KGI Financial Holding Co., Ltd. ($2883)

Good afternoon, ladies and gentlemen. Thank you for joining KGI Financial Holding First Quarter Online Investor Conference. I'm Mandy Chao from Investor Relations. Today's meeting will begin with my slide presentation, followed by our Financial Holdings CFO, Jenny Huang, who will share management's perspectives and host the Q&A session. The financial executives of our major subsidiaries are also present. We invite everyone to actively ask questions and interact using the WebEx Q&A function. First, please refer to Slide 5, operational performance. First quarter 2026 net income after tax was TWD 11.7 billion with an EPS of TWD 0.69. Starting this year, we have adopted IFRS 17, including the realized gains from the disposal of FVOCI equities by KGI Life. The adjusted profit for the first quarter was TWD 26.2 billion, translating to an EPS of TWD 1.55. Driven by a vibrant capital market and a significant increase in daily trading volume, our subsidiary, KGI Securities, leveraging its solid customer base as the second largest broker by market share, saw a 220% year-over-year profit growth, making it a crucial engine for our profit growth. Next, please turn to Slide 6, capital position. With continuous growth in both profit and business volume, the holding company and its subsidiaries maintained a robust capital position. At the end of the first quarter, the holding company's double leverage ratio remained at an ample level of 116%. KGI Securities capital adequacy ratio remained at 282%, well above the statutory requirement. Driven by the growing stock market trading volume, KGI Securities as the second largest broker in the market, obtained Board approval in the first half of the year to issue up to TWD 15 billion in corporate bonds to support continuous business growth. It has already completed the issuance of TWD 9.1 billion in senior bonds and TWD 3.7 billion in subordinated bonds, which will be used to strengthen its capital structure and business growth. Under the new generation solvency regime, KGI Life's capital adequacy ratio of 140% has been approved by the competent authority. To continue strengthening capital, KGI Life expects to complete the issuance of TWD 10 billion in subordinated bonds by mid-June. KGI Bank's CAR ratio also remained at an ample level of 14.6%. KGI Life. Please look at Slide 8, operational highlights. First quarter net income after tax was approximately TWD 4.8 billion with a single quarter ROE reaching 8.3%. By seizing investment opportunities in the Taiwan stock market, we realized equity gains under FVOCI. The adjusted profit reached TWD 19 billion, equivalent to 3x that of the same period last year, demonstrating an outstanding profit performance. Next, please refer to Slide 9, premium income. First year premium for the first quarter grew by 28% year-over-year. mainly driven by the sales of investment-linked policies, which saw revenue grow more than twofold compared to the same period last year. Our product strategy for this year, as previously explained, will focus on 3 main pillars: high season and regular premium policies, foreign currency policies and investment-linked policies. In the first quarter, the proportion of foreign currency policies to traditional policies increased to 59%, showing a significant growth compared to 35% in the same period last year. Slide 10 shows CSM balance changes. The CSM balance at the beginning of the year was TWD 235 billion. The new business CSM contribution in the first quarter was TWD 8.2 billion, which is in line with our full year target of TWD 33 billion to TWD 35 billion. The release to the income statement was TWD 3.7 billion. The balance at the end of the first quarter was TWD 240.9 billion. The amortization rate was approximately 6.3%. Next, please turn to Slide 11, investment spread. In the first quarter, the investment team seized market opportunities to realize profits. In terms of pretax profit, the investment yield reached 2.67 percentage, adding the realized gains under FVOCI. The total yield reached 5.53% upon the adoption of IFRS 17. The asset-based cost of liabilities was 2.29%. Moving on to Slide 12. Investment portfolio. The investment portfolio maintained a stable allocation. Among them, domestic equity investments increased to 10.9% due to the appreciation in market value. As of the end of March, under IFRS 9 asset classification, amortized cost accounted for 57%, FVOCI for 37% and FVTPL for 6%. Next, on Slide 13. Regarding recurring yield and hedging portfolio, the recurring yield for the first quarter was 3.49%. The difference compared to the same period last year was mainly due to the stock market surge, which enlarged the total applied assets, while the recurring yield didn't increase proportionately. The hedging ratio for the first quarter was 39%. Under the new foreign exchange accounting system, the hedging cost has dropped to 1.3% and the foreign exchange valuation reserve has accumulated to TWD 44.8 billion. Next, please turn to Slide 15. Net income after tax. First quarter net income after tax was TWD 2.5 billion, a 23% year-over-year growth and ROE improved to 10.6%, driven by the One KGI collaboration synergies, the active promotion of settlement accounts, transfer from KGI Securities and digital banking customer acquisitions, the annual growth rate of new customers reached 69%. Consequently, the bank's demand deposit ratio increased to 44% and the retail banking demand deposit ratio rose to 58%. The Hong Kong branch newly established last year, has already accumulated over 400 clients and TWD 20 billion in deposits. Going forward, it will submit applications for our wealth management business to provide comprehensive financial services. Next, moving to Slide 16, profitability. First quarter net revenue was TWD 4.9 billion, a 10% year-over-year growth. The profit growth mainly came from the expansion of credit business volume, which drove a double-digit growth in net interest income. Broad-based fee income grew by 14% year-over-year. The wealth management business performed exceptionally well with related fee income growing by 23% year-over-year, marking the third consecutive year of over 20% growth, demonstrating the effectiveness of our continuous cultivation of the wealth management business. With the ongoing optimization of the deposit and loan structure, the overall spread increased by 2 basis points year-over-year to 1.98%. NIM increased by 10 basis points year-over-year to 1.41%. The NPL ratio rose to 0.26% this period, mainly impacted by a specific syndicated loan case where the extension was then completed in time. Excluding this case, the NPL ratio will be around 0.1% level, indicating stable asset quality. The collateral for this case has entered the disposal process and the NPL ratio will normalize upon completion. Next, on Slide 17, you can see loans and deposits. The loan strategy in the first quarter focused on structural adjustments and optimization. Compared to the same period last year, various types of loans maintained mid- to high single-digit growth. In terms of deposits, driven by the growth in new customers, deposit balance grew by 7% year-over-year. Both NTD and foreign currency demand deposits experienced double-digit growth, which also expect the lower our funding costs. Next, to online KGI Securities operations, please turn to Slide 19, operational highlights. First quarter net income after tax was TWD 5.9 billion, a 220% year-over-year growth with ROE reaching 33%, outperforming the securities industry average. In a robust stock market environment of the first quarter, KGI Securities as the second largest broker, leveraged its long-term cultivation of clients and operational channels to achieve active growth across our business. Notably, brokerage fee income grew by 70% year-over-year. Next, looking at Slide 20, net revenue. Driven by continuous breakthroughs in the average daily trading volume of the Taiwan stock market, KGI Securities brokerage fee income and investment income both delivered stellar performances. Investment income grew more than sixfold, driving a 146% year-over-year growth in net revenue. Amid the active capital market, in addition to the stellar performance in brokerage fee income and investment income, KGI Securities' long-term development of its wealth management business resulted in a 20% year-over-year growth in wealth management AUM and a 30% growth in wealth management-related revenue. On Slide 21, you can see business performance. Brokerage market share stood firm at 11%, retaining the #2 position in the market. The underwriting business also secured the #1 market position, CDIB Capital Group. Finally, regarding CDIB Capital Group, please turn to Slide 26, net income after tax. First quarter net income after tax was TWD 190 million within the overall investment portfolio. The valuation of domestic listed equity positions increased by 10.9%, outperforming benchmarks such as the Taiex and Mid-Cap 300 Index. New fundraising is ongoing with a total amount exceeding TWD 10 billion and is expected to be completed in the second half of the year. Slide 27 outlines the asset management business. Assets under management at the end of the first quarter stood at TWD 62.2 billion. If we include the TWD 1.03 billion recovered from disposal in first quarter 2026, the figure would be TWD 63.2 billion, representing an increase of TWD 700 million compared to the end of last year. In terms of regional layout, we continue to focus on Taiwan as our primary target. Management fee revenue was TWD 150 million. The slight decrease compared to last year was due to the change in the international markets fund management fees to back-end fee structure. Slide 28 details proprietary funds. Private credit maintained a stable scale with first quarter interest income and fee income totaling TWD 87 million. Proprietary investment also maintained a stable scale with a balanced regional allocation. Next, a brief overview of KGI site. Our ETF business continues to grow. For example, the 009816 ETF launched this year, which uses market value and profitability as core stock selection criteria and adopts a no dividend reinvestment strategy has seen its fund scale exceed 130 billion since issuance. This also drove a massive increase in the number of KGI site beneficiaries to 950,000 by the end of March. The innovative capability of products issued by KGI Securities has also been recognized by the market. The site subsidiary is an important channel for the KGI Group to build relationships with clients. With a continuously expanding client base, the group will also promote cooperation and growth across various businesses. That concludes the presentation on our first quarter operations. Next, we will hand the time back to Jenny.

Thank you, Mandy. Next, I will summarize some of KGI's recent operational highlights. Regarding the financial holding company, for the first 4 months of this year, the holding company's cumulative profit was TWD 17.6 billion with an EPS of TWD 1.04. If gains from the disposal of FVOCI equity are included, the adjusted profit reached TWD 37.5 billion, translating to an adjusted EPS of TWD 2.21. This represents a year-over-year growth of 306% and hit a record high. It's worth noting that although the gains and losses from the disposal of FVOCI equity instruments are not recognized in the current period's profit and loss. They are directly reflected in retained earnings, which still belong to distributable earnings. As of April, KGI Life has realized approximately TWD 20 billion in capital gains at appropriate 8x, expanding the calculation base for distributable earnings. Additionally, benefiting from the strong performance of global stock markets, the holding company's net worth at the end of April increased by more than TWD 80 billion compared to the end of last year, translating to a net asset value per common share of over TWD 23. In May, the Taiwan Stock Index rose by nearly 15%, and the trading volume continued to expand from about TWD 1 trillion at the beginning of the year to TWD 1.64 trillion. The market trading momentum is robust, and the securities and life insurance business continue to capture this market momentum, injecting into operational performance. Moving to securities. Securities firms are the beneficiaries of expanded market trading volume, which directly impacts brokerage fee income. KGI Securities is the second largest brokerage by market share and its foreign institutional business is the market leader since the beginning of the year. The average daily trading volume of Taiwan stocks has exceeded TWD 1 trillion, driving KGI Securities profit for the first 4 months to TWD 9.8 billion, continuing to hit a record high for the same period and representing 368% year-over-year growth. The annualized ROE for the first 4 months reached a high of 40%, ranking #1 among large brokerage, demonstrating excellent capital utilization efficiency. Furthermore, KGI Securities successfully grasped investment opportunities with investment operations outperforming the broader market. The operations of related investment positions all adhere to the existing risk management framework and various control mechanisms are strictly enforced to ensure operational stability. Regarding life insurance, KGI Life Insurance released TWD 3.7 billion of CSM in their first quarter, which is expected to contribute over TWD 15 billion this year with a target of double-digit growth next year, providing a stable source of core business profit. Notably, KGI Life's CSM balance in the first quarter reached TWD 240.9 billion, the highest in the industry in terms of relative scale. This demonstrates a substantial profit foundation accumulated under [ PES ] product strategies, which will continue to be released into profits in the future, providing KGI Life's profit structure with excellent visibility and stability. Benefiting from approximate 23% single month surge in Taiwan stock in April, KGI Life's total comprehensive income for the month already exceeded the total comprehensive income of the entire first quarter, although KGI Life's income statement showed TWD 6.1 billion for the first 4 months. If the gains from the disposal of FVOCI equities are included, it reaches TWD 25.7 billion, a year-over-year growth of 28%. The net worth at the end of April increased by over TWD 70 billion since the opening balance and the net worth ratio further improved from 9.14% at the opening to 11.82%. Regarding the banking business, profit for the first 4 months of this year was TWD 2.9 billion, growing by 27% year-over-year. This growth rate ranked second among peer banks under financial holding companies. KGI Bank's profit primarily comes from interest and wealth management income, focusing on stable revenue streams. Notably, wealth management income has maintained a growth of over 20% for the past 3 years. It's worth mentioning that the One KGI cross-selling synergy continues to materialize. Looking at referred accounts, the bank opened 50,000 new retail deposit accounts in the first 4 months, of which 44% were referred by KGI Securities, with the number of referred accounts growing by 123% year-over-year. Settlement account deposits referred by KGI Securities continue to grow. With the increase in just the first 4 months of this year already surpassing last year full year level, demonstrating remarkable cross-selling results, benefiting from the growth of settlement accounts and KGI Bank's own operations, the NIM for the first 4 months expanded by 10 basis points year-over-year and the CASA ratio increased to over 45%. Finally, regarding SITE. In February this year, KGI SITE issued its first non-dividend paying Taiwan stock ETF, the well-known 009816 in less than 4 months after listing. Its scale surpassed TWD 130 billion, and the number of beneficiaries exceeded 790,000, showing that nondividend-paying ETFs are highly favored by investors. To further meet market demand for nondividend-paying ETFs, KGI site subsequently took the lead in issuing the first domestic nondividend paying active Taiwan stock ETF. Active KGI Taiwan, ticker 004078 was the fundraising period from June 4 to June 10. In addition to the nondividend reinvestment mechanism, it integrates an active stock selection strategy based on quantitative and fundamental analysis, which is expected to become a new option for investors seeking excess returns. This concludes our presentation for today. Should you have any questions, please raise them via WebEx or contact our IR team directly. Thank you for your time and attention.