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

Welcome to CTBC Holding 2026 Q2 Earnings Call. 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, CFO of Taiwan Life and Justine Shen, Head of IR of CTBC Holding.

Good afternoon, dear investors and media guests. Thank you for taking the time to attend CTBC Holding 2026 Q2 Earnings Call. The format will be a bit different, I will first invite IR to present on Q2 financial performance. And then I will provide more explanations before we enter the Q&A session. So this will be roughly the order. First, I'd like to invite the IR team to present the financial performance of H1.

First, performance highlights the first half of 2026, the holding reported net profit of TWD 39.5 billion, up 10% Y-o-Y and reaching the record high total comprehensive income reached 50.5 billion in the first half, mainly driven by significant games at Taiwan Life. The holding shareholders' equity continue to expand, increasing Y-o-Y 7% while [indiscernible] was 13.5%, and the CDC bank's net profit was TWD 31.2 billion, up to 12% Y-o-Y, once again, reaching a record high in ranking #1 on peers. Both NII and fee income delivered solid growth. Loan growth momentum remained strong, while asset quality stays stable. Telelife reported Net profit of NT dollar 10.3 billion up to 42% Y-o-Y mainly driven by valuation gains from bond and funds, steady contributions from CSM release remeasurement impact of investment-linked policies following IFRS 16 adoption in terms of business momentum, FYP increased 139% Y-o-Y, supported by stronger sales from participating and investment-linked policies. Our results including CTBC Securities and CTBC venture capital benefited from strong capital market performance with total net profit growing 188% Y-o-Y. Next slide. Holdings [indiscernible] EPC was TWD 1.69 in the first half. Shareholders' equity increased 59% and Y-o-Y, mainly driven by strong growth in OCI. Group ROE was 13.5%, and ROA was 0.8%. We remain well capitalized across the group. Bank card was 13.6%. CET1 ratio was 10%, mainly reflecting dividend upstreaming to the holding company in the second quarter and strong loan growth year-to-date. Taiwan Life maintained a TIS ratio of 125%, Group [indiscernible] 0.5% as of the end of March, mainly affected by Taiwan Life's transition to the TIS regime. Group [indiscernible] of the end of June remains subject to update in Taiwan Life TIS parameters. Profit breakdown by entity. CTBC maintained strong business momentum in the second quarter. Net interest income continued to grow. Fee income declined 9.4% Q-o-Q mainly due to the higher base of later release fee income in the first quarter, in addition, accessible provision was set aside for individual case in the second quarter as a result, second quarter net profit declined 12% Q-o-Q. Taiwan, like second quarter earnings declined 67% Q-o-Q. This was mainly due to the high base effect from the one-off 15 implementation impact recognized in the first quarter. In addition, total investment income in the second quarter was lower due to reduced valuation gains from bonds and funds. And our subsidiaries benefited from favorable market conditions in the second quarter for securities and sites do double-digit earnings growth. However, venture capital earnings declined quality equity evaluation gains moderated from the elevated level of [indiscernible] recorded in the first quarter, other release earnings also declined due to a higher seasonal base in the first quarter over second quarter earnings from other subsidiaries 37 [indiscernible] And because IFRS measurement, other -- for the first half, other subsidiaries benefited from a strong Taiwan equity market security capital insight, all delivered solid performance. Overall earnings from other subsidiaries increased 188% Y-o-Y. Their contribution to holding earnings increased to 11%. The bank contributed 67% of holding earnings while attributed Taiwan Life 22%. Let's go to our banking business. CTBC Bank continued to deliver solid operating performance. ROE was 13 4%. Revenue breakdown, revenues decreased slightly by 3% Q-o-Q and increased 13.9% Y-o-Y. Net interest income accounted for 57% of total revenue, growing 34.4% Q-on-Q, mainly driven by loan growth. and increased 33.8% Y-o-Y, mainly due to loan growth and NIM expansion. Fee income represented 36% of total revenue decreased 9.4% Q-on-Q. This was mainly due to the higher base of [indiscernible] in the first quarter, including luxury related fee fees, income increased 5% Q-o-Q. Fee income increased 25.9% Y-o-Y, mainly driven by a 44% increase in wealth management fees. Meanwhile, trading income and other revenue increased 19.8% Q-o-Q due to higher equity valuation gains. For the first half, trading income and other revenue declined 46.7% Y-o-Y. This was mainly due to lower derivatives and swap related income, their revenue contribution declined to 7%. Total loans increased 5.5% Q-o-Q. Growth was mainly driven by NTD corporate loans, foreign currency loans and mortgages. NTT corporate loans increased 8.3% Q-o-Q. This was mainly supported by AI infrastructure-related demand as well as increasing funding needs from the manufacturing, financial services and service sectors. Compared with the same period last year, total loans increased 17.5%, mortgages, foreign currency loans of secure personal loans and NTD corporate loans all delivered double-digit growth. New loan origination in the first half has already surpassed the total value recorded for the whole year of last year, demonstrating robust growth momentum. Next on foreign currency loan. Foreign currency loans increased 3.8% Q-o-Q, excluding FX impact, foreign currency loans increased 4.9% Q-o-Q. Growth was mainly driven by OBU, DVU in Southeast Asia. And the CTBC Bank has established comprehensive overseas network in growth, Southeast Asia, Japan and the United States amid geopolitical changes and supply chain restructuring, we continue to support our clients' financial needs -- financing needs. Foreign currency loans increased 18.2% Y-o-Y. Excluding FX impact, growth was 15.2% Southeast Asia remains a strong contributor to India branch reported loan growth [indiscernible] Y-o-Y, excluding FX impact, Thailand, Singapore and Vietnam also delivered double-digit growth in North America loan growth impact was 8.8%. Growth was mainly driven by cross-border lending to Taiwanese corporations and syndicated loan opportunities through the New York branch. Tokyo branch has delivered double-digit growth. OBU and DBU loans decreased 41.8% Y-o-Y [indiscernible] impact Greater China recorded growth of 5.4%. Bank deposit mix. As of the end of the second quarter, total deposits reached NT $6.2 trillion, growing Q-o-Q and 14.8% Y-o-Y and proportion of [ Casa ] deposits to decline slightly in both NPD and foreign currency deposits compared with the previous quarter loan-to-deposit LDR ratio, anti-dollar LDR was 87.4%. Foreign currency LDR was 63%. Overall LDR was 77.1%, continuing to improve mean and [indiscernible] . NIM was 1.65% in second quarter of 2026, down 3 basis points Q-o-Q, mainly due to higher funding costs, made strong demand for liquidity in the market. In addition, loan pricing came under competitive pressure, leading narrower loan deposit spread and lowering. For the first half NIM was 1.67%, up 17 basis points Y-o-Y. The improvement was mainly driven by lower foreign currency funding costs following rate cuts as well as reduced swap positions, including swap income, NIM was 1.7%. Fee breakdown. Total fee declined 9.4% Q-o-Q in the second quarter. This was mainly due to the higher base effect from the lottery we released fee income in the first quarter as well as lower syndicated loan fees from the corporate banking business, excluding [indiscernible] release fees, total fee income increased Q-o-Q. This was mainly supported by strong wealth management momentum amid active capital market. Management fee income increased 44% Y-o-Y. Corporate banking fee income increased 19% Y-o-Y, mainly driven by loan-related fees, structured finance and insurance commissions from our offshore private banking. Other business including overseas subsidiaries, credit cards and lottery operations also delivered steady growth. For Wealth Management, strong market activity, continue to [indiscernible] work product sales and because of the capital market, we actually see the sales of structured products growth. And for the cost -- now we actually see improvement of 1.2% of Y-o-Y reflecting solid core business growth and well-contained OpEx. Next, on asset quality. The bank's NPL ratio was 0.54% as of the end of the second quarter, the NPL coverage ratio was 281% [indiscernible] cost increased by 20 basis points Q-on-Q. This was mainly due to higher general provisions associated with loan growth as well as the physic provision recognized at the Tokyo Star Bank compared with the same period last year, credit cost increased by 9 basis points. This was mainly driven by higher general provisions resulting from loan growth. Overall asset quality and risk management remains sound. Moving to Life business. Taiwan Life reported net profit of TWD 10.3 billion for the first half profit was mainly supported by valuation gains from bonds and funds CSM release and the measurement impact resulting from IFRS 16 adoption for investment-linked policy, total comprehensive income reached TWD 189 billion was 8.01%, following IFRS 17 adoption and the phaseout of the overlay approach reclassified most of its equity holdings to FVOCI. As a result, equity capital gains now have a smaller impact on current earnings and ROE CSM movement as of the end of June CSM balance due at TWD 177 billion. New business contributed approximately about $7 0.4 billion of nation. CSM interest, a good question. Foreign exchange movements and assumption changes contributed a combined TWD 11.9 billion. Meanwhile, TWD 6.7 billion of CSM was released into current earnings, Tonalite continues to focus on value-driven products, foreign currency policies and investment-linked products supported by strong growth. In [indiscernible] Prandinvestment linked policies, total premium increased Y-o-Y FYP grew by 139% Y-o-Y, reflecting strong business momentum. Looking at product mix, the proportion of traditional products increased benefiting from strong sales and participating policies. In terms of currency mix, foreign currency policies accounted for 50% of FY where NTD policies represented 23%. Looking at premium paid type regular paid products accounted for 40%, while Single-Pay product represented a bit 32%. This was mainly driven by strong sales and participating products. Turning to channel mix, distribution channel recorded FYP growth supported by strong sales of foreign currency and investment-linked products, CTBC Bank contribution increased to 49%. External bank channels also increased to 30%, mainly driven by participating policy sales as of the end of the second quarter investment asset remained around TWD 12 trillion as [indiscernible] continued to do diversified asset allocation, optimize its portfolio and intense investment yields. At the end of the second quarter, ACS accounted for 45% of investment portfolio. OCIS represented 46%. For the first half, total investment yields were 2.96%. The yield from realized gains on OCI assets was 2.78%, pre-hedge recurring yield were 3.39%, an Cost of liabilities were 2.47%. As a result, pre-hedge recurring spread was 92 basis points. Overall, Taiwan Life maintained a positive investment spread. On the left, 38% of overseas investment assets were foreign currency policies, 20% were fully hedged, 36% were hedged and the rest was OCI position. On the right, Taiwan Life continued to strengthen FX reserve as of the end of Q2, FX reserve amounted to TWD 33 billion. Following the adoption of FX amortization mechanism for AC [indiscernible] , Taiwan Life gradually reduced its hedging ratio to lower hedging expenses. As a result, hedging cost was 1.19% for the first half. Turning now to ESG. Slide 30 to 32 is the CTBC [indiscernible] for your reference. Our latest 202 sustainability, 2026 report has been published and is available on CTBC Holdings Investor Relations website. Thank you very much.

Thank you for the presentation. So now I would like to give some explanations before going further. This year, IFRS 17 has been applied to accounting standard and the overlay approach has been abolished. Therefore, insurance assets must be reclassified and the asset segments that were originally covered by the overlay approach are reclassified and adjusted in accordance according to the purpose of asset holding. So if we only look at the after-tax net profit it will not be able to fully reflect the company's performance during this period. But for shareholders, well, this is because for shareholders, the ability to create shareholder value comes from 2 different parts -- the first part is current profit or loss or GCI. And the second part is BOC. So these are the 2 parts. And in the past, loans gains and losses were reflected in P&L. However, under the new current system, the proportion of and current P&L varies greatly among holding companies. This is why we'd like to provide such explanation. So it depends on each company's purpose of holding financial assets and different risk preferences. For example, Taiwan Life at the beginning of this year only classified less than TWD 3 billion of stock positions into PL while more than TWD 70 billion of stocks were reclassified into OCI. As a result, the same stock disposal, such as TSMC, is sometimes reflected in current P&L and sometimes recognize and retained earnings. So it will not appear in after-tax net profit, and it will affect related indicators such as EPS and ROE. For example, when OCI profit is high and its net worth increases, the numerator are, meaning return on ROE only reflects the current P&L, but the denominator, which is equity net worth already includes OCI's realized profit. This results in an increase in network but a decline in ROE. And on Page 7 of our presentation just now, CTBC Holdings ROE in the same period last year was 16.29%, but this year, it has declined to 13.52%, which is a very obvious example. In this regard, in H1, CTBC Holdings network has exceeded TWD 700 billion, even with more cash dividends this year our net worth has still grown by nearly 60% Y-o-Y. As net worth goes up rapidly the growing denominator make ROE appear to be diluted, but this does not mean that the shareholder value creation ability has declined rather it reflects that the company keeps accumulating capital and enhancing future profit and dividend payout capabilities in the future. In addition, we have simulated a figure for your reference. If we exclude the influence of OCI for both the numerator and denominator the figure was TWD 15.7 million in the same period last year and 16.5% 6% in H1 this year, which also shows growth. This is quite a challenge for people to see. This is why we make this simulation for your reference. So when we analyze CTBC or comparing it with other financial institutions, this is quite a challenge. Internally, we also need to pay attention to the consistency of such basic comparisons. Therefore, in the future, we will place greater emphasis on the increase of overall shareholder value, which includes changes in current P&L and OCI, not just EPS or ROE. So we will pay more attention to shareholder value increase, including current P&L and as these are real shareholder value. And in addition to current P&L, future dividend payouts will also take into account not only current P&L, but also realized gains from financial products in OCI. Our presentation this time includes Page 6, which is shareholders' equity and OCI for your reference. Shareholders' equity has increased by nearly 60% Y-o-Y and BPS has also increased from TWD 24.8 at the end of last year to TWD 34.4 million, up 38.7% within months, so almost 40%. Well, as P&L can no longer reflect the full picture of financial performance now, this is why I just took some time to provide a more concrete explanation for the H1 performance of CTBC Holdings. I hope that this can be helpful for future interpretations. Next, I will explain the key points of the major subsidiaries. In H1, CTBC Bank achieved steady growth across core businesses, after-tax net profit TWD 31.2 billion, up 12% Y-o-Y, which is a new record, again, Y-o-Y. As for NII, the biggest momentum in H1 came from demand from the 5 trust worthy industries, including AI industries. And in H1, total loans went up by about TWD 500 billion which is a record high. So already exceeding the increase of about TWD 400 billion for the entire last year and the Y-o-Y growth is 17.5% and driven by loan growth. NII went up by 24% Y-o-Y. As for fee income, the biggest highlight this year comes from wealth management. The reason is because with active capital market and growing demand for world management from high net worth clients. Wealth management fee income grew by nearly 44% Y-o-Y. This is a remarkable growth, which boosted overall fee income by 26% Y-o-Y. As for trading, due to the different financial market environment this year, swap-related income contribution was not as high as last year. In addition, the rise in bond yields in H1 caused valuation losses in some bond positions, which leads to a decline in trading income Y-o-Y of minus 47%. The results of our overseas deployment are gradually emerging. And thanks to Taiwanese investment in the United States, Japan and South Korea and supply chain vacation, we have been able to see such business opportunities. So we believe that CTBC Bank grasps not only AI opportunities in private world, but also the long-term growth trend from global supply chain restructuring and cross-border capital flows. In H1, Taiwan Life's after-tax net profit was TWD 10.3 billion. And thanks to a strong stock market, OCI stock valuation already largely went up. making the total comprehensive income, TWD 189 billion. Last year due to factors such as tariffs and FX rates, total comprehensive income or total P&L was minus TWD 16.3 billion. Taiwan Life's outstanding financial performance is mainly due to 2 main areas in H1. So in addition to investment business, which I just explained, the insurance business also showed strong growth momentum. In H1, FYP was TWD 64.1 billion, up about 139% Y-o-Y, which is better than the industry growth rate, which is 52% roughly Taiwan Life starts from customer needs and respond to the aging trend in Taiwan. We have paid attention to these issues, our new products and our new services all around this theme. As a result, our policies have grown rapidly, and foreign currency policies have also grown by more than 100% especially they can help us strengthen our assets and liabilities and reduce FX risks. We have strong new sales, which have driven CSM balance growth. In H1, the balance reached TWD 177 billion up from TWD 164.4 billion on January 1, 2026, up about 8%. Sustainability, we continue to integrate that into business strategy. Our core business is financed. We will continue to deepen sustainable finance to unleash our influence. In H1, we cooperated with TSMC on School tree governance Sustainability us. And yesterday, we completed the hosting of syndicated loan for SPIL, TWD 50 billion sustainability-linked SSL, and we will continue to pay attention to climate governance and nature related risk management. So the new version of our sustainability report was went online already, and the English version will go online at the end of August. So in different aspects of ESG, you can have a clear -- more clear picture of what we do. As for the future outlook, I've covered a lot already. We will maintain the same tone. We remain cautiously optimistic about the environment. The AI industry is driving business growth, including for investment, supply chain restructuring and cross-border capital flows and private banking, financial management.This is not just a short-term economic cycle, we believe. We think that this is a structural trend for the next few years to come with its comprehensive network and deployment of CTBC Bank. We believe that we will be able to help customers meet their diverse financial needs overseas and see relevant growth opportunities. As for insurance, Taiwan Life will continue to develop towards high profit and high CSM products. We will focus on aging the aging trend in Taiwan in order to have more comprehensive programs and services. The overall goal of CTBC Holding is to continue its efforts in enhancing shareholder value. This concludes my brief presentation on H1 performance.

Next, I would like to first answer the questions submitted by the media and by analysts in the [indiscernible] So first, with regard to micro economy that when it comes to the interest policy trends in both Taiwan and the United States, we actually see many questions in that line that in the states, in the market, when it comes to Fed, whether they are going to hike interest rates, people still have concerns. But according to recent numbers, that the overall estimation is that there may be a downward correction. So we are expecting on the third of November and midterm election in the United States. So maybe the interest rates will maintain at a stable level, but there are uncertainties because in rent and the United States are taking move today. So maybe they are going to fight as while the negotiation is ongoing. So we are going to whether that is to continue to affect interest rates. So for the second half of 2026, we're expecting the policy of interest rates will maintain the same. That's more likely development and with the uncertainty of geopolitics that we actually see higher demand for U.S. dollar. But because of the spread and also the physical policies in the United States, they are actually showing more rent. We do have these concerns. We can actually expect that in July and June, we actually see the impact of FX risks. We actually see that is putting strain on TWD. But in the recent 2 days, we are seeing TWD moving over to $31. And we expect -- we actually saw $31.8 this morning. So in the second half, we may see a trend going by 31.5%. And we actually see that in the second half of 2026, we actually see that in the first half of GDP, we actually see a 14.15% of Y-o-Y, and we are benefiting from that. And according to the DGB that we are actually expecting an exceeding performance of over 10%, considering CPI that in the recent few months, that we can see the CPI Y-o-Y exceeded 2%. So this is something we probably need to look out, stay look at for in the future. And also tomorrow, we actually are going to see the market funding demand is actually very high. So in recent years, we actually see all the banks are offering high interest rates on deposits. benefits. We actually see a lot of these kind of advertisements. So we actually see de facto interest rate has already been risen. So whether the Central Bank is going to raise their policy, they actually is one possibility, but we will still stay on the lookout for the future. Maybe there will be more concrete indicator to actually -- for us to actually to expect and anticipate central banks policy moves. And then in terms of the overall operation of the second half of our earnings prospects with regard to deposits, I would like to give a report in terms of the bank in terms of the loan that we are going to maintain the same to. We are going to show double-digit growth because we actually see a momentum of over 10%. So I think the momentum will continue into the second half of 2026 and also that we are maintaining at this level of 1.7 to 1.73 percentage level and because we see the funding goes into the market. The funding cost is actually raising, but we still maintain at the same tone in terms of the fee that we actually expect double-digit growth. But as we mentioned before, because there is a contribution from Wealth Management, 44%. And the overall first half, we actually see a 26%. We'll continue to a very strong double-digit growth, and that is going to also help and contribute and benefit our overall earnings and income. And in terms of asset quality, our guidance was 28 to 33 points, but we can actually see from our presentation that we can actually see this spread is 38 [indiscernible] actually remind you that we actually see for the first half of the loan, we actually show a TWD 500 billion of growth. So that is 1% of 0 provision. Now we'll give you 5,000 sorry, the TWD 50 billion. So we are actually maintaining at the guidance range for this year. And for our cost/income ratio, the original guidance was between [indiscernible] We are going to see a downward strength between 52% to 50% because we continue to maintain this income. So we are actually controlling our expense quite well. That is about the bank. And with regard to the licensure one big guidance adjustment reflecting our FYP. Our guidance was to TWD 82 billion. In the first half, we have reached around TWD 64 billion. So we are expecting that onward, a revision of over TWD 100 billion. And then for the margin, we are expecting 15% to 20% of margin growth. So above is about our prospects of some of our prospect guidance revision and then also quite many questions about [indiscernible] question about our overseas allocation employment. So about the overseas profits, about our profit and earnings performance. The overall net profit is around in TD. So we actually see a Y-o-Y growth and then we actually see a slower growth compared to the same period of last year, but the overall contribution is still around 30% to our total bank profit income. So it's still a very important profit source. And then the slow growth in the first half of this year has to do with the trading income reduced from both Hong Kong and China and then also we have this individual case provision. So in Tokyo. So we actually see only 4% of growth for the overall deployment. And then by region, we actually see Southeast Asia shows the most promising and excellent 46% of Y-o-Y growth. When it comes to supply chain restructuring or geopolitics, our branches in both India and South Asia, they actually have received opportunities for derivatives. And then also in North America, we actually see a 32% of growth for the first half of this year because in the United States, we have both the branches subsidiaries. So we can actually tap into the great growth opportunities from Taiwan. And then about overseas deployment and footprint. We are continuing to enhance AI supply chain services in both the States and Japan. That in Texas, our offices in Q2 will be inaugurated if all goes well in the Los Angeles branch is expecting to open in the first quarter of 2027. So these 2 offices or branches or offices. And then in the states, we have around 20 spots in the states. And in Phoenix, we're expecting to open up a new branch and the time will be around the fourth quarter, the following quarter in this year as far Asia Pacific and in Tokyo branch, we are going to obtain July from the local authorities at Fukuoka. So in Q2, we are expecting an opportunity to open up a new branch. And then for our branch in [indiscernible] we actually changed it into the branch of Tokyo. And then also, they are relocated to the Kuma station. And then for Taiwanese businesses, we hope these branches can also benefit from the convenience supported by the location to better serve their customers. And about the capital liquidity and then also equity earnings related questions. And because in Q4, that authorities have already gave us approvals for introduction and IRB regime. So how would that affect our BIS -- so if we use RWS to give a test calculation in June, then we can actually see the foundation of we can actually release around TWD 100 billion of capital that into 5 years, then that will be around TWD 220 billion. Of course, this is just an estimation because over time, our risk capital positions will change your sites and the risk factor will change because you actually get loan to different applicants. So we use a number of 2026 June to give the model testing, and then that gives around roundsaving of TWD 100 billion, and that will give you an amortized impact of TWD 20 billion per year. Of course, that is based on our number in June this year. And then, of course, the tested results indicate a very important factor that can support our business growth. Like I said about our loan volume growth in 6 months billion. Of course, that requires certain capital to support these kind of business size. And of course, the self-owned capital will be very important and critical to our future business growth. And moving on to -- in our dividends. And like we said before, because the IRB of a bank allow us to release more capital. So in one way that can support our growth and on the other investors and also some of corporates, clients are asking about the changes to our cash dividends. So previously, like I mentioned, that when it comes to the dividend payments. In addition to the current income, we also have the OCI capital gain, of course, we will factor into business needs of our different subsidiaries to make appropriate dividend payout. Of course, we would factor in the investors' expectation in that arrangement and also on corporate shareholder assets. If these equity, maybe we can get more upstreaming to the group. If we have these -- the good level of the bank over our equity capital, there may be we can actually raise that cap of $1.5 because in the past the statutory capital return. Now we can only upstream to the group $1.5. But no, we are not doing that right now, but we do have the opportunity to do that in end of this year. And then according to the regulation that if it's -- of course, we can upstream more of our equity remains to our earning group. And the next question about LCR we actually see a tightening of market tech capital. Therefore, CTBC in Q2, the June LCR is around 111% this year. And in the past 5 to 6 quarters, we are maintaining -- we have been maintaining around 100% to 120%. So internal control, we want to maintain that level at over 110%. So we are -- we have been hitting that goal because of the tightening of market capital and funding, we are going to pay close focus on the total deposit structure and also our top 20 deposit account holders about the intensity of that. We are going to leverage different tool sets for management so we can actually have a robust liquidity management. So our LCR maintain within the range of 100 to 120 percentage. We would like to continue to enhance that liquidity management. And with regard to interest rates rise and its impact -- with regard to our asset and liability at the banks and have funded, we are with interest right or cuts. Based on our June number, we actually see these 1 bps. Our interest rate hike of foreign currencies, the new impact is actually quite small. It's -- it will be less than 0.01 bps per year. So that is about TWD 3 million. And if TWD shows a little bit of interest rate, the NIM impact will be between 0 to 0.07 bps. And the [indiscernible] impact will be around TWD 47 million. So these are numbers for your reference. And about the mortgage and then the recorders and journalists asked about our current credit loan and mortgage loan policies and strategies. We actually still focus on the self-help client segment. We are going to first prioritize our own clients and then we actually see a 26 percentage of mortgage rates. And then -- so it's under the regulator's requirement 30%. So we actually show -- see a room about more than TWD 200 billion. And then about CTBC that we actually should see we are going to use a syndicated credit center disclosure of information, including these mortgage derivatives and mortgages and car mortgage these products, we are going to run that against our own client database to evaluate and gauge our risk exposure size. So we actually identify only about 50 head counts. So the total exposure amount is actually quite low, as low as TWD 700 million. So for us, this is not yet posting a big risk to us. And for the mortgage, our current LTV is around 42%. So that is another information for your reference. And other questions with regard to the investment target and also investment market change and also investment allocation, a lot of information has been provided maybe the allocation probably is not the right place to share with you right now. And now with regard to Taiwan Life, some of the real estate investments. So for the first half of 2026, as of June, the overall real estate scale has already reached TWD 126 billion. And for the first half, we actually have these new 2 sites investments. So that investment reached around TWD 19 billion. Of course, that is will be recognized to our income statement after the completion of the 2 sites, but that will be amortized into our real estate statements and then the return is around 4% to 5%. So we have this internal hurdle rates in the future, we will continue to expand our real estate investment to improve our ROE of real estate investments. The last question is about whether or not Taiwan Life is going to issue debt and this is a question from an institutional analysts. So on June 30th, we had important announcements saying that Taiwan Life will issue less than TWD 20 billion for equivalent in foreign currency bonds. We will look at the market situation and it can be through domestic or overseas investment entities. We have one in Singapore. We will look at the market situation to raise funds. The last question is a question that is asked the whole time, which is about M&A because on the market, there have been some relevant issues. I think for a long time, CTBC has been consistent under the strategies of holding. We review our strength and weaknesses in both banking, insurance, securities, an investment. If there are opportunities, we will review them very carefully. So these are the presubmitted questions from you. I was reminded that I had a slip of tongue, Loan, 1% was not TWD 50 billion, but TWD 5 billion. I had a little bit tongue sorry about that. Now I'd like to invite foreign and online analysts to raise questions.

Thank you, Mr. President. Now I would like to invite institutional analysts to post questions. If you want to ask your question, please raise your hand and introduce yourself first before you ask your questions. Thank you.

Hello. I have a few questions First, you talked about 1.7% to 1.73% for NIM. So how does the government -- how does the company going to achieve this goal? In terms of Taiwan Life, you mentioned that future dividend payout would depend on the current P&L and OCI. So in Q2, including Light bank and holding what was the stock gains under the OCI because we couldn't see that on Page 8 of the presentation. My third question, in Q2 and the latest [indiscernible] equity and bond levels, your CG is it -- has it returned to the same level as Q2 or not? And also, this year the fair value liability level has gone down significantly. Could you tell us the NTD and USD numbers? And in Q2 for Taiwan Life, you mentioned that there was a positive TWD 2.8 billion in Q1 because at first -- so what's the reason behind the loss in Q2. Could you explain that?

First, how does the bank achieved the NIM goal. We mentioned that it post interest rates are going up and capital is tied on the market. we will likely raise our loan pricing in order to guide the loan interest rate to go up so that does spread can be widened slightly. This is basically our method. The second question was about Q2 OCI stock gains. Well, in Q2, the number [indiscernible] bond found. So I put it together. So on realized number was TWD 38 billion and equity investment on realized gains was roughly TWD 14 billion. You also asked about fair value liability view. It was roughly TWD 36 billion and 80% of it is in NTG, the other 20% is U.S. dollars. You also asked about other operating profit in Q2, it went down largely because the number was operating expense OpEx. So if it's a direct expense, then it's reflected, then if it's indirect and it's reflected on this very item. So normally speaking, it's the concept of expenditure. That's it.

Are there any other questions from institutional investors? Please introduce yourselves.

Hello. This is Tina from Toni. I want to ask you about a question on Page 46. Newly added loans, they have gone up over the past 2 quarters, and there were specific provisions. So are you worried about a specific industry and so this is the first question. The second question, I see the P&L of Taiwan Life in Q2, the insurance service result is lower than in Q1. I want to ask you what's the main reason for that? And will that reason last until the second half of this year? My last question is also for Taiwan Life. The cash dividend income, how much is that according to your forecast?

First, in terms of NPL, in the NPL increase in Q2. Well, the number was generated from subsidiaries. Tokyo Star, as we mentioned, has a larger NPL amount and also in terms of LH in Thailand, there are some cases there as well. There's one bigger one related to construction and the projects are mostly public construction projects and because accounts receivables have been delayed. So there's a shortage of -- so in the second half of this year, we will continue to observe the situation. Well, I'd like to talk about CSM in Q1. Participating Policies performed pretty well on the market. So there was an increase, which is reflected here. When the market is good, the reflected amount is more visible when the market is just okay, then we don't see that reflected that much. So that's about the difference in 1 as for dividend according to our forecast for the full year, including ETS and domestic and overseas stocks, dividends will amount to TWD 11.9 billion which is lower than last year by TWD 3 billion. Our stock management is that we pursue overall value growth rather than just sticking with dividend income we want to focus more on the creation of total return, which is more important for us. So in a we made some adjustments in terms of stocks. We try to find bigger equity stocks as our targets. So dividends will go down for this year. But overall, the total return of stocks, as we said, will enjoy a higher growth.

Okay. We open the floor now for questions on the phone line. So Mr. Operator, please help us collect questions.

[Operator Instructions] JPMorgan, Jemmy Huang, please.

Hello. I have a few questions. First, credit cost guidance remains unchanged, so -- which is still 28 to 33 bps. Does it mean that in the second half of this year, the loan growth momentum will be slower than in H1? So the number will go down or do you think that in the second half of this year, there won't be such specific cases happening? And this is the first question. The second question is for Taiwan Life. Someone has asked about the insurance service results Q-o-Q and your answer was that participating policies sold better. I don't know how that impacts insurance service results. When they sell well, does it mean that CSM should be better? Then why is it directly reflected on the current insurance service results? Can you also tell us a little bit about financial results in Q1? If we look at Page 47 in for --

Sorry, could you repeat the second question? There were some disconnections.