung Yeh, CSO of Taiwan Life; and Justine Shen, Head of IR of CTBC Holding. [Operator Instructions] And later, we will open the floor for questions. And we have simultaneous interpreting service available, so please slow down your speaking to make sure that your voice can be heard clearly. Thank you. First, I would like to invite President Kao to give her opening remarks.

[Interpreted] Good afternoon, media friends, investors and analysts. Thank you for attending CTBC Holding 2024 Q4 Earnings Call. CTBC Holding's performance in 2024 was very impressive. Pretax net profit reached TWD 88.1 billion and after-tax net profit was TWD 72 billion, a new record high and up by nearly 30% Y-o-Y or 28.4%. EPS also hit a record high of TWD 3.64. ROE was 16.4%, ranking the second among all the peers. Our core subsidiary, CTBC Bank, achieved a net profit of TWD 13.1 billion in Q4. The total net profit for 2024 was TWD 49.4 billion, up by 20% Y-o-Y. This maintains double-digit growth, sets new records and continue to lead the industry. Overall, different businesses have performed well. Deposit and loan grew steadily. Wealth management benefited from the vibrant capital market with the sales of insurance funds, structured bonds soaring and driving fee income to grow by 40% Y-o-Y. Credit card was driven by strong overseas consumer demand, so its fee income grew by 28% Y-o-Y. Overall, fee income grew by 27% Y-o-Y. In terms of capital market, growing revenue from swap drove trading income to grow by 26% Y-o-Y. Overseas business performed well with pretax profit reaching TWD 20.5 billion in 2024. This is a historic high. And overseas, this is accounted for 30%. So North America and Japan, both are achieving double-digit growth. Our second engine, Taiwan Life, had an after-tax net profit of TWD 21.5 billion in 2024, up more than 70% Y-o-Y. The insurance business had good momentum and benefited from the vibrant investment market, investment income soared and overall profit was stable. Securities investments and capital have seen steady profit growth, thanks to active trading of Taiwan stocks and our market share growth. The securities brokerage fee income increased and the scale of our investment trust funds continue to grow. Venture capital also performed well. As for 2025, the government predicts that Taiwan's GDP growth will be about 3.14%. The economic fundamentals are sound and domestic inflation is now in a slowing downward trend. So it is expected that the Central Bank of Taiwan will maintain the current interest rate policy. Now different economies have entered rate cuts cycle. The U.S., the Fed began a rate cut cycle last September, and the market expects the Fed to cut rates by 25 bps once in Q2 and once in Q3, but it still depends on market conditions. Now in terms of our assets and liabilities, we -- if the entity interest rates will maintain while the U.S. interest rates go down, then the impact of rate cuts on our NII is positive and our asset allocations will be dynamically adjusted based on market conditions. Now the tariff -- American tariff policy is still uncertain. So this is why the NTD is volatile as a result. Now Trump 2.0 has ushered in the second wave of global supply chain relocation. As the most international financial institution in Taiwan, CTBC has a relatively complete deployment in Southeast Asia, Japan and the U.S. CTBC entered the U.S. market more than 30 years ago. We have more than 20 locations in the U.S. We are expected to benefit from this wave of America first policies. Our other businesses, including wealth management, credit card and capital markets, maintain good momentum and bank profit is expected to grow steadily this year. As for Taiwan Life, under the current system, IFRS 17 and ICS, the Fed rate cuts have a positive impact on net worth and alleviate cash outflows from policy terminations. To sum up, although uncertainty in the global financial markets remains high, we believe that CTBC Holding's profit this year should still be very good. As for sustainable development, CTBC has focused on this topic in recent years. We have once again been selected as a constituent stock of Dow Jones Sustainability Index. We have also won eight awards at the Elite Awards for Taiwan Banking Excellence, basically all of the awards available, once again breaking the record. And also we cooperate with Evercomm from Singapore to codevelop an AI carbon finance management platform, becoming Taiwan's first financial institution to do this abroad. We hope to help high emission companies in Taiwan and Southeast Asia as well as global supply chain customers to achieve low carbon transformation. We will continue to leverage the influence of finance and the power of inclusive finance to implement the SDGs of the UN. These are some highlights for 2024 and 2025. Now my IR colleague will present in detail the financial review of 2024 Q4 as well as the whole year of '24. Thank you.

Please turn to our performance highlights on Page 4. Holding's net profit reached TWD 72 billion in 2024, up 28% Y-o-Y, achieving a record high and EPS was TWD 3.64. Holding's ROE was 16.4%. CTBC Bank's net profit was TWD 49.4 billion, up 20% Y-o-Y in 2024, marking a record high and leading Taiwan banks. Bank's capitalization was solid and asset quality remains stable. Taiwan Life reported net profit of TWD 21.5 billion in 2024, up 73% Y-o-Y, benefiting from decent investment gains. Other subsidiaries, including Investments, Securities and Venture Capital performed well, benefiting from favorable capital markets conditions and sustained business momentum. Page 5, 2025 business focuses. On banking business, CTBC Bank targets to enhance franchise value and further develop business platforms through focusing on private banking, emerging payments and smart sales. We aim to strengthen competitiveness in Hong Kong and Singapore hubs and seize supply chain shift opportunities. At the same time, we utilize digital technology to enhance customer acquisition and deepen client engagement on digital platforms, integrate business processes through AI to improve operational efficiency. On life insurance business, Taiwan Life will grow value product and enhance investment returns. We focus on protection-type and foreign currency policies, and targets fluent retirees, most young adults and middle-age groups. We will scale up the agency force and improve productivity. In addition, Taiwan Life continues to optimize investment portfolio, including equities, fixed income, real estate and public infrastructure projects to enhance returns. On Securities and SITE business. Securities business aims to expand brokerage market share by upgrading trading platforms and collaborating with bank branches, if we continue to expand its underwriting business. For the SITE business, we aim to solidify leading position in ETFs, expand actively managed funds, reinforce distribution of offshore funds, and realize synergies from discretionary investments. Page 6, profitability. Holding's 2024 EPS was TWD 3.65, Group ROE was 16.4% and ROA was 0.86%. Page 8, capital ratio. We remain well capitalized with group CAR at 123%, Life RBC ratio at 328%, Bank CAR at 13.9% and CET1 ratio at 11.2%. Page 9, profit breakdown by entities. In 4Q, Bank net profit reached TWD 13.1 billion Q-o-Q, driven by increased net interest income led by NIM expansion. Life reported net profit of TWD 405 million, down 95% Q-o-Q, mostly due to lower cash dividends and capital gains. Holding's net profit was TWD 13.4 billion, down 38% Q-o-Q. In 2024, Bank net profit reached TWD 49.4 billion, up 20% Y-o-Y, driven by robust fee income growth and increased trading income. Life profit was TWD 21.5 billion, up 73% Y-o-Y driven by different capital gains amid positive capital markets condition. Holding's net profit was TWD 72 billion, up 28% Y-o-Y. Let's go to our banking business. In 2024, CTBC Bank achieved record high profits and received numerous domestic and international awards. Key financial indicators and award records are provided for reference. Bank performed well in 2024. Net profit reached TWD 49.4 billion, up 20% Y-o-Y, outperforming peers. ROE was 13.1%, up 126 basis points Y-o-Y. Page 13, revenue breakdown. Total revenue was up 11.8% Y-o-Y. Net interest income was up 0.2% Y-o-Y. Fee income was up 27.1% Y-o-Y. Trading income and others increased 26% Y-o-Y, driven by fixed income and equities-related gains and stock income at the bank. Next, on loan growth. Total lending with credit card revolving was up 9% Y-o-Y. NT Dollar corporate loan was up 5.7% Y-o-Y, driven by growth in government and construction and real estate sectors. Mortgage was up 7.8% Y-o-Y as business momentum remained stable. Unsecured and other loans increased 11.1% Y-o-Y. Foreign currency loan was up 12.3% Y-o-Y. Next, on foreign currency loan breakdown. Overseas subsidiaries accounted for 57.5% of foreign currency loans with TSB and LH being two larger subsidiaries. Overseas branches accounted for 31.9%. Overseas subsidiaries loan was up 7% as business momentum remained solid at our branches -- overseas subsidiaries. Overseas branch loan was up 20.3%. Growth was especially strong in Singapore, Greater China, Tokyo, India and New York branches, all reporting double-digit growth. OBU plus DBU was up 20.9%. Page 16, bank deposit mix. Total deposits reached TWD 5.3 trillion, up 6.6% Y-o-Y. On the right, CASA accounted for 59.2% of NT Dollar deposits. Time deposits accounted for 62.9% of foreign currency deposits, down 0.4% Q-o-Q. Page 17, loan-to-deposit ratio. Overall LDR went up to 73% as both loans grew faster than deposits. NT Dollar LDR was 84.4%. Foreign currency LDR was 58.3%. Page 18, NIM and spreads. In 4Q, NIM increased to 1.45% as Fed rate cuts led to lower funding costs. Including SWAP income, NIM was 1.61% in 2024. Page 19, fee breakdown. Total fees were up 27.1% Y-o-Y driven by solid business momentum in wealth management, credit card and corporate banking business. Both maintenance fee was up 39.9% Y-o-Y as sales of wealth management products increased, supported by higher sales momentum and favorable capital markets conditions. Credit card fees were up 28.3% Y-o-Y, supported by increasing consumptions related to travel, better dining, department stores and hypermarkets. Corporate business fee was up 21.2% Y-o-Y, driven by loan-related private banking syndication and cash management fees. Page 20, wealth management fee. For wealth management fee breakdown in 2024, the proportion of mutual funds increased underpinned by strong capital markets conditions. Page 21, cost/income ratio. Cost/income ratio was 52.1% in 2024, improved Y-o-Y, driven by faster growth in operating income and content OpEx growth. Next, on asset quality. Asset quality remains stable with NPL ratio at 0.49%. NPL coverage ratio was 331%. 4Q credit cost was 19 basis points, down 15 basis points Q-o-Q due to large general provisions. Credit costs in 2024 was 29 basis points, up 4 basis points Y-o-Y, mostly due to higher provisions for corporate loans and debt relief program. Moving to Life business. Taiwan Life performed well and received numerous awards in 2024. Key financial indicators and awards records of Taiwan Life are provided for reference. Taiwan Life reported net profit of TWD 21.5 billion in 2024, up 73% Y-o-Y, supported by decent investment gains amid positive capital markets conditions. ROE was 13.1% (sic) [ 14.07% ] and ROA was 1%. Total premiums grew 7% Y-o-Y due to increased recurring premiums of interest-sensitive policies. FYPs in 2024 dropped 1% Y-o-Y, as sales of interest-sensitive and health policies declined, but sales of investment-linked products increased. Page 27, FYP breakdown by products and channels. On the left is the product breakdown. We can see the proportions of investment-linked policies increased. On the right, in terms of channels and proportions of tied agents increased to 18.7%, reflecting increased sales of interest-sensitive and investment-linked policies. Page 28, FYP breakdown by type and payment and currencies. On the left, regular paid products accounted for 51% and single paid products 32% of FYPs. On the right, foreign currency policy accounted for 46% and NT Dollar policy, 37% of FYPs. Page 29, investment asset mix. Total investment assets reached nearly TWD 2 trillion. Taiwan Life continues to optimize its asset allocations in preparation for IFRS 17 and ICS adoption. Page 30, investment yield, cash cost of liability and breakeven point. In 2024, total investment yield after hedge was 4.13%, up 64 basis points Y-o-Y, reflecting higher capital gains. Recurring yield before hedge was 3.73% improved Y-o-Y. Taiwan Life continues to maintain positive investment spreads against rising cost of liability and breakeven point. Page 31, hedging and FX. On the left, 41% of overseas investment assets were foreign currency policies. 29% were fully hedged, 20% were unhedged and the rest was OCI positioned. On the right, FX reserve amounted to TWD 10.6 billion as of 4Q '24. Hedging cost was 91 basis points in 2024, increased Y-o-Y, given lower cost of high hedging instruments in 2023. Turning now to ESG highlights. CTBC Holding is committed to sustainable financing. In 2024, we conducted the first pilot project at Kaohsiung FinTech Innovation Park in collaboration with local enterprises, implementing an AI-driven digital carbon management platform. In addition, CTBC Bank introduced GreenGPT to assist customers in addressing their carbon reduction concerns and calculating their carbon footprint. The content on Pages 34 to 36 highlights the sustainable development and recognitions of CTBC Holding. For more information, you may also refer to CTBC's IR website. That concludes the presentation. We are now open for Q&A.

[Operator Instructions] Questions in Mandarin are now being asked. [Operator Instructions] We will answer the English questions after the Mandarin questions are over. The first question comes from Jemmy Huang.

[Interpreted] I have a few questions. First of all, in terms of Bank, I don't know if you missed the full year SWAP revenue in 2024. What was the sum roughly? And this year, how do you look at the outlook in terms of NIM? As for credit costs, if you look at last year, it was around TWD 10 billion. How much is GP related? And this year, the credit cost will still be around between 25 and 30 bps. As for OpEx, could you explain to us a little bit about this RSA's impact and ESOP's impact? If we exclude them, the pro forma OpEx in 2024, what was the growth? And how do you look at 2025, including RSA? What was the growth this year? As for Taiwan Life, well, as we know, other companies are now giving more information about IFRS 17 and ICS guidance. If we look at your profits over the past 2 years, do you have some per forma estimate in terms of IFRS 17? What would be your profit level you can use 2024 or 2023 as your baseline? My last question is about dividend policy. In the past 2 years, your payout ratio is higher than 60%. And can investors still expect something similar? Another question. In 2026, if you can start to apply IRB, well, in the past few years, the Bank's pay out to Holding was around 50% to 40-or-so percent. If CET1 increases in the future, then will there be a higher level of payout to -- from the Bank to the Holding level?

[Interpreted] Okay. Let me first explain the bank situation. You mentioned that in 2024, the full year SWAP, you asked about this number in 2024. Well, for the full year, the SWAP revenue was around TWD 12 billion. This is a 9% growth Y-o-Y compared to 2023. In terms of 2025, due to the lowering spread between Taiwan and the U.S., so we expect that the SWAP point this year will also go down. Overall, we believe that our outlook this year in terms of NIM -- well, as Rachael mentioned, the spread is increasing. Now we are liability sensitive. So the impact is positive, as mentioned by Rachael. And the SWAP gain, this will be offset by the SWAP gain. We believe that NIM this year will be between 1.63% and 1.66%. As for credit cost, well, the credit cost composition, there is also the return of bad debt from the previous year. So if you look at 2024, if we look at the provision from 2024 standard [indiscernible] is around TWD 12 billion or so. And we also have -- so this is about the composition of bad debt. As for credit cost this year, well, as previously, it will be between 25 and 30 bps. This doesn't change. As for dividend policy, our current planning direction is this. In the last 2 years, our payout ratio was around 60%. And this year, we try to plan in this direction. Will it become a norm in the future? Well, I think this will depend on our profit situation and our asset growth situation. You asked about whether or not -- will we pay more dividend to the Holding level? Well, in Taiwan, the law stipulates that the bank -- well, there are some laws and regulations about this level. In addition to CAR, we also need to look at other factors and whether or not some certain criteria are met. Before meeting that criteria, our payout at maximum is TWD 1.5 per share at maximum. So this is the payout maximum. So this is my explanation.

[Interpreted] Can you also talk about OpEx?

[Interpreted] Excluding RSA and ESOP, our growth situation is about 10%. And this was 2024 compared to 2023, 10%. As for Taiwan Life and the profit situation after connection to IFRS 17, there are a few points that I want to make. In terms of mortality gain, from this perspective, upon connection, our CSM will be around more than TWD 100 billion. And every year, about TWD 10 billion can be released. So from this perspective, the contribution to our profit compared to the current situation with mortality gain will be about the same. As for spread, now the cost of liability in Taiwan Life reflected on our P&L is about 3.27%. After the connection, the cost will go down to 2.6%. In other words, the regular spread will be more, which means that this will be a better situation in terms of recurring or regular spread. Overall, by the same token, in 2024, after this connection, the contribution mainly comes from the increase of regular spread. In the following years in terms of mortality gain, since CSM will be accumulated, our current estimation is that in the next few years, every year, the released amount will be a 15% growth annually.

[Interpreted] Okay. So the credit gain will decrease?

[Interpreted] Well, this has to do with the accounting reclassification, Basically, we will follow our operation type for the decision. With IFRS 17 going live, assets can be reclassified. And this reclassification has to do with the overall economic situation and also the interest rate level and other factors. So we haven't made the final decision. By the end of the year, we will make that final decision. As for equities, where should we -- where do we put our equities? Well, I think it will come down to the purpose, whether it's a transaction purpose or holding purpose to increase our dividend income. So it depends on the purpose when we choose the asset class. Thank you.

[Operator Instructions] Questions in Mandarin are now being asked. Now from Morgan Stanley, Peggy Shih.

[Interpreted] Managers, I have a few questions. First of all, in terms of Taiwan Life, Mr. Yeh mentioned TWD 100 billion after connection and every year, TWD 10 billion. And the spread can be around 67 points. So my understanding is that in the future, the profit level will be TWD 10 billion plus the spread. So in my -- if I do the math, it will be around TWD 13 billion or so. This profit level will be around TWD 20 billion if I do the math correctly, I just want to make sure that my calculation is correct. My second question, IFRS 17 adoption -- after the adoption, the shareholder equity and Taiwan Life net worth, now being TWD 160 billion, will it go up or will it go down after the adoption? This is my second question. Previously -- this is my third question. Managers mentioned previously that every year, the CSM, it would be TWD 12 billion every year. And in 2024, the CSM, how much was it? So this goal will it be maintained at TWD 12 billion? And every year, you said that every year, the release will grow by 15%, right? I just want to confirm these numbers. And so these are about IFRS 17 adoption. As for Taiwan Life profited a lot, more than TWD 21 billion. So can you tell us about the realization of your equities and bonds? And this year, what's the URCG of equities and bonds as of this point in time this year? I have one question for Bank as well. President Kao mentioned that you have comprehensive deployment overseas. Last year, loans in North America grew less -- well, there was some -- sluggish. So how do you look at this year's growth? And what is the target for this year?

[Interpreted] You asked about profit level. Simply put, on P&L perspective, from the P&L perspective, spread increases by 67 points. That's a simple calculation. In other words, now the current profit level reflected -- well, so this is a simple calculation. Of course, this has to do with how to put and allocate assets. This has to do with the contribution of P&L to profit. If all the assets don't move, we assume that, or if the level will be the same as the current level, then the recurring profit, regular profit will go up. As for net worth, your question, in terms of IFRS 17 liability valuation, well, this has to do with the market interest rate level. Now based on the latest calculation, the result will be that after tax, the contribution to our net worth will be TWD 40 billion or so. So our net worth will go up as a result. But IFRS 17 adoption, you can -- with the adoption, you can reclassify your assets once. Why do we choose to do that? Well, because the reason is because assets and liabilities and their sensitivity to interest rates, we want to have a better offsetting effect. So as a result, some assets will be moved from AC positions out of the AC position so that they can also change along with market interest rates, as a result, offsetting the impact of liabilities. So from a network perspective and from a P&L perspective, this will have a stabilizing effect. If we move things out of the AC position, then it will have some negative impact on the network. But overall, if the net worth, once you maintain at the current level, well, the likelihood of maintaining at the current level will be high. The third question is about CSM. CSM calculation has been adjusted this year. If we look at it 2 years ago and if we adopt the new calculation method for 2 years ago, the number is about TWD 15 billion. Our target this year is that in the following year, CSM can maintain at more than TWD 20 billion level. The focus will be on protection products and promotion effects of these products. Last year, we made some adjustments with -- some claims went up. As a result, we adjusted that. So NTD policy sales were affected. This year, we will still use TWD 20 billion as our target. In 2024, the bond interest rate was about TWD 2 billion and equities TWD 13 billion. This is the contribution to P&L in 2024. As for your last question, if we look at equities and funds together, at the end of last year, there was a remaining of TWD 10 billion as for bonds. It was minus TWD 17 billion. As for our overseas deployment, we entered the U.S. market 30 years ago. We have 20 locations in the U.S., mainly in San Francisco and L.A. and also in New Jersey and New York. These are subsidiaries so we can provide comprehensive retail and corporate financial services. Right now, in Arizona, we also have presence in Phoenix for loan services for TSMC and also for other supply chain enterprises and employees and family members. We don't exclude the possibility of setting up a presence in Texas as well. So I was talking about subsidiaries. As for branches, we have a branch in New York. And in LA, we have an office. We want to expand this office, turning that into a branch, so that we can leverage -- better leverage our bank's balance sheet while focusing more on corporate customers in order to accommodate to capital needs of some larger enterprises. As for subsidiaries' growth rate, I'm not going to elaborate on this point. But this year, in 2025, our loan -- if we look at our loan, foreign currency loan, it seems that it is still growing. If you look at the overall loan, the growth will be double digit. Loan will grow faster than deposit. So the LDR in total in our bank will become higher. This is my answer.

[Operator Instructions] Questions in Mandarin are now being asked. We will answer the English questions later. [ Tina Chen ] from Securities.

[Interpreted] I have a few questions. First of all, I want to ask some questions about Bank, your fee income outlook for this year. Because the growth last year was very strong, especially in terms of wealth management. What will be the growth range this year? Second, I want to ask Taiwan Life. In 2024, what was your dividend income? How much was it? And this year in terms of recurring income, what is the outlook?

[Interpreted] Okay. Wealth management fee income outlook, we believe that -- we expect that this year, it will be a mid- to high single-digit growth. As you mentioned, in 2024, the overall fee income growth was a record high. In 2024, the growth was about 40%. And the momentum is already very high. And in it, with that, this year we will try to adapt to the market dynamics to see if we have some corresponding products to meet customers' needs. In the first 2 months of this year, the momentum was about 15% growth. As for dividend income for Taiwan Life, for the full year, it was TWD 14.9 billion. And there are three parts: Taiwan stocks, about TWD 5 billion; foreign stocks, TWD 3 billion; and the others included ETF and mutual funds. As for recurring income, this year, we believe that it will go down slightly. The main reason is the following. Next year, we are going to adopt IFRS 17, right? So right now, if you look at the current assets and liabilities structure, TWD 70 liability and USD 70 assets. That's the current structure. So there is some mismatch going on. In the future, on our P&L, because the interest rates between NTD and foreign currencies differences, the net worth or P&L will be more volatile as a result. Right now, we hope to have the chance to make some adjustments in our plans. This year, some foreign bonds, we want to move them back to Taiwan. The best situation is to have some Taiwan bonds that we can purchase, or we may increase some real estate positions and allocation. Is there a little room for that arrangement? Well, if the market moves into the right direction, then we may also have more allocations towards equities. Right now, in terms of asset classes, we now -- interests are higher abroad. So when they move back to Taiwan, the interest will go down, right? So we believe that in terms of our recurring income, it will go down by a few points. As for cost of liability, we believe that it will go up by 3 or 4 points. Now USD policies, interest rates are -- it's about 4.3%. So when there are more such USD policies, the cost of liability will go up as a result. So we believe that our cost of liability will go up by a few points as well. Overall, our recurring income ratio will go down compared to the current situation.

Now there is one question in English. This is from Jennifer. The question is, in 2024, Bank and Taiwan Life enjoyed high profits. And now this year, in 2025, what are the growth opportunities? Where are these opportunities?

[Interpreted] Okay. I'd like to add to what Mr. Yeh mentioned in terms of Taiwan Life's profit. Well, first of all, in terms of Bank, our NIM, despite rate cuts, we can still benefit from that. Our NIM can go up compared to 2024. As for loans, now NTD and foreign currency both have double-digit growth. As for fee income, in 2024, we had a high base line in 2024. But yesterday, we released a report saying that in Taiwan, investable assets, in the past, we thought that it was TWD 30 million. Now we have raised it to TWD 33 million. And there are more than 800,000 people with that level. So we will try to expand our client base to do some cross-selling and marketing for these customers. So despite a higher base, we expect to see a high single-digit fee income growth. By the same token, we believe that in terms of credit card, overseas consumption -- consumer demand will go up. So the fee income can also enjoy high single-digit growth. As for credit costs, our situation is about the same as last year. So the level will be the same as last year, about 25 to 30 points. Cost/income ratio will be about the same as 2024. So in 2025, our profit can have a chance to be better, to be even better than in 2024.

[Operator Instructions] Jemmy Huang from JPMorgan.

[Interpreted] I want to ask Mr. Pai-Hung Yeh. You talked about portfolio adjustment due to IFRS 17. And your currency mismatch should be the lowest among the major insurance companies. And under the current system, I think the you can put -- you don't need to -- you can put assets into AC. But you wanted to -- still want to do this due to ICS considerations? Or structurally, you want to reduce the currency mismatch? And if so, what will be the extent? Now you have 70% of your foreign currency assets that account for 70% of your assets, right?

[Interpreted] Okay. To answer this question, our thought is the following. In the future, the liabilities will be evaluated based on market interest rates. So that will be reflected on our net worth. Of course, we can choose not to move any of our assets, most of them hiding under AC. But if that's the case, then we cannot adjust them, because of some accounting rules and principles. We cannot make adjustments easily under AC and we cannot rebalance easily along with interest rates. So as a result, our net worth, in order to have -- so there's almost zero offsetting effect possible. So this is why in our liabilities, when the net worth contribution can be positive, we tried our best to move some assets out of AC, so that in the future, it can have a stabilizing effect on our net worth. When we calculate ICS or IFRS 17, when you calculate interest rate pressure, you can assume that they are simultaneous regardless of the currency and the pressure extent can be the same. But that's just calculation. When it comes to the real situation, market valuations will still face the situation where NTD assets and liabilities go with the NTD, while the USD assets and liabilities follow the USD. And ultimately, this will be reflected on your P&L or balance sheet. This is why we want to make such adjustments. Currently speaking, the extent of our adjustment requires continuous trial calculation because interest rates on the market keep moving. So by the end of this year, we will have the final decision made. Our OCI position or TL position, when we can make adjustments, we try to move our positions from abroad back to Taiwan. But right now, the extent of being able to move around is little. So I think the reclassification later will have a greater impact.

The next question is Eric Shih from KGI Securities.

[Interpreted] Managers, can you hear my voice?

[Interpreted] Yes, very clearly.

[Interpreted] I want to ask you, what will be the ICS with the Phase IV adoption? And will you have some capital requirements in the future? And also Mr. Yeh mentioned that after the adoption of ICS, the profit level will go up by to 6 to 7 bps. So will that consider hedging costs and also operating costs already?

[Interpreted] To answer the question, ICS, according to our current calculation, it's more than 130%. During the transition phase over the next 15 years, it will go up every year. When we look at the numbers, it seems -- well, the numbers are smaller than some other numbers released by other companies. Well, during this transition phase, one larger impact is net asset transitioning. This item will depend on how many policies do you have that are higher than 6%. The number in our company is 13%. Among the peers, this percentage is very low compared to our peers. In other words, when we look at this 13% of our assets, when we want to allocate these assets, then the impact from these assets will be lower on us. This is good news to us because for -- we need to have policies with lower cost of liability. But in this transitioning period, there are such things that are counterintuitive. The second question is about hedging costs. Well, if you look at this year, one positive factor is that people in general believe that the USD, well -- the interest rates will go down 2x or 3x this year. So the hedging cost will benefit from it. Bad news, so a negative factor, is that the USD is almost 33 -- USD 1 is almost TWD 33. This is a historic high. So this poses a threat or a challenge to us. Overall, we believe that the hedging cost can be controlled at around 1%. This is the target that we set up. As for your third question, after the adoption, what will be our profit level. Well, I was talking about P&L, the impact on our P&L. Now when we look at our reserves or the liability valuation, there's only 2.6% according to IFRS 17. So this is lower than 3.2%, which is our current situation. So 67 bps, this can be reflected on the P&L as a result. But I think there is one caveat. Because this is assuming that everything else doesn't change, then we will have this 70 -- 67 bps.

Thank you. Thank you for all the questions. This concludes our Q&A session. Now back to President Kao.

[Interpreted] Thank you, investors and analysts, for your participation. We hope that in 2025, we can perform better so that investors can profit more. Thank you. This is the end of our call. Now you can log out. Thank you. Goodbye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]