SinoPac Financial Holdings Company Limited (2890.TW) Earnings Call Transcript & Summary

Thank you for listening to SinoPac Holdings' Fourth Quarter Financial Results. Please note that SinoPac Holdings does not hold an English version Analyst Meeting. This presentation only includes explanation of the operating results and does not include a Q&A session. Should you have any questions regarding the results or wish to meet with us, please reach the IR team. This presentation and presentation materials distributed herewith may include forward-looking statements. The fourth quarter of 2021 financial data is preliminary. Page 2. Executive summary. SinoPac Holdings fourth quarter net revenues of TWD 10.5 billion decreased 14% quarter-over-quarter due to seasonal effects, including less dividend income. Accumulated net revenues and net income both reached record highs. The whole use net profit reached TWD 16.2 billion to increase 32% year-over-year. Both net interest income and net fee income reported double-digit growth, contributed by lower funding costs, increasing interest-earning assets and robust wealth management and brokerage business. ROE came to 10.15%. For asset growth, SinoPac Holdings' total assets of TWD 2.4 trillion increased 5% quarter-over-quarter, driven by short-term investment position increase. The banking loans of TWD 1.2 trillion decreased 3% quarter-over-quarter, mainly due to the year-end fund management needs of some corporate clients. Capital remains sufficient. The fourth quarter SinoPac Holdings CAR was 131%. Bank SinoPac BIS and Tier 1 ratio reached 15.78% and 12.66%. Regarding awards and achievements, SinoPac Holdings won 73 awards in the fourth quarter of 2021 and 174 awards for the year. Page 3. SinoPac Holdings' financial highlights. SinoPac Holdings' total assets increased 11.5% year-over-year. Both Bank SinoPac and SinoPac Securities total assets increased. SinoPac Holdings' 2021 net revenues, net income and EPS all reached new highs. ROE of 10.15% reported significant growth compared to the past few years. Page 4. Bank SinoPac financial highlights. Bank SinoPac's fourth quarter net income decreased by 25% quarter-over-quarter due to lower net fee income and fewer capital gains. Accumulated net income grew 17% year-over-year, driven by the steady growth of core revenues. Net interest income increased 19% year-over-year, contributed by the continuous increase of interest-earning assets and lower funding costs. Net fee income increased to 7% year-over-year, boosted by wealth management and syndication fee. Bank SinoPac ROE reported 8.05% in 2021. The total deposit of TWD 1.85 trillion increased 4.8% quarter-over-quarter, 11% year-over-year. A total loan of TWD 1.21 trillion, a decrease of 3% quarter-over-quarter, however, increased of 4.2% year-over-year. In terms of daily average balance, outstanding loan remained steady compared to last quarter. Bank SinoPac NPL of 0.13% outperforms peers average. The capital remains sufficient. Page 5. SinoPac Securities financial highlights. Due to decreasing market turnover and less dividend income, SinoPac Securities' fourth quarter net income of TWD 1.1 billion decreased 13% quarter-over-quarter. Accumulated net income of TWD 4.8 billion increased 67% year-over-year, driven by robust fee income growth. ROE reached 15.55%, continuously increasing for the past few years. In addition to fortified fee income growth and increasing market share, SinoPac Securities' net interest income reported strong growth momentum in 2021. Daily average margin trading balance increased to 74% year-over-year, bringing net interest income to a 57% increase compared to last year. Page 6. SinoPac Holding profit contribution by subsidiaries. In 2021, Bank SinoPac contributed 70% of SinoPac Holdings' net income, and SinoPac Securities contributed 30%. The contribution of SinoPac Securities is increasing. Compared to last quarter, the fourth quarter SinoPac Holdings net income decreased 20% quarter-over-quarter due to seasonal effect, resulting in lower profit injection from Bank SinoPac and SinoPac Securities. Compared to 2020, the 2021 SinoPac Holdings net income increased 32% year-over-year, driven by rising profitability across all subsidiaries. Page 7. SinoPac Holding P&L breakdown. From a consolidated perspective, the fourth quarter SinoPac Holding net revenues decreased 14% quarter-over-quarter, and net income decreased 20% quarter-over-quarter. Accumulated net revenues grew 17% year-over-year, and net income increased 32% year-over-year, driven by revenue growth, outpaced expenses. Page 8. SinoPac Holdings' net revenues. Among the 3 major revenues of SinoPac Holding, the fourth quarter net interest income maintained steady growth and reached a new high. In terms of accumulated revenues, the net interest income reported 12% CAGR from 2018 to 2021, and net fee income reported a 20% CAGR at the same period. Page 9. Bank SinoPac NIM and spread. Compared to last quarter, interest-earning assets increased 1.7% quarter-over-quarter to TWD 1.99 trillion. Net interest income was TWD 5.3 billion, increased 1% quarter-over-quarter. Spread was increased by 2 bps quarter-over-quarter, with sequential expansion for 6 consecutive quarters, supported by lower funding costs. However, on the rate hike expectations, we took a prudent approach in fund investment. We parked the residual funds in the money market, resulting in a lower investment yield. So the net interest margin flattened compared to last quarter. Page 10. Bank SinoPac loan structure. Total loans increased by 4.2% year-to-date, mainly boosted by SMEs. SME loans grew 15.8% this year because of the asset optimization strategy. Bank SinoPac allocated more capital to SME and consumers instead of government or jumbo corporates. Non-SME corporate loans decreased 12.6% year-to-date. The percentage of NTD loans and FX loans remained steady. The percentage of USD loans slightly decreased due to the lower balance of jumbo enterprise. Page 11. Bank SinoPac deposit portfolio. Total deposit of TWD 1.85 trillion increased 5% quarter-over-quarter and 11% year-to-date, benefit from ample market liquidity. The percentage of USD deposit increased 2 percentage points to 27.4%, which will boost the potential wealth management business momentum. Page 12. SinoPac Holdings' net fee income. As for fee income, the fourth quarter SinoPac Holdings net fee income of TWD 3.4 billion decreased 21% quarter-over-quarter, caused by moderating market sentiment and a slower market turnover. While cumulative debt fee income of TWD 17 billion increased 21% year-over-year, driven by robust Securities and Wealth Management business. Securities fee income grew 35% year-over-year, and wealth management fee income increased 9% year-over-year. The contribution of securities fee income increased to 55%. If we look into Securities fee structure, brokerage fee increased 74% year-over-year was the main driver resulting from elevated market share and growing market turnover. Page 13. SinoPac Holdings operating expense. The fourth quarter CI ratio of 57%, whole year CI ratio of 54% decreased to 3.5 percentage points compared to last year. Operating expense remains under control. Page 14. Bank SinoPac asset quality. The fourth quarter NPL ratio was 0.13%, decreased 3 bps quarter-over-quarter, outperforming peers average. The coverage ratio was 1,026%, and the loan coverage ratio was 1.31%. Asset quality remained benign. Provision expense of TWD 2.4 billion and credit costs at 19 bps stays on track to whole year guidance. Page 15. This page demonstrates our 4 major business strategy build from starting from 2022 to 2024. First, accelerate digital transformation. SinoPac Holding has implemented numerous AI and RPA programs for precision marketing and enhanced operational efficiency. The digital account services of Bank SinoPac, named DAWHO, launched in 2019 grew to over 1 million accounts for just 2.5 years. In addition to DAWHO and DAWHO [indiscernible] number reached 200,000 by the end of 2021. Looking ahead, we aim to enhance the customer journey, data mining and precision marketing. We will construct a flexible and adaptable IT infrastructure, accelerate automation and develop a fintech talent pool by activating a digital empowerment plan for all employees. Second, boost overseas revenues. Globalization is always included in our corporate vision. Our overseas revenue delivered 20% CAGR for the past 3 years. Looking ahead, we will focus on Mainland China and Southeast Asia, starting from facilitating Taiwanese corporates to gradually reach local retail customers through more convenient digital banking services. Moreover, we are also seeking collaboration opportunities with local enterprise. Our overseas footprint can be accelerated and fortified with their knowledge of local markets. Third, provide integrated services and optimize customer experience. 100% customer satisfaction with one SinoPac experience is our ultimate goal. To do that, we will design the customer journey by thinking ahead and beyond our customers. We aim to create a superb experience, personalized financial services and provide real-time response mechanism across all business segments. We believe this will help us in earning customer loyalty and reaching prolonged business in the long run. Last, explore green opportunities. SinoPac Holdings has always been the pioneer and market leader in solar PV financing. Our market share ranked #1 in Taiwan. Looking ahead, we aim to develop a green finance e-com system that links investors, lenders and borrowers together for fundraising, lending and investment products. In terms of lending, Bank SinoPac's solar PV financing targets TWD 100 billion loans outstanding and continue to discover new business such as electric car and energy storage areas. We will also develop our ESG scoring models to better manage risk-reward balance. In terms of investment, we will issue more GSS funds, launch more ESG mutual funds and provide underwriting services for the renewable energy industry. In terms of the ESG initiative, SinoPac is planning to increase the usage of the green power and prepare a road map to net zero carbon emissions. For the past 3 years, SinoPac Holdings outstanding financial performance and ESG recognitions demonstrate our commitments to fulfill business strategy. From 2022 to 2024, we will continue to focus on these 4 strategy and pursue sustainable growth. Thank you for listening. If there are any questions, please feel free to reach us. You can click or scan the QR code for our IR mailbox and official website. We look forward to hearing from you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]