Fubon Financial Holding Co., Ltd. ($2881)

Thank you for joining Fubon Financial's First Quarter Results Briefing. We'll begin with an overview of the holding company's operating highlights and then we'll go through the key subsidiaries. Please turn to Page 5. At the holding company level, the Board of Directors announced cash dividend per share of $4.25 in year '25 which is a cash payout ratio of 50.8%. And the company's net income reached over $33 billion and EPS of $2.40 in first quarter '26. If we further include the FVOCI equity disposal gain and losses, the adjusted net income will be $66.35 billion. adjusted EPS will be $4.74. The total assets exceeded $13 trillion. That is up by over 8% and the net worth exceeds $1 trillion. That is up by 11.5% year-over-year. And looking at the major subsidiaries. Firstly, the Fubon Life, reported a net income of over $15 billion or adjusted net income of over $47 billion. That is also a record high on the adjusted basis. And in the meantime, the foreign currency reserve balance that $147.4 billion that reached the highest level in the life industry. And next, the Taipei Fubon Bank, it delivered net income of over $12 billion. That is up by more than 20% year-over-year, which is another record high. And this is supported by its strong growth in both the net interest income and fee income. In Fubon Securities, its net income reached over $4 billion and it was up by 154% year-over-year, and that's a beneficiary from the strong capital market in Taiwan. In Fubon Insurance, its net income reached over $2.5 billion or adjusted net income of $2.94 billion. We see the premium growth and the improvement in its net combined ratio. And moving on to Page 6. We can see the first quarter's net income and also the reported EPS of $2.40. And after we include the FVOCI's equity disposal gain and losses, the net income -- adjusted net income increased to over $66 billion and adjusted EPS of $4.74, and both we can see reached a record high. And we also see this adjusted basis of the net income that will provide a more complete view of the financial performance and also dividend generating capacity under the new accounting framework. In Page 7, we can see the profit contribution from the major subsidiaries and all key subsidiaries reported year-over-year growth. And specifically, in Taipei Fubon Bank, Fubon Securities, Fubon Bank Hong Kong and Fubon Bank China, each reached its record high net income. While the Fubon Insurance delivered the second highest level in the first quarter on record. And Fubon Life, its adjusted net income reached a record high for the same period. And next page, moving on to the net income year to April. We can also see the holding company that reached a net profit of over $72 billion with adjusted net income that increased to over $121 billion. And this already exceed the full years -- year '25 net income level. And from the major subsidiaries, again, all deliver year-over-year growth, while several business reached it's record high for the same period. In Fubon Life, it continued to post a decent momentum with the first year premium reached over $57 billion, and we also see the rise in Taiwan and U.S. equity market contribute to its valuation mark-to-market increase and also the capital gains. In Taipei Fubon Bank's first 4 months, the total revenue growth is 24% year-over-year, again, driven by NII and fee income that both grow at double digit. In Fubon Insurance written premium, it was up by 9%, while Fubon Securities also maintained a strong momentum with its brokerage and wealth management fee continue to grow. In Page 9, the total asset of the holding company reached over $13 trillion, that is up by more than 8%. And while the net worth exceeds $1 trillion by March, the adjusted net worth would exceed $1.3 trillion. That's including after-tax, CSM and translate into the adjusted book value per share at $90.6. In Page 10, in terms of profitability, the annualized ROA is 1.04% and ROE at 14%. While including the FVOCI equity disposal gain and losses, the adjusted ROA increased to over 2% and ROE over 27% on an annualized basis for Q1. And before we move on to the subsidiaries, also let us brief you the ESG's highlight in Q1. Firstly, Fubon Financial Holding received the highest level of award from the CDP. And it's also a top 5% globally in the insurance sector from S&P's sustainability yearbook. And in addition, several subsidiaries recognized in its stewardship disclosure and also it's a sustainable finance performance that reflects the holding company's overall execution in governance climate risk management, green finance and also the transparency. And we'll move on to the performance review of Fubon Life. So please turn to Page 13. And here, we summarize Fubon Life's key operating metrics. On the business side, the first year premium and also the new business, CSM, both increased by double digits. While on the earnings side, this is the first quarter disclosure under the IFRS 17 framework. And the source of profit are mainly from the insurance service results, and the financial results that both contribute to the reported net income that reached over $15 billion. And also, we have the equity investment now mostly booked under the FVOCI. So it's a realized gains of $32.2 billion that contribute to the adjusted net income. And from the net worth, it's over $630 billion. And including the after-tax CSM that have our adjusted net worth reach on $961.9 billion. In Page 14, it shows the profit composition. And as the first time we report the quarterly IFRS 17 results, we can see the insurance service result $8.4 billion, mainly from the CSM amortization and also the RA release. And also from the financial results, it's $12.3 billion that is from the recurring positive spread and also the investment gains. And the net income of $15.1 billion while the adjusted net income reached $47.3 billion. So here the annualized ROA will be 1.08% and ROE is 10.42%. On Page 15, let's turn to the premium performance on its stand-alone basis. The first year premium reached 27.4% growth year-over-year, while the renewal premium and total premium both increased by double digit. And in the market ranking, Fubon Life is the second largest in terms of FYP, renewal premium and also total premium among peers. In Page 16, we break down the first year premium by product. The strong capital market conditions that support the sales of the participating and also the investment-linked specifically a single paid products. In addition, we also see the non-NTD policy contribution increased from 53% up to 62.3% this quarter. And that is mainly driven by the U.S. dollar participating policy. And also gradually improved the currency matching between assets and liabilities. For the value metrics in Page 17, Firstly, regarding FYPE, it came down by about 5.3%, mainly because of the higher mix from the short-term payment product. And even so, we can see the FYPE to FYP ratio at over 36%, that is still well above the industry average. And from the right-hand side, the new business of CSM increased 29.4% year-on-year, although the CSM margin softened slightly as the share from the short-term payment product increase. In Page 18, it shows the channel mix and the internal ones that comes from Fubon Holding as a subsidiary and that contribution is 84.8% of the FYP. And that mainly comes from Taipei Fubon Bank tied agent and also subsidiaries across the board's [ cooperation ]. And the growth specifically strong in the tied agent that increased by 40% year-over-year and also Taipei Fubon Bank channel that also grew over 52% year-over-year. In Page 19, if we look at the CSM movement. Firstly, the balance by end of March is $414.7 billion, which is up by $11.5 billion or 2.8% year-to-date. The growth was mainly driven by the new business contribution. At the same time, the CSM release contribute to the underwriting profit and we can see the quarterly release in Q1 is around 1.7%. In Page 20, this page summarizes the investment portfolio. The total invested assets reached over $5 trillion at the end of March, while the total return is 6.46%, a including the FVOCI gains. The company also maintained a sufficient liquidity while we continue to dynamically adjust the asset allocation according to the market condition. We can see the domestic equity performance was particularly strong. And also the investment returns outperformed the market indices. In Page 21, we look at specifically at overseas fixed income, the portfolio remains focused on the investment-grade corporate credit and financial bonds. And by geography, the investments will be primarily in North America and followed by Asia and other regions. While the overall mix remains stable. In Page 22, we can see the investment income composition and specifically from the cancellation of the overlay approach in '26. In '26 Q1, the recurring investment income was $38.8 billion. While the total investment income is $44.9 billion, that's before the FVOCI gain. And after we include the FVOCI gains, so the total investment income was up to $81.4 billion. In Page 23, this page focus on the FX management. As we have the new FX AC accounting and also the reserve mechanism, the foreign currency's volatility will be absorbed through the FX reserves, while the reserve balance reached over $147 billion now. That will be the highest in the industry in March. And in the meantime, as we see the Taiwan and U.S. dollar monetary policy turning more neutral. The improvement trend in the SWAP cost may become more gradual. While meanwhile, the Fubon Life will continue its management of hedging and currency exposure prudently. In Page 24, regarding the spread, the cost of liability first improved year-on-year as we are under the IFRS 17 current rate basis. And the spread between the investment return and cost of liability or the spread between the recurring return and the cost of liability, we can see all are positive. The recurring return before hedging declined, that is due to the NT dollar's appreciation. And the lower hedging ratio reduced the swap costs and supported the recurring yield after hedge. While the total return, including the FVOCI equity disposal gain and losses that increased year-over-year. And in Page 25, it shows the movement in FVOCI and the net worth. The FVOCI unrealized balance, we came down in Q1 mainly due to the capital gain realization as we capture the market opportunities. While the net worth increased during Q1 is supported mainly by 3 factors. Firstly, it's a lower fair value of the insurance contract liability as the Taiwan and U.S. dollar risk-free rates then move higher. And secondly is the contribution from the Q1's earnings. And also thirdly, the changes in FVOCI assets. And let's move on to Taipei Fubon Bank in Page 27 and onwards. In Page 27, we can see the bank delivered a strong revenue growth in Q1, which is an increase of over 23% and mainly supported by the net interest income growth of over 25% and also the net fee income growth of over 27%. The increase in the net interest income reflected both the balance sheet expansion and also a higher net interest margin while the fee income was a broad-based growth across major business lines. In Page 28, on the loan portfolio perspective, the total credit balance increased over 15% year-on-year. Excluding the government lending, we can see both the corporate and retail credit delivered double-digit growth. While in Page 29, the corporate business, the NT dollar loans is a 13% growth, that's also driven by the SMEs credit, that's up by 14.4%. The foreign currency loan growth even faster that was up by 33%, and it also accounted for over 38% of the total corporate credit end of March. In Page 30, in the retail side, firstly, the mortgage increased over 10% year-over-year, mainly driven by the home equity loans. And other personal loans that has a very strong momentum of over 40% growth supported by the unsecured consumer loans. And overall speaking, the bank continued to expand the retail credit while maintaining a disciplined risk management. In Page 31, on the deposit side, it remains a healthy growth momentum of over 12% growth rate, mainly driven by the NT dollar deposit that was up by 14 -- 17.5%. While the foreign currency deposit up by 4%, mainly by a faster growth in demand deposits. In Page 32, we can see the improving trend in margin. In first quarter, the net interest margin was 1.27%, up by 3 bps quarter-over-quarter or 11 bps year-over-year. And a similar trend also delivered in loan-to-deposit spread up by 8 bps quarter-over-quarter or 26 bps year-on-year. which reflect the effective deposit and loan structures optimization, also a lower deposit costs. In Page 33, the asset quality remained very stable. The NPL ratio is 0.12%, stay at a very benign level. While the coverage of over 1,000% they remain well above the market average. And by major product lines, we can also see a steady trend. The provisioning cost on the lower right-hand side chart, we can see mainly reflect a higher general provision and the annualized credit cost is 29 basis points in Q1 '26. In Page 34, regarding the credit card business, the numbers of active cards is stable, while spending increased 7%. Its asset quality also remains strong with NPL ratio of 0.17%. In Page 35, the fee income growth basically is broad-based. And the growth rate of 27.8%, while the wealth management grew even faster at 29.6%. And it mainly supported by the sales of the mutual funds, the insurance and also the equity and bond product. In Page 36, turning to the overseas operation. The deposit and loans both increased at double digit, which is 18.6% for deposit and 23% for loans. The net revenue up by 9.7%, while the net income increased slightly lower at 3.7%, mainly reflect a higher general provision along with the loan growth. And overall speaking, the overseas operation continued to expand while maintain a stable profitability. And next, let's move on to Fubon Securities in Page 38. Fubon Securities delivered a very strong quarter in Q1 '26. It's net income reached $4.23 billion, that is up by over 154%. That is a record high and supported by the very strong trading volume and also the record index level in Taiwan. And the company maintained a top 3 market player in its major business lines. And Fubon Securities continued to focus on the wealth management transformation and also enhancing digital services. And let's move on to Fubon Insurance. In Page 40, it summarized Fubon Insurance key metrics, including the market share of a written premium of 27%. The net combined ratio improved to 87.2%. And also, this is the first quarter report the IFRS 17 framework in Fubon Insurance. And we can see the insurance service results was over $2.3 billion and financial results was over $603 million. And therefore, it's a net income reached $2.59 billion, while the adjusted net income will be $2.96 billion. While its capital remain at a decent level with its net worth of $32 billion. In Page 41, Fubon Insurance direct written premium, up by 10.5% and with a leading top market share. The net combined ratio improved that reflects its effectiveness in the business mix optimization and also is a discipline in the risk management. In Page 43, let's move on to Fubon Bank China. Its balance sheet and also the profit both improved at a double-digit growth. The loan balance increased 18.7% growth and also the deposit up by 16.4% growth. The net interest margin improved by 23 basis points that's supported by the online retail lending and also a lower U.S. dollar deposit cost. While the NIM, including SWAP declined mainly due to a narrower U.S. dollar and CNY swap spread. Its net income increased 16.7% year-over-year, driven by higher net interest income and also a lower provision, while its asset quality remained stable. So here we conclude the presentation today. And if you would like to ask questions, please access Fubon's website and click Analyst Meeting web page under the Investor Relations section. You may type in questions and management team will respond in live audio meeting session. Alternatively, please feel free to contact us at [email protected]. Thank you for your attention.