CTBC Financial Holding Co., Ltd. (2891B.TW) Q3 FY2025 Earnings Call Transcript & Summary

Welcome to CTBC Holding 2025 Q3 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, CSO of Taiwan Life; and Justine Shen, Head of IR of CTBC Holding. [Operator Instructions] Now please welcome President Kao for her opening remarks.

Good afternoon, media friends, investors and analysts. Thank you for attending CTBC Holdings 2025 Q3 Earnings Call. In the first 3 quarters, our pretax net profit was TWD 70 billion, after-tax net profit, TWD 60.8 billion, up 3.6% Y-o-Y. EPS TWD 3.06, ROE, 17.5%, ranking first among financial holding peers. Now let's look at our subsidiaries profit. Our core subsidiary, CTBC Bank performed well in the core businesses in the first 3 quarters. It ranks #1 in bank peers, and it set a historic high. And the after-tax net profit TWD 42.1 billion, up 16% Y-o-Y. So overall, a solid base of deposits and loans was maintained with loans at the end of Q3 growing by 9% Y-o-Y performed steadily with fee income growing by more than 10% Y-o-Y in the first 3 quarters. Overseas business also performed well. Pretax profit of the first 3 quarters, TWD 17.6 billion, up 4% Y-o-Y, accounting for 34% of that of the bank. As for our second largest engine, Taiwan Life profit in Q3 went up significantly after-tax net profit, TWD 10.5 billion and after-tax net profit of the first 3 quarters, TWD 17.7 billion. This is mainly due to rising stock markets and dividend income will -- it was down by 16% Y-o-Y in the first 3 quarters, mainly due to the depreciation of the U.S. dollar in the first half of the year. Taiwan Life has taken measures adopting the new FX reserve system starting in June. In July, TWD 15.1 billion was set aside from its liability reserve to replenish the FX reserve. As of September, the FX reserve balance was TWD 17.6 billion in order to better cope with FX fluctuations. In addition, Taiwan Life's business momentum has rebounded, driven by growth in traditional and investment-linked policies. FYP of the first 3 quarters went up by 37% Y-o-Y. So this is the overall performance outlook of CTBC Holding. Now I'd like to invite IR for a detailed report. Thank you.

Please turn to performance highlights on Page 4. Holding reported net profit of TWD 60.8 billion in the first 9 months, up 4% Y-o-Y, marking a record high. EPS was TWD 3.06. Holdings ROE was 17.5%, leading peers. CTBC Bank's net profit was TWD 42.1 billion in the first 9 months, up 16% Y-o-Y, ranked #1 among peers. Bank's capitalization was solid and asset quality remained stable. Taiwan Life's net profit was TWD 17.7 billion in the first 9 months declined Y-o-Y due to higher hedging costs amid depreciation of U.S. dollar. In terms of business momentum, FYPs increased 37% in the first 9 months, supported by sales of investment-linked and traditional policies. Other subsidiaries, including venture capital and securities reported better profits Q-o-Q, underpinned by robust capital markets performance in Q3, but weaker earnings Y-o-Y due to market volatility. Page 5, profitability. Holdings EPS was TWD 3.06 in the first 9 months. Group ROE was 17.5% and ROA was 0.9%. Page 7, capital ratio. We remain well capitalized with group CAR at 126% and Life RBC ratio at 369%. Bank's CAR was 14.7% and CET 1 ratio was 11.2%. Page 8, profit breakdown by entity. In Q3, bank net profit reached TWD 2.3 billion, flat Q-o-Q. Life's net profit surged to TWD 10.5 billion, mainly due to capital gains and dividend income. Holdings net profit was TWD 24.9 billion, up 56% Q-o-Q. In the first 9 months, bank net profit reached TWD 42.1 billion, up 16% Y-o-Y, driven by strong net interest income and fee income. Life profit was TWD 17.7 billion, down 16% Y-o-Y, mostly due to higher hedging costs amid U.S. dollar depreciation. Holdings net profit was TWD 60.8 billion, up 4% Y-o-Y. Let's go to our banking business. Bank's net profit reached TWD 42.1 billion, up 16% Y-o-Y, outperforming peers. ROE was nearly 14%, up 93 basis points Y-o-Y. Page 11, revenue breakdown. Total revenue was up 2% Q-o-Q and 9% Y-o-Y. Net interest income was up 10% Q-o-Q and 21% Y-o-Y, driven by increased loans and wider net interest margin. Fee income was up 16% Q-o-Q and 10% Y-o-Y on sustained growth momentum in wealth management, corporate and credit card businesses. Trading income and other revenues declined 37% Q-o-Q due to lower income from derivatives and swaps and fell 18% Y-o-Y, mainly driven by reduced swap income. Next, on loan growth. Total lending with credit card revolving was up 2% Q-o-Q and 9% Y-o-Y. NT dollar corporate loans were down 3% Q-o-Q due to reduced lending to government and manufacturing sectors. Year-on-year, they were up 2%, driven by services and real estate sectors. Mortgage was up 5% Q-o-Q and 15% Y-o-Y as business momentum remained stable. Unsecured and other loans increased 3% Q-o-Q and 13% Y-o-Y. Foreign currency loans were up 3% Q-o-Q and 8% Y-o-Y. Next, on foreign currency loan breakdown. Overseas subsidiaries accounted for 56% of foreign currency loans with TSB and LH being 2 larger subsidiaries. Overseas branches accounted for 33%. Overseas subsidiary loans were up 1% Y-o-Y, mainly driven by solid growth in LH and TSB. Overseas branch loans were up 13%, mainly driven by Singapore, Tokyo, New York and Vietnam branches, all reporting double-digit growth. OBU and DBU loans were up 40%, driven by inventory stockpiling effect ahead of tariffs, which led to higher loan demand for working capital. Page 14, Bank deposit mix. Total deposits reached TWD 5.6 trillion, up 3% Q-o-Q and 7% Y-o-Y. On the right, CASA accounted for 60% of NT dollar deposits. The time deposit share of foreign currency deposits declined Q-o-Q to 61%. Page 15, loan-to-deposit ratio. Overall LDR was 75.2%. NT dollar LDR was 85.1%. Foreign currency LDR was 61.4% Page 16, NIM and spread. In Q3, overall spread remained flat. NIM went up to 1.59% as U.S. dollar interbank borrowing position declined, leading to lower funding costs. In the first 9 months, NIM was 1.53%, supported by improved yield of marketable securities and lower foreign currency funding costs. including swap income, NIM was 1.65% in the first 9 months. Page 17, fee breakdown. Total fees were up 16% Q-o-Q and 10% Y-o-Y. Wealth management fees were up 31% Q-o-Q and sales momentum continued to improve, underpinned by robust capital markets. In the first 9 months, wealth management fees were up 9% Y-o-Y, driven by stronger sales of bancassurance and structured products. Corporate business fees were up 9% Q-o-Q, mostly due to higher loan-related and syndication fees in Q3 and up 20% Y-o-Y, driven by loan-related syndication and private banking fees. Credit card fees were flat Q-o-Q and up 7% Y-o-Y, supported by continued growth of credit card consumption. Page 18, wealth management fee. For wealth management fee breakdown in the first 9 months, the proportion of bancassurance and bond and others increased due to better sales of bancassurance and structured products. Page 19, cost/income ratio. Cost/income ratio was 50.7% in Q3, improved by 1.1% Q-o-Q. In the first 9 months, cost/income ratio was 51.5%, improved Y-o-Y, driven by faster growth in operating income and content OpEx growth. Next, on asset quality. Asset quality remained stable with NPL ratio at 0.48%. NPL coverage ratio was 330%. Credit costs were 34 basis points in Q3, up 8 bps Q-o-Q due to higher general provisions on new loans to private corporate. Credit costs in the first 9 months were 31 basis points, down 2 basis points Y-o-Y, mainly due to decreases in provisions for the retail segment. Moving to Life business. Taiwan Life reported net profit of TWD 17.7 billion in the first 9 months, down 16% Y-o-Y, mostly due to FX volatility. ROE was 14%. Next on premiums. Total premiums in the first 9 months were up 16% Y-o-Y and FYPs grew 37% Y-o-Y, driven by increased sales of investment-linked and traditional policies. On the upper right-hand side, the FYP product breakdown shows that the proportion of investment-linked policies rose to 24%, while traditional policies increased to 19% -- on the lower left-hand side, regular paid products represented 44% of FYPs, while single paid products accounted for 32%. Foreign currency policies made up 49% and NT dollar policies 28%. On the lower right-hand side, in terms of channels, the proportion of CTBC Bank increased to 40%, reflecting increased sales of investment-linked policies. Page 24, investment asset mix. Total investment assets reached TWD 2 trillion. Taiwan Life sees market opportunities to realize gains from equities, resulting in lower holdings in equities. In addition, Taiwan Life continued to increase holdings in bonds and funds. The allocation of other asset classes remained relatively steady. Page 25, investment yield, cost of liability and breakeven point. In the first 9 months, total investment yield after hedge was 4.06% declined Y-o-Y amid higher hedging costs. Pre-hedging recurring yield was 3.73%, down 7 basis points Y-o-Y, mainly due to reduced bond interest income resulting from NT dollar appreciation this year. The high interest rate environment has increased cost of liabilities. Despite this, Taiwan Life continues to deliver positive investment spreads. Page 26, hedging mix. On the left, 42% of overseas investment assets were foreign currency policies, 29% were fully hedged, 19% were unhedged and the rest was OCI position. On the right, FX reserves amounted to TWD 3.4 billion as of Q3. Hedging costs were 1.58% in the first 9 months, increased Y-o-Y, mainly due to the depreciation in the U.S. dollar. However, in Q3, the stabilization of the U.S. dollar, together with FX reserves offsetting led to an improvement in hedging costs compared to the first half. Turning now to ESG highlights. CTBC Holdings' continuous efforts in ESG has led to recognition. This year, we received The Asset Platinum Award for Corporate Sustainability Leadership Award. Page 28 to 30 highlights CTBC's key achievements and recognitions in sustainability performance. The latest sustainability report and TCFD report can be accessed via the link on Page 30 or by scanning the QR code to visit the website. That concludes the presentation. We are now open for Q&A.

[Operator Instructions]

Sorry, this is CTBC Holding. In the media session, there were a few questions that I'd like to also answer here so that you won't need to ask questions that have already been asked. So last Friday, there was an article from the economist. It seems that Taiwan Central Bank has released some related announcements. There were some big fluctuations in the foreign exchange rates, but the market has stabilized. It's been around TWD 31 to USD 1. The Treasury Department of the U.S. has made -- has reached agreements with Japan, South Korea, Thailand, Malaysia and Switzerland before Taiwan. And these countries' foreign exchange rates didn't go up dramatically after the agreements were made. So we believe that the signing of this agreement between the U.S. and Taiwan led to many discussions in Taiwan, but positive discussions. So these are a good thing for the long-term development. There are many factors affecting foreign exchange rates, current accounts, financial accounts and foreign capital inward and outward, and there are different factors affecting exchange rates differently. Our -- we believe that the Taiwan dollar will appreciate to roughly TWD 30 to USD 1 before the end of this year. So this is one question. As for our Uni open cooperation with Taiwan Uni President Group, which was launched on August 21. Upon the launching, we said that we wanted to issue 1 million cards, and it's been 3 months. The progress has been great, and we've exceeded our target even. As for our overseas strategies and deployment, which we have explained, let me explain one more time. In addition to the existing operating overseas units in Haiphong and Binh Duong in Vietnam, the offices have been approved by the local authority. By the end of this month, they will open. As for GIFT City branch in India and our L.A. branch and Texas office and Sydney branch as well as Semarang branch in Indonesia, they are expected to open in Q1 next year. As for Fukuoka office in Japan, it's passed our internal BOD, and now we are talking with the FSC. As for Cambodia and Mumbai in India, they are also ongoing. We will continue to focus on Southeast Asia, Northeast Asia and North America over -- in the near future. These are our focused development areas. As for overseas profit, I mentioned at the beginning that in the first 3 quarters, the overseas profit accounts for 34% of that of the bank. If we look at regions and countries, the Greater China and Southeast Asia account for respectively, 35%; Japan, 18%; North America, 12%. And Southeast Asia and Northeast Asia, which is Japan, have performed relatively well this year. As for insurance, later, our CSO of Taiwan Life will add more to it. And another question was asked about the M&A with Mercuries Life. It's a past event, but many media friends asked about this. So let me explain this. The overall M&A process had 2 stages. On August 29, they wanted to receive nonbinding offers from the willing parties. So because it's nonbinding, we didn't go through BOD, so we didn't make any announcement. But on October 23, we had to make a binding offer. The amount was tremendous. It was important, and it might affect shareholders. So we went through the BOD and we made announcement accordingly, but we didn't get the bid. So the law didn't require us to make an announcement, but the FSC wanted us to make an announcement before the opening of the market the next day. So August -- sorry, on October 27, we did make an announcement accordingly. As for Pou Chen M&A, we didn't make any announcement because the offer at that time was nonbinding. So there was no BOD discussion. So this is my explanation related to Mercuries Life insurance and our announcements made. So these are some of the questions asked by media friends. So Mr. [indiscernible] is going to answer questions related to life. Many questions are about the adoptions of IFRS 17. And well, as for IFRS 17, if we use the market interest rates by the end of September, so the adoption of IFRS 17 reserve. So if we use this interest rate, then the amount is roughly the same. So from the perspective of reserve, it doesn't have impact on the net value. Well, back in July, we set aside TWD 15 billion to replenish FX reserve. In other words, this amount, based on the situation as of the end of September, then this TWD 15 billion will have an impact in terms of reducing our net value. But when it comes to calculating the capital adequacy FX reserve can still be considered as part of it self-owned capital. So that's this question. As for the impact on future profit, we see that in terms of business after IFRS 17, there won't be new business first year loss anymore, which means that in P&L terms, there will be a better performance for life insurance. As for cost of liability level and in terms of the impact because the interest rate curve is low on the front and high at the back. So the cost of liability right now is 3.31%. After the adoption, if everything follows the situation at the end of September and after the adoption, it will be roughly 2.52%. So the cost of liability goes down, which is a positive impact. As for cost of hedging, now we have FX reserve already. So FX fluctuations will be absorbed by the FX reserve. From the perspective of the hedging cost, this year, the cost is roughly 1.5%. Next year, with this fixed 1.5% and with our hedging position, there will be a cost incurred. If we look at past average, the company's total hedging cost will be between 1.1% and 1.2%. So the hedging cost is relatively good. But next year, there won't be the coverage anymore. So if we sell the OCI stocks, it won't affect our P&L numbers. But as for how much will be taken out from the bond AC position or stock position, will it be put under OCI or elsewhere? We are still discussing this issue. It has to do with interest rates and the economic environment. We will only confirm this towards the end of this year. It might be a negative impact on our P&L. But overall, if we look at all of these factors, the trend is going into a relatively positive direction. And our current evaluation is roughly the same in the sense that the balance is TWD 110 billion. This is the same as what we previously announced. As for ICS adoption, the new ICS is more stricter. So there are transitional measures. The percentage is 360%. So we can apply to achieve 125%. And depending on the CSM accumulation and the profit situation every year, the 125% level. And as for whether or not there should be a submission to the parent company, well, there hasn't been any rule announced by the competent authorities. So we can only know this after the announcement is made.

[Operator Instructions] The first question is [indiscernible].

I have a few questions. For CTBC Bank, this quarter is special. The U.S. dollar spread goes down and the NTD spread goes up. I don't know, well, our original estimation was that rate cuts might be helpful, but it turns out to be different. So the rate improvement, is it due to CASA ratio going up or due to other factors? And when we look at the U.S. dollar spread, what will be the trend in the future? My second question, CET1 ratio in the bank, do you have a guidance now after IRB, what will be the impact roughly? In the last earnings call, you mentioned that CTBC Bank's surplus is around the capital level. So what is the target payout ratio? Because in the past 4 years, the average is 50% roughly. So when the legal surplus is achieved a certain target, will there be a different target in the future? As for Taiwan Life, I have many questions. Mr. Yeh, you mentioned book value and you said reserve is sufficient and book value will go down by TWD 15 billion. Is that the net impact? Or are there other factors? Because the bond reclassification, if some bonds go to OCI, there will be extra negative impact. So your -- so is it an equivalent transfer? There's no excess reserve that can be released. And ultimately, the transition impact will be net negative. Do you have a guidance about what is the impact of book value? As for hedging cost, in the first 3 quarters, 1.58% does it or doesn't include the TWD 15 billion reserve? How do you calculate this hedging cost exactly. It seems that the negative position increases. And in this situation, do you think that when FX reserve is still relatively abundant, maybe at the end of this year or next year, some hedging accounting rules might change. So the position will go up progressively over the next 1 to 2 years. Another question Mr. Yeh mentioned earnings under IFRS 17 pro forma change. So your P&L, Taiwan Life, every year, do you release any mobility and loading gain every year? If so, could you tell us roughly the numbers? I assume that now in motility loading gain will be -- it will be replaced in the future, right? And ICS ratio, you target 125%, correct? You don't -- if that's the case, if that's what you assume, then 125% there might not be any pressure, but 25% as your buffer, is it enough to face big fluctuations on the financial market?

Thank you. Let me answer the 3 questions related to bank. In Q3, the U.S. spread -- U.S. dollar spread was down by 4 points. What's the reason? Well, first of all, if you look at the deposit loan spread, indeed, it went down -- the foreign currency was down 9%, but deposit interest rate was down by only 5%. So there are several factors. Our foreign currency loans foreign currency deposits is roughly 2x as foreign currency loans. So it's not necessarily negative as a result. And second, when we have more U.S. dollar position, we had some transfer and the cost went down quite a lot. So with these 2 different factors combined, our NIM was still higher by 9 points as a result. And you mentioned CET1 ratio of the bank. Next year, after we apply for IRB, will it get better? Well, our total target, when we adopt IRB, we believe that there will be an increase of 3% of EIS ratio. Third, you mentioned legal surplus. Currently, our book legal surplus is TWD 154.5 billion. So there is still roughly TWD 16.8 billion difference. And we believe that this year, we can replenish, we can fulfill this gap this year. And next year, when we distribute surplus, as long as next year, the legal surplus plus our accumulation over the past few years, as long as it exceeds our capitalization, then the surplus can be higher than TWD 1.5. Do we have a target in terms of distribution to the parent company? Well, we believe that it will be higher than in the previous years, but the actual situation can only be known when our budget planning and our -- and the economic situation are taken into consideration. As for the net value impact, I said that the impact is TWD 15 billion, but that's excluding AC. Interest rate impact is on both assets and liabilities at the same time. As for liabilities after our calculation, it's roughly the same as IFRS 14, which means that our bond position hardest the position compared to last year, the value this year will go up compared to the situation last year. But how much will be taken out from AC, we haven't made the final decision yet. As for hedging cost, 1.5%, this doesn't include the TWD 15 billion that we set aside. As for -- well, we will still look at foreign exchange rate trend and make an evaluation. If we believe that the NT dollar will go in a negative direction, then we will still do the necessary hedging. FX reserve is bigger now, but we don't maximize the hedging just because of the FX reserve going up now. As for PL in the future, yes, the morbidity and the -- it will be replaced the morbidity and mortality difference. If we don't -- so either we use CSM or we use the difference to us, to our profit, it's roughly the same. There won't be a huge difference between these 2 options. And the advantage is that every year, there is some first year loss. But in the future, there won't be that anymore because of distribution. As for ICS, whether or not it will be higher than 125%. Well, according to the competent authorities examples, we see that, for example, if we in its calculation, if you go up from 125% to 130% and over the 5 years, it will go down from 130%, 129%, 128% every year. So we don't see a reason to reach 130%. And if you want to raise it to 125% and your profit of that year and the CSM incurred by sales or your asset adjustment, if you just follow your existing steps, then the next year, the calculation base will still be 125%. If you achieve what you have promised, you can continue to maintain 125% despite market -- negative market factors. If that's the perspective that we see things from, then we don't see a reason why we need to set a number higher than 125%. If it's higher than 125% and if you don't achieve that level, then the extent of impact in the following years will be larger. So this is why now we use 125% as our application target. I want to follow up. So Mr. Yeh, based on what you said, the CSM amortization basically will be the same as -- will be neutralized with mobility release, which means that we see the pro forma benefits, which is cost of liability going down and also there is no first year loss, which is a positive thing. Can we understand it that way?

Yes.

[Operator Instructions] Michael Zhang from Citi.

I have a few questions. First, I want to follow up on NIM. is in the first 3 quarters, the adjusted NIM is 1.65%. It seems that the full year will be higher than 1.63% to 1.66%. So how do you look at the fourth quarter and next year? Will NIM have a chance to go higher than your full year target? And for fee income, it seems that bond and insurance have done well, but mutual fund is relatively weak. What might be the reasons when you look at Q4 and next year, is it still the same trend? My third question, in terms of bank investment, you have more FVTPL going down and moving towards OCI this year. So what are your investment strategies and the considerations behind? As for Taiwan Life, I want to ask you if hedging cost next year is 1.1% to 1.2%. I remember that your guidance in the past was 1% roughly. So when the hedging cost goes up, what are the main reasons? Because now we are still in a rate cut cycle, then why do you believe that the hedging cost will be higher than the previous guidance?

To answer the questions related to NIM in Q3, NIM with the swap was 1.667% and the Q4 situation, we believe will be roughly around this number, and there is only 1 quarter left. So it won't have a huge impact on the full year. So our full year estimation is still the same, between 1.63% and 1.66%, maybe more towards 1.66%. As for next year, we are still conducting relevant plans. So next time, we will report the results to you. As for retail wealth management, we see the momentum of mutual fund is weaker this year. But as for structured notes and insurance, the momentum is good. So mutual funds are more related to the market. In the first half of this year, especially in Q2, stock markets fluctuated more. So customers were less willing to buy mutual funds as a result, but our team uses different products flexibly. So mutual funds went down, but structured notes sales grew quite significantly. As for -- as for PL to OCI position, do you mean stocks? Well, if we look at the overall bank and CTL, from the beginning of this year to now, it went down by 40% and OCI went up by 100 -- what's the reason and the OCI stocks also increased. Well, for the stock increase, previously, CTBC Bank's stock position was not big. And now we've found a better team. So we've had -- we've invested more in stocks, but compared to our peers, the total is TWD 24 billion to TWD 25 billion as our position only. So when it comes to trading, stock fluctuations may impact our inter statement. So for the relevant business units, this is why they decided to put them under OCI. As for the hedging cost in Taiwan Life, there are many factors the cost of hedging tools on the market at the time and also foreign exchange rates, among others. According to our current estimation, it's between 1.1% and 1.2%. The future foreign exchange rates will be absorbed to a certain extent by the FX reserve. And there are 2 types of costs. First, for unhedged position, we will have to put forward a 1.5% in the old FX reserve rule, it was only 0.72%. Now we adopt a new FX reserve system and we also have the TWD 15 billion FX reserve. So now for unhedged position, now we adopt the new percentage of 1.5%. The second cost is cost of tool. We have to have this cost of tools, and it's based on the market -- the cost of the tools on the market. And it's roughly 2.5%. So the average between 1.5% and 2.5% is 2%. So -- and we have some positions that don't need to be hedged to the U.S. policy. So the result will be 1.1% to 1.2%. And in Q3, it was roughly 1.14% in the third quarter this year.

UBS, Alex here. I have some follow-up questions for Taiwan Life. The situation on the day of the adoption, you said that it will be roughly the same -- does it already include the [indiscernible] so the impact, is it neutral? As for the transfer of bonds to, I'm not sure if I understood it correctly. It sounds like a positive impact. The long-term interest rates are still over 4%. So isn't the impact more negative? So and the overall impact will be higher or lower than TWD 15 billion. As for DLR, it goes down at the holding level. So could you elaborate on that? And do you have a target within the next year to lower it further to leave some room for future M&A. And also the adoption of the new rules will also have some pressure on the DLR. And in Q3 this year, Taiwan Life had a lot of traditional policies sold. What are the reasons behind? Do you have some different strategies compared to the past?

Okay. First, to answer the questions about DLR in September, it was 123.5% in October. It went down to 122.78%. It's first due to our profit. And second, OCR stocks and bonds mark-to-market went up. So the net value went up as a result.

In the future, do we take any measures to lower the DLR?

Well, we don't say that without any particular incidents, currently, we don't have the intention to increase the capital. So the DLR will go down because of the attribution to parent or we make more money or we -- the dividend payout goes down. So it depends on the balancing between these different factors. We believe that DLR is still under our expectations. As for Taiwan Life, first, reserve, IFRS 7 reserve is a liability, which includes CSM because at the beginning, CSM is a liability item. So before and after the transfer, the liability amounts are roughly the same. What I mean by that is that there is CSM included in it.

And moving out of AC, will it have a negative impact?

If the moving out ratio is high, then the impact on the net value is also high. So we are deciding which level of negative impact is tolerable. This is something that we have to make a decision about. This is why currently, we cannot yet tell you whether -- how much we will move out, how much position we will move out from AC. We consider several things. We don't move out a lot so that our net value goes down dramatically, we probably will not do that. Third, for traditional policies in Q3, the sales of traditional policies were better. In -- I think the sales of both traditional and investment-linked policies were both good. And the sales were mainly from USD policies. In terms of the third quarter, well, in Q2, there were some new products launched. This is why the growth was better in Q3. As for how channels, how different channels have different promotions, well, different promotions from different channels may also have an impact. Otherwise, there should be nothing particularly special.

The next one is Eric Shih from KGI.

I have a question for bank. In Q3, overseas NPL ratio went back -- went up. So what's the reason? And now for the full year, is it going to be between 25% and 30% or higher than in Q3? My second question is for Taiwan Life. In Q3, the unrealized stocks and bonds numbers, could you give us that number? And Mr. Yeh, you mentioned TWD 120 billion on the adoption date next year. So what's the CSM level in the 3 quarters?

The CFO mentioned that CTBC Bank -- so can the number mentioned only be achieved next June and next year, upon dividend payout, the bank can still not attribute that much to the holding level.

If that's the case, next year, the payout ratio can still be as high as 60%.

Okay. In terms of dividend payout, we looked at the law. Next year, when we distribute surplus as long as so that the law can be applied as long as certain conditions are met. So we looked at the law. And will the payout ratio -- will the payout be still 60% as in the past few years? Well, in principle, the answer is yes. As for the unrealized part, for fixed income, it's around TWD 10 billion for stocks, it's TWD 14 billion and CSM, TWD 120 billion and the amortization rate is TWD 7 billion to 8 billion roughly. Our CSM now is TWD 8 billion to TWD 9 billion roughly. Let me explain a bit further here. We all look at CSM. Investment-linked policies, if they are annuity policies, they follow IFRS 15, not 17. This is something a bit troublesome. We sell -- if we sell many annuity products, then the CSM will be 0. CSM is not everything. There are different IFRS systems to follow 15 and 17. For investment annuity policies, they will still contribute to our profit. There was a question about NPL and credit cost issues. In Q3 compared to the second quarter, NPL went up by TWD 631 million. subsidiary, the big ones are the Filipino, PSBank in Tokyo and LH in Thailand, the increase was TWD 200 million. It's not isolated cases. The reason is because our loans went up more this year. The position -- the loan position went up more this year. And in Taiwan, we don't -- there are 5 different levels of classifications according to the government. So we have to put forward at least 1% according to this law and according to this rule. And from January to September, there was an increase of TWD 300 billion. So the credit cost went up as a result and the NII every month came in afterwards. When there is a big loan position increase, the credit cost goes up as a result.

[Operator Instructions]

To add to the question from Citi. So in terms of trading and OCI positions, so you said TWD 100 billion. I misheard that number. So our PL position decrease mostly comes from commercial papers and time deposits. So these are transfer behaviors. So we put shorter day terms on to longer day terms. So this is what we do.

Thank you, CFO. Please enter your questions in the chat box. There are no further questions. This concludes our earnings call. Thank you for your participation. This is the end of our earnings call today. Thank you.