Thank you for joining CTBC 2022 fourth quarter analyst meeting. Today we have Rachael Kao, a Spokesperson of CTBC Financial Holding Company, Megan Hsu, CFO of CTBC Financial Holding Company, Pai-Hung Yeh , CSO of Taiwan Life, joining the meeting. Now we will have the Spokesperson, Ms. Rachael Kao, to speak first.
Good afternoon, everyone. Welcome to the 2022 analyst meeting for Chinatrust CTBC Financial Holding Company. Before our analyst meeting, I would like to sum up what's happening in the year 2022. Because of the war between Russia and Ukraine, inflation, and the hike of base fund rate, the crypto market has been impacted massively. Our business related will be the life insurance investment business and the treasury business and so on. In year 2022, CTBC Financial Holding Company still delivered before tax, TWD 47.1 billion earnings. That's net decline of 24%. After tax, there's TWD 31.3 billion. That's 42% decline compared a year ago. If we exclude the impact from COVID, the P&C losses, there will be 7% decline compared a year ago. Thanks for the good performance of our core business at the CTBC Bank.
The 2022 before tax earnings was TWD 47.4 billion, which was 35% increase compared to year 2021. After tax, there's TWD 37.2 billion, and it's 25% increase compared a year ago. There's three reasons for that. First of all, because our Greater China, which covered China, Taiwan, Hong Kong, there's a momentum of this area, especially the strong franchise. We are the number one cash management bank in this area. Our net interest margin increased about 17 basis points, and we will have more highlights later on of the presentation. The second reason is because the smoothing of the COVID impact, some of the foreign country, like Southeast Asia or Japan, which was impacted deeply two years ago. In 2022, we see better performance, and the earnings was actually came back to before the COVID situation.
The overall overseas delivered TWD 15.1 billion pre-tax earning, which accounted for about 32% of the total bank earnings. The third reason is our infrastructure. Our deposits and the loan foundation continue to expand. Our loan expanded about 17%, and the deposit increased about 12%. The bank is actually booked a record high earnings into year 2022, and will continue to be the rank top one among all Taiwanese bank. That's a brief update of our performance in year 2022. Then I will have our IR colleague to go over more details. Thank you.
Thank you everyone for joining CTBC's 4Q 2022 earnings call. Please turn to page four on performance highlight. CTBC Holding's net profit reached TWD 31.3 billion in 2022, down 42% YoY, ranked number three among peers. If excluding COVID policy related loss, net profit would decline by 7%. Holding's total assets increased 9% YoY to reach TWD 7.7 trillion, thanks to strong growth at CTBC Bank. Capitalization remain adequate with CAR at 119%. CTBC Bank delivered record high net profit of TWD 37.1 billion, up 25% YoY, ranked number one among peers, attributable to strong loan growth, widened margins, contained expense growth, and benign credit cost. Asset quality was stable, with NPL ratio at 0.49% as of 4Q, and credit cost of 26 basis points in 2022. Bank's capitalization was sound, and CET1 ratio was 11%.
Taiwan Life reported net loss of TWD 3.4 billion due to COVID policy related loss and subdued investment gains. Capitalization was sufficient, with RBC ratio at 275%. On ESG, CTBC Holding's ESG rating is rated AA by MSCI, and it's a constituent stock of the MSCI Taiwan ESG Leaders Index, DJSI World & Emerging Markets Index, FTSE4Good Index Series, and Bloomberg Gender-Equality Index. In addition, we join Coalition of Movers and Shakers on Sustainable Finance initiated by FSC and serve as chair. Page five. On 2023 focuses. On banking business, CTBC Bank continues to enhance growth management and digital payment business models. We aim to scale up SME business and enlarge cross-border business in order to further expand our customer base. We will focus on cultivating business opportunities at overseas subsidiaries to enhance earnings. In addition, we will continue digital transformation to strengthen core competencies.
On life insurance business, Taiwan Life will prioritize growth in value-driven products in order to enhance sustainable earnings. Considering the implementation of IFRS 17 and ICS, we adjust investment portfolio by balancing capital allocation and investment returns. In addition, we'll leverage digital competency and develop new core systems in order to provide better product and service offerings. On sustainability, we aim to take constructive actions to advocate biodiversity. To realize our commitment to net zero emissions by 2050 using SBTi standard, we will intensify engagement with our customers and investees. We also serve as chair on Coalition of Movers and Shakers on Sustainable Finance to lead more active measures on sustainable development. We are committed in extending our impact to ESG through our core financial business, and we'll continue to develop sustainable financial products and innovative digital services.
In addition, we support community development through social investments in five key areas, including charity, anti-drug awareness, sports, education, and arts and culture. Page six, on profitability. Holding's 2022 net income was TWD 31.3 billion. EPS was TWD 1.55. Group ROE was 8.2%, and ROA was 0.4%. Page seven, on capital ratio. We remain well-capitalized with group CAR at 119%, life RBC ratio at 275%, bank CAR at 14.1%, and CET1 ratio at 11.1%. Page eight, on profit breakdown by entities. In 4Q, bank net profit reached TWD 8.2 billion, down 35% QoQ, mostly due to increased provisions and higher ESOP valuations. Life made a loss of TWD 8.6 billion, mostly due to loss related to COVID policies. Holding's net loss was TWD 9 million.
In 2022, bank net profit reached TWD 37.1 billion, up 25% YoY, driven by increases in net interest income and trading gains, benign credit costs, and contained growth in operating expense. Life reported net loss of TWD 3.4 billion, mostly due to COVID policy-related loss and lower investment income on base effect. Excluding COVID policy-related loss, Life net profit reached TWD 15.7 billion, down 32% YoY. Other subsidiaries together reported net profit of TWD 1.9 billion, down 53% YoY, due to lower trading income at securities and venture capital subsidiaries. Holding reported net profit of TWD 31.3 billion, down 42% YoY. Excluding COVID policy-related loss, Holdings' net profit reached TWD 50.4 billion, down 7% YoY. Page nine, on net profit movements. On the bottom, operating revenue was up 11%, as loan growth and widened net interest margin underpinned increases in net interest income.
Provisions were up 8% YoY, mostly due to impact from LH. Credit costs remained benign at 26 basis points. Expense growth was contained on lower ESOP valuations. Life pre-tax profit declined on COVID policy-related loss and subdued investment income. Holdings' pre-tax profit reached TWD 47 billion, down 24% YoY. Page 10, on revenue breakdown excluding Life. Total revenue was up 11% YoY. Net interest income was up 27% YoY, as total lending grew 17% YoY, and net interest margin widened by 17 basis points, benefiting from rate hikes. Fee income was down 8% YoY, as volatility in capital markets led wealth management and securities fees lower, but credit card, corporate, retail, and investment trust fees increased. Combined derivative, FX and trading gains was down 3% YoY, mostly due to lower trading income at securities and venture capital subsidiaries. Despite that, FX-related trading income increased.
Long-term investment and other income declined in 2022 as the bank no longer booked long-term investment income from LH after consolidating the entity since 4Q 2021. Page 12, on bank's loan breakdown. Total lending with credit card revolving was up 17% YoY. NT dollar corporate loan was up 31% YoY, driven by higher investment demand, working capital needs, and property development. Foreign currency loan was up 13% YoY. Mortgage was up 14% YoY, supported by stable business momentum and our participation in lending to civil servants. Unsecured and other loans were up 7% YoY, mostly on growth in unsecured consumer loans as we continue to expand our customer base. Page 13, on foreign currency loan breakdown. Foreign currency loan accounted for 36% of total lending. Overseas subsidiaries accounted for 59% of foreign currency loan, with TSB and LH being two larger subsidiaries. Overseas branches accounted for 29%.
OBU plus DBU was 12%. Looking at the foreign currency loan breakdown by region, Japan accounted for 31%, Southeast Asia 29%, Greater China 14%, and North America 14%. Overseas subsidiaries loan was up 11% YoY, driven by solid business momentum at LH, U.S., Philippine, and Indonesia subsidiaries. Overseas branch loan was up 16% YoY as Hong Kong, Singapore, and New York branches observed double-digit growth. OBU and DBU was up 27% YoY, driven by growth in syndicated loans. Page 14 on bank deposit mix. Total deposits reached TWD 4.6 trillion, up 12% YoY. On the right, total NT dollar deposits were up 10% YoY. NT dollar savings accounted for 62%. Total foreign currency deposits were up 16% YoY. Foreign currency savings accounted for 46%. Page 15 on loan-to-deposit ratio. Based on average loans and deposits, overall LDR was 72%. NT dollar LDR was 81%. Foreign currency LDR was 16%.
Page 16 on NIM and spread. In 4 Q, foreign currency spread was 2.77%, up seven basis points QOQ due to rate hikes and changes in loan mix. NT dollar spread was 1.75%, down two basis points QOQ, reflecting rising deposit rates and changes in deposit mix. Overall spread was 2.08%, down two basis points QOQ. In addition, rate hikes led higher yields for marketable security. 4 Q NIM was up one basis point QOQ at 1.63%. NIM in 2022 was 1.57%, up 17 basis points YoY, benefiting from rate hikes. Page 17 on fee breakdown. Total fees were down 8% YoY. Wealth management fee was down 24% YoY as volatility in capital markets impacted customer demands and caused sales of bank insurance and mutual funds to weaken. Fees on bonds increased as rate hikes triggered rises in bond yields and prompted customers to invest in bonds.
Credit card fee was up 15% YoY due to increased consumption, supported by increasing cross-border travels post-COVID, expanded customer base, and further penetration of mobile payments. Retail business was up 14% YoY due to increases in ATM and loan-related fees. Corporate business fee was up 13% YoY, driven by syndicated loan and trust fees. Overseas subsidiaries fee was up 8% YoY, mostly due to the consolidation of LH. Lottery fee was up 1% YoY due to lack of high price last year. Page 18 on wealth management fee. For wealth management fee breakdown in 2022, bank insurance contributed 61%, mutual funds 23%, custodian and trust 4%, and others 12% to total wealth management fees. Page 19 on cost income ratio. In 4 Q, bank operating expense increased 21% QOQ, mainly driven by higher ESOP valuation, leading to cost income ratio at 55.9%.
In 2022, cost income ratio was 53.2%, lower compared to that in 2021, mostly due to 13% growth in operating revenue and lower ESOP valuation. Overall operating expense growth was contained. Page 20 on asset quality. Asset quality remained stable with NPL ratio at 0.49%. NPL coverage ratio was 332%. 4 Q credit cost was 38 basis points, up 13 basis points QOQ due to adjustment of impairment parameters and increased specific provisions. 2022 credit cost was benign at 26 basis points, down two basis points YoY. Moving on to life business. Page 22 on total premiums and first-year premium. Total premiums were TWD 138 billion in 2022, down 33% YoY. FYPs were TWD 57.5 billion in 2022, down 46% YoY. Those volatile capital markets affected sales of investment-linked products and customers turned to interest-sensitive policies that capture rate hike trend. Page 23 on FYP breakdown by product and channels.
On the left is the product breakdown. Investment-linked products accounted for 16%, interest-sensitive policies, 77%, health and PA, 6%, and traditional, 1% of FYPs. On the right, in terms of channels, 49% of FYPs came from CTBC Bank, 32% from external banks, 10% from tied agents, and 8% from insurance brokers and others. Page 24 on FYP breakdown by type of payment and currency. On the left, regular pay products accounted for 40%, and single pay products accounted for 44% of FYP. On the right, investment-linked products accounted for 16%, foreign currency policy, 65%, and NT dollar policy, 19% of FYP. Page 25 on FYPE. FYPE was TWD 17.7 billion in 2022. On the right is the FYPE mix for your reference. Page 26 on investment asset mix. Total investment assets reached nearly TWD 2 trillion. Taiwan Life took suitable opportunities to adjust its investment portfolio.
In terms of breakdown, cash accounted for 4.3%, domestic fixed income, 9.1%, overseas fixed income, 60.6%, equities, 9.5%, mortgage, 2.3%, policy loans, 1.3%, real estate, 5%, and mutual fund, 7.9%. On the right is the pre-hedge return for each type of investment assets for your reference. Equities position generated a negative return of 6.1%, largely due to loss at P&C. Page 27 on investment yield, cost of liability, and breakeven point. In 2022, with impact from P&C, overall investment yield after hedge was 2.61%, and recurring yield before hedge was 2.35%. If excluding impact from P&C, overall investment yield after hedge was 3.68%, and recurring yield before hedge was 3.42%. Cost of liability increased 6 basis points YoY to 3.11%. As foreign currency policies increased, breakeven point continued to improve at 2.68%. Page 28 on hedging mix.
On the left, 43% of overseas investment assets were foreign currency policies. 30% were fully hedged, 10% were OCI position, and 17% were unhedged. On the right, FX reserve amounted to TWD 12.2 billion as of 4Q. Overall hedging cost was 15 basis points in 2022, declining 104 basis points YoY, thanks to NT dollar depreciation. Next section is the ESG highlights for your reference. That concludes the presentation.
Now we are opening for Q&A. If you have any questions, please enter your question now. First, we have questions from JP Morgan, Jemmy. The first question is about the hedging cost guidance of 1.08% in 2023. What is the embedded assumption for USD NT dollar FX rates?
For this question that we have Pai-Hung Yeh , the chief strategist from Taiwan Life to answer the question. Thank you.
Give me a minute. I check for you. 30.708 is our assumption.
The second question is also coming from JP Morgan, Jaime. The P&C Insurance Association just announced that mild COVID cases are no longer qualified for claim payment. Do we see any possibility for reserve reversal for CTBC Life IBNR reverse?
Around TWD 0.8 billion -TWD 1 billion reversal.
The third question is also from Jemmy Huang. JP Morgan, Jemmy Huang. The question is about the URCG on equity and bond investment at Taiwan Life as of fourth quarter 2022.
For equity position, the unrealized loss was TWD 28.2 billion. For fixed income position was TWD 17.6 billion loss.
Just a soft reminder, now we are at our Q&A session. If you have any questions, you can type your question in the text box. Thank you for listening to CTBC Holding Company fourth quarter analyst meeting. If you have any questions, please type in your question. Now we have a question from Michael. For the TWD 0.8 billion-TWD 1 billion reversal of IBNR reserve, will this be recorded as a net gain in March or April?
Thank you, Michael, for your question. For the reserve on IBNR, we will wait until all the policies will be due, which will be by end of April. I think we will clean up the whole COVID policy and then reverse if there's still reserve left. Thank you.
Thank you for listening to CTBC fourth quarter analyst meeting. Now we are in the Q&A session. If you have any questions, please enter your questions now. If you have any questions, you can enter your question. Thank you.
It seems there's no more follow-up questions. It's 5:30 P.M. Taipei time. If there's no question, I think I will suggest that we end for today's analyst meeting. Wish you a nice weekend. Thank you.