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

Thank you for listening to SinoPac Holdings Second Quarter of 2023 Financial Results. Please note that SinoPac Holdings does not hold an English version Analyst Meeting. This presentation only includes explanation of the operating result and does not include the Q&A session. Since the beginning of this year, we faced great volatility in financial markets on the [ last bank draft ]. SinoPac Holdings still demonstrate operating resilience, achieved record-high monthly net income in both June and July. From January to July, SinoPac Holdings' cumulative net income reached TWD 12.4 billion. Net income increased 21.3% CAGR for the past 3 years. In terms of sustainability governance, SinoPac Holdings is highly consumed with the management of climate-related risks and opportunities. Both SinoPac Holdings and Bank SinoPac were honored by BSI with Level 5 plus Excellence, the highest-grade verification in TCFD, climate-related financial disclosure conformity check and the maturity model. To assist Taiwan enriching net-zero in 2015, SinoPac Holdings' market share of finance solar PV in-store capacity achieved around 30% in the first half 2023. In addition to PV, SinoPac Holdings expand to all the renewable energy and energy storage facilities. Look ahead, SinoPac will continue to develop the green finance ecosystem and pursue sustainability business opportunities. This presentation and the presentation materials disputing herewith may include forward-looking statements. The second quarter of 2023 financial data are preliminary. Page 2, executive summary. In the second quarter of 2023, SinoPac Holdings' net revenues and net income increased both in Q-o-Q and Y-o-Y. The first half net revenues increased 10% year-on-year, and the net income increased 22.4% year-on-year, both taking new highs, annualized ROE was 12.42%. Net income includes 21.3% CAGR for the past 3 years of performing peers of 7.5%. SinoPac Holdings second quarter net interest income decreased 2.3% quarter-on-quarter because of the rising funding cost and enlarging FX swap trading. Net fee income increased 6.8% quarter-on-quarter, mainly thanks to the recovery of wealth management and securities-related fee revenues. In the first half, the other income grew 111.5% year-on-year, which was mainly contributed by dividend income and wealth management trading portfolios, including funding swap. As for asset growth, SinoPac Holdings total assets slightly increased 0.8% quarter-on-quarter. In response to the rising interest rate, Bank SinoPac adjust its loan structure to maintain a steady capital level. Capital remains sufficient. In the second quarter, SinoPac Holdings CAR was 127%. Bank SinoPac BIS ratio reached 15.06%, and Tier 1 ratio reached 12.45%. Page 3, SinoPac Holdings financial highlights. Total equity of SinoPac Holdings decreased 0.4% quarter-on-quarter due to cash dividend distribution of TWD 7.28 billion and increased 16.7% year-on-year, mainly due to the recovery of OCI valuation gains and fundraising this March. SinoPac Holdings second quarter net revenues and net income both increased quarter-on-quarter, mainly contributed by the fee income, dividend income and the funding swap revenues. SinoPac Holdings first half net revenues of TWD 26.52 billion and net income of TWD 10.07 billion, both reached new highs. In addition, it's the first time SinoPac Holdings net income in the first half of the year has exceeded TWD 10 billion. EPS was TWD 0.85 with annualized ROA of 0.77% and ROE of 12.42%. It has significantly grown over the past few years. Page 4, Bank SinoPac financial highlights. In the second quarter, Bank SinoPac's leverage ratio decreased to 15.42x, mainly due to the capital raising. The adjustment in the positive and loan structure in the second quarter also slightly reduced the scale of assets. During our second quarter, Bank SinoPac's PPOP and net income, both demonstrated double-digit growth rate, mainly due to a rebound in wealth management fee, dividend income and funding swap revenues. In the first half year, Bank SinoPac's net income of TWD 8.24 billion increased 9.9% year-on-year, which also hit a new high record. Asset quality remains benign with an NPL ratio of only TWD 0.09. Page 5, SinoPac Securities financial highlights. In the first half, SinoPac Securities cumulative net income increased 94% year-on-year, mainly contributed by the readily growing capital gains, driven by better market settlement in the second quarter, SinoPac Securities recurring income increased 10.6% quarter-on-quarter mainly because the brokerage fee income increased 17% quarter-on-quarter. However, SinoPac Securities first half recurring income decreased 8.8% year-on-year due to a higher base of credit volume last year and the increase in funding cost. Page 6, SinoPac Holdings profit contribution by subsidiaries. In the first half, Bank SinoPac contributed 80% of SinoPac Holdings net income and SinoPac Securities contributed 17%. The contribution of Bank SinoPac and SinoPac Securities, both of double-digit growth compared to the first quarter. Page 7, SinoPac Holdings P&L breakdown from a consolidated basis in second quarter, SinoPac Holdings net revenue increased 7% quarter-on-quarter. Net income increased 12% quarter-on-quarter because of well-controlled operating expenses. In the first half, SinoPac Holdings net revenues increased 10% year-on-year, and net income increased 22% year-on-year because of lower provisions. Page 8, SinoPac Holdings net revenues breakdown. In the second quarter, SinoPac Holdings net revenues of TWD 13.7 billion, up 6.9% quarter-on-quarter and 18.1% year-on-year, reached a new quarterly high. SinoPac Holdings net revenues increased 12.6% CAGR for the past 3 years. Page 9, Bank SinoPac NIM and spread compared to the last quarter, interest earning assets slightly decreased to TWD 2.32 trillion due to adjustment in the structure of deposit and loans because the interest rate widened between the U.S. and Taiwan, FX swap gains continue to increase. In the second quarter, the loan rate increased 14.4 bps quarter-on-quarter, which is largely the increase in deposit rate. The second quarter spread increased 7.9 bps to 1.26%. Thanks to a well-controlled funding cost, adjusting increased to 1.21%, up 3.2 bps quarter-on-quarter. Page 10, Bank SinoPac loan structure. Total loans increased 5.6% year-to-date, and SME loan accounted for 24.9% of total loans continues increasing. NT dollar loans account for 80% of total loans and FX loans account for 20%. Page 11, Bank SinoPac deposit portfolio. In the second quarter, total deposits of TWD 2.03 trillion, decreased 1.7% quarter-on-quarter. The overall cost of depositing was effectively controlled by decreasing FX deposit and increased NT dollar demand deposit, which was the main reason for the spread to improve. The percentage of NT dollar deposits increased to 65.3% of 1.2 percentage points quarter-on-quarter. Page 12, SinoPac Holdings net fee income. In the second quarter, SinoPac Holdings net fee income of TWD 3.84 billion, up 8.9% year-on-year due to increasing wealth management and security-related fee revenues. In the first half, SinoPac Holdings net fee income decreased 11.7% year-on-year, mainly because of the high base last year. Although the market turnover of Taiwan stock market decreased 10%. SinoPac Securities net income remained at same level because it's continued to diversify its fee revenue source. Page 13, SinoPac Holdings operating expense. In the second quarter, CI ratio of 52%, which was close to the previous level. Operating expenses remained under control. Page 14, Bank SinoPac asset quality. In the second quarter, NPL ratio was 9 bps, improved 2 bps quarter-on-quarter, which outperformed peers of 16 bps. The NPL coverage ratio was 1,416%, and the loan coverage ratio was 1.31%. Asset quality remained benign. In the first half, annualized credit card was 11 bps. We maintained our whole year's guidance of credit card at 15 to 20 bps. Thank you for listening. If there are any questions, please feel free to reach us. You can create or scan the QR code for our IR mailbox in IR materials. We look forward to hearing from you.