Welcome to CTBC Holding 2025 Q1 earnings call. At the beginning of the meeting, your phone calls will be muted. After the presentations, we will open the floor for questions. Now I am going to give the floor to the management team.
Good afternoon, media friends, investors, and analysts. Thank you for attending CTBC Holding's 2025 Q1 earnings call. In addition to myself, also present are Megan Hsu, CFO of CTBC Holding, Bohong Ye, CSO, Taiwan Life, and also Justine Shen, representing the IR team. Now I am going to talk about our Q1 performance. In Q1, the performance was great. Our pre-tax net profit amounted to TWD 19.9 billion, after-tax EPS TWD 1.02, ROE 17.3%. Such a good performance mainly come from bank. In Q1, the performance was great. The after-tax net profit, TWD 13.4 billion, up 11% YoY.
It maintains double-digit growth, continues to set new YoY records and ranks first among bank peers. Overall, the bank's deposit and loan base has strong momentum. In Q1, loan grew 14% YoY, driving NII up nearly 19%. Fee income grew 12% YoY, driven by wealth management and credit card businesses. As for overseas business, it was also impressive. The pre-tax profit reaching TWD 6.4 billion in Q1, and this is up 17% YoY. In Q1, this accounts for about 37% of the bank's profit. In addition to bank's good performance in Q1, our second engine, Taiwan Life, also performed well in Q1. After-tax net profit TWD 5.6 billion in Q1, even though it is down 27% YoY. This is mainly because last year the investment team disposed of positions in a timely way, resulting in a high base for capital gains. But overall, the insurance momentum is still very good.
In Q1, the first-year premium income was up 22% YoY. This is a conference call for Q1, but on April 2nd, Trump announced some tariff policy affecting the market hugely. So I am also going to talk about that. In April alone, the after-tax profit for the month was TWD 4.45 billion, and after-tax profit for the first four months totaled TWD 17.893 billion, up 21% YoY, a new record for the same period.
Taiwan Life was affected by the sharp depreciation of the NT dollar by TWD 1.2, resulting in large exchange loss and an after-tax net loss of TWD 1.322 billion for the month. After-tax profit for the first four months was TWD 4.277 billion. CTBC Holding had an after-tax profit of TWD 2.653 billion in April, and an after-tax profit of TWD 22.5 billion in the first four months. Due to, EPS TWD 1.16 and ROE 14.9%, which is a good performance.
Due to tariffs, the economic growth is affected. Most think tanks have lowered their forecast for Taiwan's economic growth this year to below 3%. As for CTBC Holding ourselves, despite the overall uncertainties on the global markets, we are still a bank-centric holding, so our assets and profit are roughly bank accounting for 70%, while life and investment accounting for 30%. Right now, it seems that in this huge fluctuations, bank's operation is relatively stable and the profit is also relatively stable. We will continue to use this 7 : 3 ratio to diversify our risks and also diversify our profit sources. Later, our presentations will focus on specifically performance in Q1. Now in terms of ESG, for six consecutive years, we have been selected into the S&P Global, the Sustainability Yearbook. And recently, we have also been selected for the highest level A, by the CDP.
In terms of climate governance and relevant risk management, we have performed well. We will continue to leverage the influence of green finance and inclusive finance to implement the SDGs of the United Nations by concrete results. These are highlights for Q1 and also our performance as of April. Our IR colleagues will present in detail the financial review of 2025 Q1. Thank you.
Let's turn to performance highlights on page four. Holding reported net profit of TWD 19.9 billion in Q1, up 49% QoQ on resilient profitability at CTBC Bank, and strong earnings at Taiwan Life, and down 5% YoY, mostly due to a high base at Taiwan Life. EPS was TWD 1.02. Holdings ROE was 17.3%. The board recently decided to pay out a cash dividend of TWD 2.30 per share, indicating 63% dividend payout. CTBC Bank's net profit was TWD 13.4 billion, up 2% QoQ and 11% YoY, marking a record high. Bank's capitalization was solid and asset quality remained stable. Taiwan Life net profit was TWD 5.6 billion on higher investment gains. Its capitalization remains solid with RBC ratio at 326%. In addition, it plans to issue TWD 30 billion in cumulative sub-debt to bolster its financial structure and capital adequacy.
Other subsidiaries, including Venture Capital, Taiwan Lottery, and Investments also performed better compared to last quarter. Page five, profitability. Holding CPS was TWD 1.02 in Q1. Group ROE was 17.3%, and ROA was 0.91%. Page seven, capital ratio. We remain well-capitalized with group CAR at 126%, Life RBC ratio at 326%, Bank CAR at 14.3%, and CE Tier 1 ratio at 11.7%.
Page eight, profit breakdown by entities. Bank net profit reached TWD 13.4 billion, up 2% QoQ and 11% YoY, driven by robust net interest income growth and sustained fee income. Life reported net profit of TWD 5.6 billion, down 27% YoY due to the base effect. Holdings net profit was TWD 19.9 billion, up 49% QoQ and down 5% YoY. Let's go to our banking business. Bank's net profit reached TWD 13.4 billion, up 11% YoY, outperforming peers. ROE was 13.3%, up 8 basis points YoY. Page 11, revenue breakdown.
Total revenue was up 10% QoQ and 12% YoY. Net interest income was up 5% QoQ and 19% YoY. Fee income was up 23% QoQ and 12% YoY. Trading income and others increased 2% QoQ, driven by derivatives and fixed-income related gains, and down 7% YoY due to lower swap income and equities-related gains. Next, on loan growth. Total earnings with credit card revolving was up 6% QoQ and 14% YoY. NT dollar corporate loan was up 11% QoQ, driven by growth in government loans, manufacturing and service sectors, and up 16% YoY, driven by growth in government services, real estate, and manufacturing sectors. Mortgage was up 2% QoQ and 10% YoY, as business momentum remained stable. Unsecured and other loans increased 2% QoQ and 12% YoY. Foreign currency loan was up 6% QoQ and 17% YoY. Next, on foreign currency loan breakdown.
Overseas subsidiaries accounted for 57% of foreign currency loans, with TSB and LH being two larger subsidiaries. Overseas branches accounted for 32%. Overseas subsidiary loan was up 13% year-over-year, mainly driven by growth in LH and TSB, both reporting double-digit growth. Overseas branch loan was up 19%. Growth was especially strong in Singapore, Tokyo, and India branches, all reporting double-digit growth. OBU plus DBU loan was up 36%. Page 14, bank deposit mix. Total deposit reached TWD 5.4 trillion, up 2% quarter-over-quarter and 7% year-over-year. On the right, COF R accounted for 58% of anti-dollar deposits. [inaudible] deposits accounted for 63% of foreign currency deposits. Page 15, loan-to-deposit ratio. Overall LDR went up to 74.1% as both anti-dollar and foreign currency loans grew faster than deposits. Anti-dollar LDR was 84.2%. Foreign currency LDR was 60.6%. Page 16, NIM and spread.
In Q1, NIM went up to 1.49% as Fed rate cuts led to lower funding costs, including swap income. NIM was 1.64%. Page 17, fee breakdown. Total fees were up 23% quarter-over-quarter and 12% year-over-year, driven by sustained business momentum. Wealth management fee was down 8% quarter-over-quarter, impacted by market volatility, and was up 9% year-over-year. Sales momentum was stronger compared to the same period last year, driving sales of mutual funds, bank assurance, and structured products to increase. Credit card fee was down 3% quarter-over-quarter due to the base effect, and up 6% year-over-year, supported by increasing consumptions related to transportation, dining, and leisure. Corporate business fees were up 82% quarter-over-quarter and 24% year-over-year, driven by loan-related syndication and private banking fees. Page 18, wealth management fee.
For wealth management fee breakdown in Q1, the proportion of bonds decreased amid US dollar rate cuts, and the proportion of bank assurance increased. Page 19, cost income ratio. Cost income ratio was 52.1% in Q1, improved quarter-over-quarter and year-over-year, driven by faster growth in operating income and contained OpEx growth. Next on asset quality. Asset quality remained stable with NPL ratio at 0.49%. NPL coverage ratio was 323%. Q1 credit costs were 33 basis points, up 14 BPS quarter-over-quarter and 7 basis points year-over-year, mostly due to higher general provisions for new loans. Moving to life business. Taiwan Life reported net profit of TWD 5.6 billion in Q1, down 27% year-over-year due to higher investment gains last year. ROE was 14.2%.
Total premiums in Q1 increased 15% year-over-year and FYPs grew 22% year-over-year, supported by increased sales of investment-linked policies. On the upper right-hand side is the FYP product breakdown. We can see the proportion of investment-linked policies increased to 28%. On the lower left-hand side, regular pay products accounted for 44% and single-pay products 28% of FYPs. Foreign currency policy accounted for 46% and NT dollar policy 25% of FYPs. On the lower right-hand side, in terms of channels, the proportion of CTBC Bank increased to 47%, reflecting increased sales of investment-linked policies. Page 24, investment asset mix. Total investment assets reached TWD nearly two trillion. Taiwan Life continues to optimize its asset allocation in preparation for IFRS 17 and ICS adoption. Page 25, investment yield, cost of liability, and breakeven point. In Q1, total investment yield after hedge was 4.27%.
Recurrent yield before hedge was 3.55%, improved year-over-year. Despite that cost of liability increased, the breakeven point improved and Taiwan Life continues to maintain positive investment spread. Page 26, hedging mix. On the left, 41% of overseas investment assets were foreign currency policies. 27% were fully hedged, 21% were unhedged, and the rest was OCI position. On the right, FX reserve amounted to TWD 14 billion as of Q1. Hedging cost was 43 basis points in Q1, increased year-over-year, given higher FX gains amid NT dollar depreciation in the same period last year. Next, we move on to Taiwan Life's end 2024 EV report. Page 28. EV reached TWD 303.6 billion as of end 2024, equivalent to TWD 15.5 per CTBC Holding share. Page 29, EV assumptions. Investment yield for NT dollar policies starts from 3.69% in 2025 and will gradually rise to 4.45% in 2044.
Investment yield for US dollar policies starts from 4.3% in 2025 and will gradually rise to 5.3% in 2044. PwC has provided an independent review on EV assumptions. Page 30 is EV sensitivity for your reference. Page 31, EV comparison. 2024 EV increased 17.4% year-over-year as adjusted net worth increased by TWD 38.2 billion, and value of in-force increased by TWD 3.3 billion. Page 32 on adjusted net worth movement. Adjusted net worth grew in 2024, mainly due to net profit of TWD 21.5 billion and changes in unrealized gains from property of TWD 7.8 billion. Page 33 on VIF movement. VIF was TWD 158.5 billion, up 2% year-over-year. VIF movement was mainly driven by VNB of TWD 7.3 billion and investment yield assumption changes, which increased by TWD 16.1 billion and offset by other assumption changes, partly reflecting higher lapse rate. Page 34 on VNB movement.
VNB was TWD 5.8 billion, down 19% year-over-year, due to changes in investment yield and other assumptions, model changes, and product mix changes. Turning now to ESG highlights. CTBC Holding remains committed to ESG and has been well recognized for our efforts. Please refer to page 36 that highlights the recognition of CTBC Holding. That concludes the presentation. We are now open for Q&A.
Yes. These are our financial highlights. Now, media friends, panelists, and also investors online, if you have questions, feel free to raise them. Thank you. Yes. Please enter your questions in the webcast chat box. Questions in Mandarin are now being asked. Please enter your questions in the webcast chat box. We will answer the English questions after the Mandarin questions are over. Thank you. Please enter your questions in the webcast chat box. Thank you. JPMorgan, Jemmy Huang, please.
Hello. I have a few questions to ask. First of all, could you tell us about swap revenue in Q1, roughly? In the last quarter, it was mentioned that the adjusted NIM for this year, and you gave a guidance at that time. At that time, you had some interest rate assumptions, right? Now, the outlook has changed.
I do not know, in terms of NIM guidance and interest rate expectations, have they changed? Second, in terms of OpEx, in the Q1 growth was double-digit, right? Could you give us some breakdowns in terms of year-on-year change drivers and also the forecast for the whole year? Also cost-income ratio, I do not know if I missed it, but I have not seen such guidance. The third question is about Taiwan Life. Right now, with the current TWD exchange rate, have you used up your FX reserves? What is the hedging strategy right now, in which direction? Would you like to apply for a new mechanism? I do not think that is going to be helpful for FX and also EV assumptions. In 2024, what is the assumption for 2024?
On page 33, the negative TWD 900 million, could you give us some breakdowns in terms of the impact from actuarial assumptions? Also return on investment. Thank you.
In terms of the first question, which is about Q1 swap revenue. The overall situation is this: in Q1, it was roughly TWD 2.9 billion swap revenue. TWD 2.3 billion, sorry. So year-over-year terms, it was down by about 30%. The next question is about adjusted NIM guidance. Has it changed? When we did the calculation, we expected that this year the Fed would lower interest rates, and our latest forecast is not very different from our original calculation. So in terms of NIM guidance, we are not going to change it. It will be between 1.63% and 1.66%. As for cost-income ratio guidance, this year, our expectation for banks will be between 52%-54%.
As for OpEx, you mentioned that this year the growth is relatively bigger. Basically, 40% of the fees come from revenue-related fees. What does that mean? For example, we sell wealth management funds and also credit card-related fees, and also some rebate money, and also insurance underwriting fee increase, et cetera, and also personnel fee increase. Half of it is due to salary raise, half of it is due to the increase of the number of people. So in year-on-year terms, in Q1, the number of people increased by 7% this year.
The next one is Michael Zhang.
Sorry. As for the question about Taiwan Life. On May 4 and May 5, the TWD appreciated hugely. So on May 5, we still have TWD 4.5 FX reserves.
As for whether or not we will adopt a new rule, as said, the few reserves mentioned there to Taiwan Life are very few, so right now we are not going to apply for the new rule. Under IFRS 17, there will be more liabilities released, and by then we will consider how much we will transfer towards the new rule in terms of FX reserves. As for EV return, NTD 4.18%, and foreign currency 4.88%. As for new business value, the composition of the change a bit. It is mainly to do with the influence of return on investment. Can I have a follow-up? VNB, is there a single rate equivalent? You said, it was mostly due to return on investment. So VNB's return on investment was revised downward. Let me correct myself.
For VNB equivalent, in terms of NTD, it should be 4.11, and foreign currency 4.96. As for the other question, let me check if I have the numbers with me. I will answer that question a bit later. Thank you. Sorry. Let me answer another question. VNB impact TWD 900 million. It also reflects total rate more. The impact is about 1.0%. These are my answers.
The next question is Michael Zhang from Citi.
Thank you for this opportunity. I have three questions mainly. First of all, I would like to ask fees and trading income. What's the momentum in April and in May? The market is quite volatile. I don't know what will be the impact on such income. My second question is for Taiwan Life, your investment portfolio breakdown. In Q1, we saw equity.
The policy loan percentage had increased over the past few year, increased more, and your overseas fixed income, overseas income decreased quite a lot. I want to ask you about your future investment. Will you have more adjustments? I remember that this year you want to lower some overseas assets, bringing them back to Taiwan, right? I don't know if there will be more adjustments? I have another question about hedging cost. In Q1, the hedging surplus didn't change that much. I don't know in April and in May, with more FX fluctuations, do you increase your hedge? Thank you.
Okay. First of all, in terms of fee income in April and in May in CTBC Bank.
In April, the situation is that at the beginning, Trump announced tariffs policy and indeed for wealth management fee income, there was some impact because investors felt more nervous. In May, we see that our wealth management fee momentum went back up because Trump announced a pause of 90 days of tariffs. In addition, the stock market rebounded. As a result, in May, the momentum compared to April came back. This is the explanation about fee income. Another question is about trade-related revenue. Let me tell you, in April, our trading income compared to March grew a little, mainly because our traders seized the opportunity of foreign exchange rate changes with some dispositions. The stock market fluctuations in terms of its impact on the net worth is not huge, especially our trading position is almost zero.
Our income statement is not affected as a result. As for FX, in May, the NTD appreciated rapidly. For bank, the assets and liabilities in foreign currencies is more balanced. There isn't much of an impact. As for Taiwan Life's assets allocations, in Q1, there was some decrease in terms of overseas assets, and we will continue in this direction, more or less, depending on the market situations. If there are opportunities, we will continue to decrease overseas allocations and increase domestic allocations. This will be the rough direction. Second, our hedging ratio. At the end of Q1, it was 45%. Now it's 53%. It seems that it will continue to increase. The adjustment method is that the hedging cost is high. If we buy directly NDF, relatively speaking, it's not a good deal.
It might also increase further the cost of hedging tools. We look at the overall FX situations. There are some reverse tools that we look at. We look at the overall market situation when it comes to adjustments. When the reversals mature and if we don't continue, then our hedging percentage will continue to go up. We believe that it will go up to 54%-55%, roughly, and we wait until the hedging cost returns to a more stable situation, and by then we will increase our hedging percentage. Thank you.
The next question is Alex Ye from UBS.
I have a few questions. The first one is the increase of loan. In Q1, we saw QoQ growth. I want to know the breakdowns.
Alex, sorry, your volume is very low. Could you repeat?
Sorry. The first question is about the loan increase momentum.
In Q1, the growth was quite strong. In terms of regions, in terms of sectors, what are the main sources of growth momentum, and also the momentum in April and in May, and also the full-year growth guidance. Second, my second question is about Tokyo Star Bank. This year, against this interest rate hike environment, what is your outlook for its growth, especially compared to last year, and also your NIM and also profit, how large of an impact will it be for TSB?
In Q1, in terms of loans in CTBC Bank, first of all, in NTD The total loan growth was 14% and NTD 13%, foreign currency 17%. Most of the growth comes from our corporate finance growth. In foreign currencies, this mainly comes from Southeast Asia, especially Singapore. There are some customers that we didn't previously develop, so there's more growth coming from this.
As for full year guidance, we hope to have a double-digit growth currently. Thank you.
Please enter your questions in the webcast chat box. The next question comes from Eric Shih, KGI.
Hello, managers. I want to ask again. You mentioned that on May 4th, the reserves had TWD 5 billion or so. If TWD now is 30.2 in terms of FX at the end of May, what will be the level of FX reserves? 1% FX loss, how is it going to be reflected on P&L? If the reserves unfortunately go down further under the threshold, will you increase your reserves at once? I also want to ask Taiwan Life, the financial products, unrealized financial products in terms of equity and bond. Thank you.
As I mentioned, on May 5th, we still had TWD 4.5 billion, and on May 5th, I think it was lower than 30.2 TWD against one USD. If that's the case, if we use the 30.2, there is more chance to stay above this number. In terms of the current sensitivity, 0.1 TWD appreciation will lead to pre-tax P&L impact as TWD 260 million. As for whether or not if we use up our FX reserves, will we increase the reserves at once? Before the end of this year, no. We will wait until the adoption of IFRS 17 in order to consider this option. As for unrealized numbers, at the end of March, in terms of fixed income, it was roughly TWD -150 million in equity and fixed income, it was loss, TWD -15 billion.
Now, in terms of TSB, in Q1, the profit in YoY terms pre-tax, the growth was 50%, and after-tax, 90% growth. The main reason for growth is due to loan growth, especially in terms of mortgage and real estate-related businesses. The loans grew more in these areas, and also compared to last year, the asset quality is also better. As for ROE, in Q1, it reached 8.73%. There are some questions online. Some questions have already been addressed a while ago. For example, Taiwan Life's unhedged percentage. This question has been answered, and also this whole year's loan outlook. We expect to see a double-digit growth. Another question is about the swap income as of May. Another question is about interest rate sensitivity, which has also been answered. As of May, we don't have the number for swap.
As of May, the CFO mentioned that as of Q1, it was TWD 2.3 billion for your reference.
Let's return to see if there are further questions from investors on the call. The next question comes from Uni-President, [Gina Chen].
Hello, I have two questions. First of all, you haven't talked about credit costs this year. In Q1, it was slightly higher than the previous guidance, 25-30 basis points. For the full year, will it stay within this range, 25-30 basis points? Second, I want to ask about fee income. In May, you said that the momentum came back. In the previous call, you said that for the full year, it's going to be a high single digit. Are you going to raise this number? These are my two questions.
Credit cost guidance. Last time we said 25-30 basis points, in Q1, the total credit cost was 33 basis points. This is because in Q1, our loan momentum was very strong. In total, the position increased by TWD 230 billion or so, and we had to have 1% of general provision, according to the FSC. This is why the credit cost increased. The net interest income generated came later than that. This is why the strong momentum month's credit cost is higher as a result. For this year, it's going to be between 25-30 basis points. That's our current view. As for fee income guidance, last time we set high single-digit growth. We maintain this view without change. Thank you.
I don't have any other questions. We continue to receive questions. Please enter your questions in the webcast chat box. If you have questions, please enter your questions in the webcast chat box. There are no further questions. Thank you for your participation. This concludes our earnings call today. You can leave the meeting now. Thank you.