E.SUN Financial Holding Company, Ltd. (2884) Earnings Call Transcript & Summary

Hi, dear investors. Welcome to the investors call for E.SUN Financial Holding third quarter of 2025. The earnings call today, we have Deputy CFO, Ms. Sarah Chen and also my colleague, Martin, Bernard and Ruby. At the beginning, I will invite Sarah for a brief opening note, then Ruby, will take over and walk you through the slide. Thank you.

Dear investors, E.SUN delivered a strong performance in the first 9 months of this year, marking a record high in net profit for the same period. Solid growth across all core businesses, coupled with high single-digit growth in overseas profits. Net income set a new record high, growing at a range of 10.3% Y-o-Y. Wealth management fee income also achieved a record high in which bancassurance grew by 26%. Last week, we announced the financial results of October. Gross rate of net profit for the first 10 months was 30.9%. Net fee income continued to grow. We are optimistic about our performance this year and expecting to achieve good results. With well execution of cost management, their ratio decreased to 47.3% in the first 9 months. E.SUN will continue to strictly control the growth rate of expense to single digits for the whole year. For overseas expansion, overseas branches and subsidiaries net profits continue to grow and Dallas rep office has opened in October. Further expanding our North American financial services network and creating a convenient cross-border financial platform. E.SUN will continue to expand our footprint across Asia Pacific, the Board of Directors have announced the resolution on acquiring the Mercuries Life Insurance through a share swap. It is still subject to the approval of shareholders meeting and the competent authority. Following the merger, E.SUN FHC's total assets will surpass TWD 5.8 trillion, propelling the company to become the fifth largest listed financial holding companies in Taiwan, expanding the financial holding company landscape is one of the critical development strategy for E.SUN's fourth decade. Following the acquisitions of 91.2% equity stake in PGIM Securities Investment Trust Enterprise this July. The Board approval of the Mercuries Life merger further solidifies the FHC's footprint. Lastly, E.SUN's outstanding performance has received recognition from international institutions. We are highly commended by the bankers as the Best Private Bank in 2025. And for the fifth consecutive year E.SUN hosted the ESG sustainability initiative to raise the awareness of ESG and to collaborate with corporate partners to a sustainable future. We will continue to deliver value to our shareholders. Thank you very much.

My dear investor, this is Ruby. I will begin the presentation with a summary of E.SUN financial holding company. On Slide 4, at the third quarter, the total asset of both Financial Holding Company and Bank is TWD 54.2 trillion, and for the key financial indicators, the book value of Financial Holding Company is TWD 16.08 per share. The double leverage ratio is 115.57%, and the Financial Holding Company's CAR ratio is 132.9%. And for the physical channels, domestically, now E.SUN Banks runs 140 branches around Taiwan. And for the overseas channels, we run 35 overseas sites in 11 countries and regions. The Dallas representative office opened in October, further expanding our North American financial service network and the security branch remained the same at 17. On Slide 5 is the business and financial review of the third quarter of 2025. For the financial performance, net revenue of Financial Holding Company was TWD 67.8 billion, which grew by 15.6% year-on-year. Net profit was TWD 26.2 billion, which grew by 25.4% year-on-year. The Financial Holding EPS was TWD 1.62, ROE 13.6%. ROA was 0.84%. For the subsidiaries, E.SUN Bank's net profit for the first 9 months was TWD 25.2 billion, which grew by nearly 30%. Moving on to business development. The loan balance reached TWD 2.6 trillion which grew by 10.7% and increase corporate loan grew by 15.7%, SME loans grew by 8.9%, and regional loan grew by 6.8% and on the deposit balance grew by 10% year-on-year. Net income was TWD 22.6 billion, which grew by 10.3% and set record high for the same period. And for the wealth management fee was TWD 10.9 billion. grew by 11.2%, also set a record high. And for asset quality, E.SUN kept benign, NPL ratio at 50 basis points and coverage ratio at 803%. For the business highlights, E.SUN expand Financial Holding Company's landscape and keep moving toward a sustainable future. The Board of Directors announced resolution on November 5 to acquire Mercuries Life via a share swap. The transaction is contingent on final approval of the EGM and regulatory authorities. On Slide 6, we will try to illustrate our financial performance. As you can see in the upper side of the slide. The net profit and the FPS both set a record high on the first 3 quarter of 2025 and ROE and ROA are all the best performance in the past 5 years. Moving to Slide 7. We present the net income of the Financial Holding Company and the subsidiary. And you can see on the left-hand side, the pie chart shows that E.SUN Bank remain the main contributor of the Financial Holding Company. which contributes to nearly 93% of the total profit and the growth momentum for the E.SUN Bank is very strong. As you can see on the right-hand side, the growth rate of the E.SUN bank is nearly 30% year-on-year. On the next slide is the net income breakdown. Again, E.SUN follows the golden rule of the growth. Net profit growth is larger than the net revenue growth, in which is larger than the operating expense growth, driven by expected cost control, the operating expense only grew by 8% year-on-year. On Slide 9 shows the revenue breakdown of the Financial Holding Company. As you can see on the left-hand side, the pie chart shows our net revenue. The net interest income accounts for 43.7% percent of the total net revenue and the net income accounts for 33.4% and the other income account for nearly 23%. On the right-hand side, you can see that all revenue sectors delivered a very decent growth. On Slide 10 shows the net fee income breakdown of the Financial Holding Company. The pie chart show wealth management accounts for 48% of the net fee income. On the right-hand side, you can see the growth rate of wealth management was 11.2%, which was after a third consecutive year of double-digit growth. We still delivered a very decent growth in the wealth management business. On Slide 11 presents the capital efficacy ratio of both Financial Holding Company and the Bank. Both maintained its capital ratio at a very adequate level. The CAR ratio of financial holding company is 132.9%, and the Tier 1 ratio of the bank is 13.72%. Moving on to the subsidiaries. First, we take a look at E.SUN Bank. On Slide 13 presents the deposit and loan structure of E.SUN Bank. The total deposit grew by 10.03% year-on-year, in which the foreign currency deposits grew by 10.13%. And the total loan grew by 10.71% year-on-year in which the foreign currency loans grew by 15.67%. And if we denominate the foreign currency deposits and loans in U.S. dollars, the foreign currency deposits and loan grew by 13.6% and 19.8%, respectively. On Slide 14, shows the loan portfolio break now of E.SUN Bank. E.SUN has very diverse loan structure, with our last corporate loan, SME loan, mortgage loan and secured personal loans are all accounts for around 20% to 25%. On the right-hand side, you can see across all the loan categories, we had very decent growth in the first 9 months of 2025. On Slide 15, we would like to highlight the SME loan and the foreign currency loan of E.SUN Bank. E.SUN Bank maintained the largest SME loan balance among Taiwan private bank, driven by stable growth and for the foreign currency loan, as just mentioned, if we denominated in the U.S. dollars, the foreign currency loan is still very strong in the first 9 months of 2025. On Slide 16 is the overseas development of E.SUN Bank. The overseas branches and subsidiaries net profit grew by 4.9% and contributed 25.5% of total net profit, and the loan balance grew by nearly 11%. For the overseas network, the establishment of Dallas representative office on October will help us grab local business intelligence and in conjunction with the Los Angeles branch, provide more timely and comprehensive financial service to local customers. On Slide 17 shows the deposit structure of E.SUN Bank. The overall LDR is 71.6% and LDR for the foreign currency is 38.9%, which has been increased in the past few years. On Slide 18, the NIM and spread, E.SUN NIM has remained at a very flat level in the past quarter around 1.28% to 1.31%. On the right-hand side, you can see that the spread has been improving over the past few quarters. It's all thanks to the well management of cost funding control. As the green line shows, we have lowered our deposit rate over the past year. On Slide 19 is a wealth management fee breakdown, the bancassurance accounts for 42% of the total wealth management fee income and the mutual fund accounts for 34%. On the right-hand side, you can see the growth rate of bancassurance was 26% in the first 9 months of 2025. And then also after the third consecutive year of double-digit growth. We still delivered 26%, which is a very strong performance. On Slide 20 is the credit card business breakdown. We have 5,438 active cards and the market share was around 13%, and card consumption hit a record high of TWD 498 billion. The gross fee income grew by nearly 8% year-on-year. On Slide 21 is the asset quality of E.SUN Bank, E.SUN keep very benign asset quality, while NPL ratio is 15 basis points in the first 9 months and the coverage ratio is 803%. The credit cost is 21 basis points. On Slide 22 is the asset quality comparing to the market. E.SUN keep very benign in asset quality, which you can see is lower than the market average. On Slide 23 is cost/income ratio, thanks to the very well management of the cost control. Now E.SUN Bank cost income ratio is 47.3%, which has been improving since 2022 from nearly 13%. And next is about E.SUN Financial Holding Company of other subsidiaries. First, on Slide 25 is E.SUN Securities. At the third quarter, we see a TAIEX rebound, driving positive year-on-year earning growth, ROE is 23.6%. Which ranked top 1 among securities under Financial Holding Company. Both net revenue and net profit delivered a positive growth. On Slide 26 is the performance of E.SUN Asset Management. Domestic fund AUM is TWD 84.3 billion, discretionary AUM is TWD 95.9 billion. Year-to-date growth rate were both 12%. On Slide 27 is the sustainable development of E.SUN company. E.SUN Financial Holding Company was honored with Jade Award, the highest rating and CEO, James Chen was recognized as best CEO at Asset Corporate sustainability leadership of award for November. We will continue our efforts and be the pioneer in ESG. As mentioned, the Board of Directors of E.SUN Financial Holding Company and the Mercuries Life simultaneously approved a conventional merge on November 5. And here's the presentation about merger between E.SUN Financial Holding Company and Mercuries Life. On Slide 29, the entire transaction will be conducted by a share swap. E.SUN Financial Holding Company plans to acquire 100% of Mercuries Life's equity by issuing new shares. Exchanges, 0.2486 E.SUN shares for every 1 Mercuries Life shares. Upon completion, Mercuries Life shareholders will hold approximately 8.31% of E.SUN Financial Holding Company's shares. The transaction is contingent on final approval of the EGM and regulatory authorities. On Slide 30, principle of M&A evaluation. The process was adhered to the ARM principle. First, affordable, the financial and future capital needs are within the Financial Holding Company's capacity, which ensures stable dividend distribution. Second, reasonable, both price and non-price transaction terms are determined to be reasonable and fair. The 100% share swap structure ensures both E.SUN and Mercuries Life shareholders will share future growth. Third, manageable, Mercuries Life's asset deal is optimal for Financial Holding Companies and being highly complementary to the bank. E.SUN will continue to unwavering operating philosophies including integrity and high centers of corporate governments, management by professional executives, by adhering to the guidelines of maintaining a bank-centric financial holding company. On Slide 31 is our strategic thinking. First, M&A is the most efficient path to achieve immediate synergies and accelerate growth. It not only align our strategy to expand the Financial Holding Company's landscape but also helps to build a complete financial ecosystem. And some might ask, why now. The current moment is a critical turning point for Taiwan insurance industry. The adoption of IFRS 17 and a new solvency regime will increase financial transparency and boost the investment value of the insurance industry. Besides government policies, including localization and new reserve rules, promote stable and healthy growth for life issuers. Last but not least, the policy of our Asian wealth management hub, supporting life insurance industry to enhance high net worth customer acquisition and competitiveness. The why Mercuries, with 32 years of operation, Mercuries Life has a solid foundation of 8,600 agents, 2.5 billion customers and 257 branches. As of June 2025, Mercuries Life TWD 1.5 trillion assets and TWD 30.9 billion net worth ensures the pro forma consolidated Financial Holding Company's capital and leverage ratio remain with safe limits and bank-centric financial holding company. For future operations, we are going to recruit top talent, leverage complementary, bancassurance channels, product diversification and technology to unleash Mercuries Life potential. On Slide 32 is the business overview of Mercuries Life. Established in 1993, total premiums of 2024 reached approximately TWD 110 billion, ranking 7 domestically with a 4.5% market share, serving 2.5 million customers across 4.3 million policy. On Slide 33, we can see that following the merger. E.SUN Financial Holding Company's total asset was surpass TWD 5.8 trillion, propelling the company to be the sixth largest financial holding company in Taiwan, status resilience and brand value. So that will be the third quarter presentation. Now we are handing to the QA session. Thank you.

[Operator Instructions]