Dear investors, welcome to the E.SUN Financial Holding earnings call, the fourth quarter of 2023. My name is Chiwei . I'll be the moderator today. Along with me, there is my colleague, Mr. Alex Chiu. At the beginning, I would like to invite the Vice CFO of E.SUN, Mr. Davis Tsai. He will give us a short opening note.
Hi. Good morning, everyone. This is Davis. E.SUN delivered a strong performance in 2023, marking a record high in net profit. E.SUN's overseas business delivered a strong profit growth last year and ranked second among domestic banks. We are optimistic that the overseas branches will continue to grow this year. Last year, E.SUN established our Fukuoka branch, becoming the first Taiwanese bank to set up a branch in Kyushu, Japan. Taking advantage of the investment enthusiasm driven by TSMC, we hope to promote economic and trade exchanges between Taiwan and Japan. In addition, we have obtained approval from the FSC to establish a rep office in Kuala Lumpur, Malaysia. Last year, our fee income achieved a record high in both net fee income and fourth quarter's net fee income.
E.SUN co-branded credit cards with Starlux Airlines and Kumamon were well-received in the market, contributing to a strong growth in net fee income. Additionally, our wealth management record a growth rate of 17%, driven by significant growth in insurance and overseas bonds. E.SUN is also the first to issue structured product, both domestically and internationally, under the Wealth Management 2.0, with the issuance scale being the largest in the market. This year, we established the private bank and wealth management business division to integrate all of E.SUN's wealth management resources, including products, risk management, and personal education and training. We will also extend our services to Hong Kong and Singapore with better expertise. Lastly, E.SUN has consistently received recognition in ESG, being selected 10 times for the DJSI and achieving the highest rating of AA A from MSCI ESG.
We will continue our efforts to support Taiwan's goal of net zero carbon by 2050. Thank you.
Thank you, Davis. Now I will spend a few minutes to walk you through the presentation of this quarter. On page one, E.SUN Financial Holding summary. On total assets of holding company and E.SUN Bank, we surpassed TWD 3.6 trillion, adding 4.5% compared to the same period last year. On the book value per share, we recorded TWD 15.08 per share, which adds TWD 1.28 per share year-on-year. On double- leverage ratio, it was 102.9%, and financial holding company's CAR ratio is 140%. On domestic channel and overseas channel, now we have 139 branches in Taiwan, and we have 31 overseas sites, which includes rep office in Vietnam, Hanoi, Ho Chi Minh City, and Bangkok of Thailand. On next page is the fourth quarter business and financial review. E.SUN Financial Holding's net revenue was TWD 66.7 billion. It was a record high.
Net profit, we also reported a record high of TWD 21.8 billion, which is a 38.1% year-on-year growth. On E.SUN Bank, we also reported net profit of TWD 19.6 billion, which was a 32.3% growth year-on-year. On E.SUN Securities and E.SUN Venture Capital, respectively, they also made TWD 1.3 billion and TWD 1.2 billion in net profit. All of the three subsidiaries had a very good performance in 2023. In January of 2024, the financial holding company reported TWD 2.8 billion in net profit, which makes the financial holding company and b ank to have the highest monthly earning ever. On business development, our loan balance had a 6.6% growth, which marks our loan balance to surpass TWD 2.1 trillion milestone, in which the SME loan balance grew by 10%, and the deposit also had a 4.3%, which made it surpass the milestone of TWD 3 trillion.
Fee income business was the highlight of E.SUN last year. The fee income, TWD 21.5 billion, it was an 11.6% growth year-on-year. It was the highest fee income year. On wealth management fee income, we reported TWD 9.3 billion. It was a 17.7% growth, and it was the second highest in wealth management fee income. On credit card fee income, it was TWD 7.1 billion, and it was a record high for credit card. On other business highlights, we are very honored to be awarded by National Quality Award in excellence in management, and this makes E.SUN the fifth-time winner of National Quality Award, and that is the best performance of any company in Taiwan. We regard this as a very high honor. Also, in DJSI, we are listed in emerging market for the 10th time and the world index for the eighth time.
This is the best performance in the banking sector in Taiwan. Last year, E.SUN was once again invited by COP28 to deliver a speech in World Climate Action Summit, and we are very proud to make a voice on behalf of Taiwanese financial companies and also Taiwanese corporates. On next page is a financial performance for the past five years. On net profit, we set a record high in 2023. On EPS, we climb up to TWD 1.41 per share. In ROE, our ROE was above 10%, and ROA was 0.61%. We are not satisfied with this performance, and we will continue to work harder to drive our ROE and ROA better. Next page is the net income of holding companies and the subsidiaries. As I just mentioned previously, all of our three main subsidiaries had a good performance in 2023, especially in venture capital.
The growth rate was 13 x, security, the growth rate was 28%. On page five is the net profit breakdown of 2023. In net revenue, the growth rate was 21.7%. The operating expenses, it grew by 14.2%. Allow me to once again remind you, there were a few one-time items took place in the year. First is the cost associated with the rights offering. Last year in the first quarter, we issued the new rights, and the amount was TWD 16 billion, and there was a cost associated with the employees' subscription. Secondly is the credit card-related expenses. Last year, our credit card performance was very good. In consumption amount, it was a record high. There was some marketing spending associated with the credit card, but it also reflects in our fee income and our credit card consumption. Thirdly is the [Non-English content]
Thirdly is the business tax. The reason for the increase of business tax is because the tax base is the growth in interest income, because of the rate hike. The interest income grew dramatically, therefore, the tax base became quite high last year. Adding these three factors together, that contributed to the operating expense growth of 14%. The bottom- line growth, it was 13%. Next page is the revenue breakdown. The total net revenue of financial holding company is TWD 66.7 billion, which includes NII of 43.6%, followed by fee income 32.3%, fixed income and others of 24.1%. On the right-hand side as well, you can see the net fee income. We had a double-digit growth, also on other income, we also had a very good performance because of the mark- to- market and also the flow business.
On page seven is the net fee income breakdown. The total net fee income was TWD 21.5 billion, leading by wealth management of 43.3%, followed by credit card 33.2%, brokerage 13.3%, corporate banking 8.7%. On the right-hand side are the two main drivers of fee income. Wealth management growth rate was 17.7%, the credit card, it was 12.3%. We are quite confident that this year we will once again deliver a quite good performance in fee income. Next page is on the page seven. It is the wealth management fee income structure. On the left-hand side as well, you can see on the fee income breakdown, l eading by bancassurance of 45.9%, followed by mutual fund and other products. On the right-hand side, the bancassurance performance was very good last year. It was nearly 25% growth on the fee income.
On other income, it also reflects our efforts in gaining market share of high-income customers, the VIP customers, whose asset allocation tends to wait on overseas bonds or structured notes. What you can see in the result is the growth rate of fee income in other products is 41.1%. These two sectors will continue to perform very well this year. On next page is the credit card business breakdown. On the two most important indicator, active cards and cards consumption, E.SUN continue to maintain top three in market position. On active cards, our market share is 12.7%. On card consumption, we grew by 12.6%, which puts E.SUN's market share at 13%. Our next page is the page 10. We put some information about E.SUN's overseas business development. Last year, E.SUN's overseas business was performing very well.
The overseas profit before tax grew by 73.8%, which accounts for 35.8% of the bank profit. This profit includes our subsidiaries and our branches, especially our branches. If we count the profit of branch by itself, the profit was doubled in 2023. E.SUN was also the second highest in terms of profit among all the Taiwanese banks. On business development, in January, we made a financial investment into Thai Credit Commercial Bank, which is a relatively small-sized private sector bank, which is very competitive in personal lending and also has very high ROE. The investment amount is $43 million, and we acquire 4.23% in its IPO. The investment amount is not significant, so it will not have too much impact to our financials. Also, last year, we opened the Fukuoka branch in Kyushu.
E.SUN was the first Taiwanese bank to operate in Kyushu, and Kyushu actually becomes a very important investment hub, which attracts a lot of attention, because the TSMC has completed the first fab in Kumamoto, Kyushu, and it plans to build other two fabs in Kumamoto. So we are very optimistic about the local economy of Kyushu and Fukuoka branch. On next page 11, is the deposit and loan structure. On total deposit, the year-on-year growth, it was 4.2%. On total loan, the growth rate, it was 6.6%, especially the SME loan, the growth rate was more than 10%. On consumer loans, the growth rate was 6.4%. In 2023, we spent some effort into optimizing our funding cost and deposit structure. So there is some decline in our foreign currency deposit. But it also helped us to effectively lower the funding cost.
This year, we have completed the optimization, and we will continue to get back to the growth path in deposit and loans. On next page is page 12, the loan portfolio breakdown. Our total loans is more than TWD 2 trillion, which is quite balanced across corporate and retail. Leading by SME, which was 27.5%, large corporate was 21%, mortgage was 25.5%, secure personal loan, which is similar to mortgage or so-called home equity loan, is 19.3%. What you can see on the right-hand side, across every sector, we have growth in our loan business. On next page is the deposit structure. The overall LDR is 69%. The NT dollar LDR was 86%. The foreign currency loan-to-deposit ratio is 35%. We still have a very affluent liquidity in supporting our foreign currency business.
On the right-hand side, the NT dollar demand deposit growth rate was 4.6% year-on-year growth, and our cost out ratio right now is 58%. The next page is the trend of NIM and spread. In the fourth quarter, we added 1 basis point to our NIM, and on spread, it was a 3 basis point decline from 1.29% to 1.26%. It was mainly because of the increase of funding costs. Another reason is the loan-to-deposit ratio of foreign currency was lower, at only 35%. So when we calculate the blended spread, it will make the blended spread skewed downward. On next page 15, we use two graphs to illustrate our asset quality. The NPL ratio was 0.16%, which makes our coverage ratio at more than 750%. On next page is our asset quality by products.
On corporate, the NPL ratio was 19 basis points, and on mortgage, it's only 4 basis points, which our asset quality was still very stable. On the right-hand side is the NPL comparison with the market. As you can see, we are on par with the market's performance. Next page is the cost-to-income ratio. The CI ratio improved a little bit at 57.1%. This year, we hope to implement some cost management, and to contain the growth of our OpEx. Our target for the CI ratio for this year is 55% or lower. Next page is the capital adequacy ratio. The financial holding CAR ratio, it was at 140%. On the bank BIS ratio, Tier 1 ratio is 13.1%, and CET1 ratio is 11.6%. E.SUN Bank is very well capitalized, especially after the rights offering in the first quarter of last year. Now, E.SUN's capital ratio is quite sufficient.
It is even higher than the minimum of domestically bank of importance. Yeah, in BIS ratio, we're quite good. On the last page is a few awards and recognition that we received from ESG agencies and other regulatory related agencies. No matter in DJSI, MSCI, CDP, we all gain a very good performance and very high recognition from these agencies, and we will continue to work hard towards our goal in sustainable development. This is all we have for the presentation of this quarter. Now we can head into the Q&A session. Please fill in your question in the box, and we will answer your question. Thank you.
In the first question, please share E.SUN's 2024 guidance for loan growth, fee income, wealth management, and credit card, OpEx, and so on.
On the growth guidance of E.SUN for this year, I think the most important is in asset growth. We guide to add TWD 180 billion in our loan balance, which is equivalent to 8%-10% of the loan growth. On the deposit, we target to TWD 200 billion to our total deposit, which makes the growth rate to be 6%-8%. Once again, we set a rather slightly aggressive target for this year, even though E.SUN has been growing quite fast for many, many years. This year, we're still continuing to set aggressive targets. On fee income, as we just mentioned earlier, bancassurance, we are confident we will continue to carry on the strong momentum into this year.
On other products, including structured notes and overseas bonds, last year the growth rate was 40%, and this year we are confident we will have also double-digit growth in other products. In mutual funds, the investment sentiment started to turn better since the second half of 2023. In January, our wealth management fee income, the performance was very good, and it was largely contributed by the mutual funds. Putting all these three main product categories together, we are confident we can deliver double-digit growth in wealth management fee income as well as in credit card. We also set a quite high- double-digit growth in card consumption, and also the credit card fee income, we also set a double-digit growth for this year. Putting all these things together, the net revenue is likely to grow also at a double- digit.
On the operating expenses, as I just mentioned, we will put some control measures in containing the OpEx. The target will be middle- single-digit growth in the OpEx. On NIM and spread guidance, I will invite Davis to tell us about the NIM and spread.
Hi, this is Davis. For our NIM and spread, because this year our house view is that the Taiwanese Central Bank may not cut rates this year. The Fed, the market expected that it will cut in the second half and maybe three quarters this year. Right now, we have already doing something to lower our funding cost and try to higher our loan rate. Because if the Fed do cut rates, the rate of our loans may be back faster than the deposit. Right now, we've been our effort on lower our funding cost and higher our loan rate. We are trying to achieve that for the average of NIM. We will try to maintain the current level or a little bit higher than 2023. Thank you.
Yeah. Thank you. Okay, we have the second question. There are two parts of this question. First is the NIM guidance and also the NII guidance. As what Davis just spoke previously, the NIM guidance, we hope to maintain the NIM at least above the level of 2023, even with a little bit room of upside. On the loan growth target, we set 8%-10%. Adding these two factors together, we are confident the NII growth can be high- single or even double- digit this year. The second question is the dividend payout ratio for this year. In the past few years, it has always been our dividend policy to pay 50/50 in cash and equity, a quite balanced dividend policy. This year, something is different.
First is, last year we issued new rights of TWD 16 billion, which puts our capital adequacy ratio at a very sufficient level, and also make our paid-in capital to be TWD 156.6 billion, which makes E.SUN one of the top five in terms of paid-in capital. We are very sizable already, and we are thinking maybe it is time to rethink our dividend policy. As the Chairman, he spoke in the earnings call this afternoon. Our dividend policy for cash payout, the proportion will increase. His target for the payout ratio this year is 70% in cash and 30% in stock. Compare with the balanced 50/50, now we have the more capacity to pay more in cash, 70% in cash. At the same time, we still want to retain a little bit, a portion in stock dividend to support our organic growth.
This is the very significant change in our dividend payout policy this year.
This is Davis. Chiwei just mentioned that our dividend payout policy may change this year. It is still subject to our Board resolution. Thank you.
On the total payout, we used to reserve 10% as legal reserve, which means if we make TWD 100, we only pay TWD 90, 50% in cash, 50% in equity. However, in 2022, there was a sudden rate hike, which makes E.SUN suffer in the mark-to-market loss in equity. The loss was reversed in 2023. In addition to the net profit that we made in 2023, we still have some more capacity, which is the reversal of the mark-to-market loss in equity, allow us to pay more in dividend. Instead of the 90% payout, this year, we might have some more capacity to pay out in dividend. Thank you. Okay, we have the next question. It is about the CRE exposure in the U.S. How much do we have in CRE exposure in the U.S.?
For E.SUN, we only conduct CRE business in our Los Angeles branch, the total exposure of CRE in Los Angeles branch accounts for less than 1% of our total loan. There is one thing that we want to note, is that the asset quality of our CRE loan is very good. It is because there is a fundamental difference between our exposure to the recent CRE trouble. In our L.A. branch, we do not do office buildings CRE, we also have some special rules to conduct CRE business. We do not only perform the traditional analysis to analyze the cash flow of the CRE. On the other hand, we also check the credit profile of the borrower. Our main target customers are the Taiwanese immigrants who are wealthy who are interested in purchasing commercial properties, for example, like shopping complex or condos.
The loan type is very different from the recent CRE trouble news that you might heard. This is our answer to this question. Thank you, investors. It seems we have answered all your questions. Thank you for your participation, and we look forward to meeting you once again in the earnings call of next quarter. Thank you. Bye bye.
Bye bye.