Good afternoon, ladies and gentlemen. Welcome to join us for First Financial Holding first quarter 2024 Webcast Investor Conference. We will start with the presentation, which includes the snapshot, financial highlights, and operating results. After the presentation, we will invite Ms. Annie Lee, our EVP and IR Head, to proceed to the Q&A session. You can raise your questions by typing at the bottom box of the webcast, either in English or Chinese. The presentation material is on our IR website, www.ffhc.com.tw. Also, we would provide one-year replay service for the webcast meeting for your convenience. I will hand over the microphone to Ms. Yating Chang to start the presentation.
Thank you, Keith. Good Friday afternoon, everyone. For the first quarter 2024 earnings results, First Financial Holding reported a net income of TWD 7.01 billion, up by 5.8% year-over-year. EPS was 0.52. A couple of highlights here. Bank fee grew by 60.7%, offset by a decline in treasury gains. Loan book expanded by 5.2%, which was driven by mortgage and large corp lending. A cash dividend of 0.85 per share, plus a stock dividend of 0.3 per share was declared. These key points are covered on page five of this presentation slides. Let's move on for details. In addition to net income and EPS, we provide First Financial Holding's key financial numbers and ratios on page six. Here they are. Book value per share for the quarter was TWD 19.04. ROE was 11.04%, and ROA was 0.64%. Group's CAR and double leverage ratio maintained at healthy levels.
They were 129.95% and 110.33%. In page eight, first quarter's net income of TWD 7.01 billion was on a combined revenue of TWD 18.7 billion. The revenue was up by 5.6% year-over-year. For reserve and expense items, please refer to the data on this page. Next, for key subsidiaries, their performances overall are in line with our expectations. First Commercial Bank delivered a net income of TWD 6.5 billion, a rise of 2.7% year-over-year. Now, we focus on bank's results, starting on page 11. Bank's ROE climbed to 10.04% on a net income of TWD 6.5 billion for the quarter. Next page. On revenue side, for the quarter, revenue was TWD 15.6 billion, up by 2.5% year-over-year. In the beginning, we highlighted bank fee growing by 60.7%. It was TWD 3.3 billion for the first quarter 2024 versus TWD 2 billion for the same period last year.
It reflected strength in wealth management business momentum that effectively made up for the fall from the treasury gains in the year to March. Treasury gain was down by 20% year-over-year or TWD 1.1 billion. Later, we'll talk more about the fee components. In terms of net interest income, it was down by 3.1% under deposit cost pressure. Given Central Bank of the Republic of China (Taiwan) hiked rate by half of a quarter point in late March, we expect this change could positively translate into net interest income onwards. As to the expense side, credit cost was 19 basis points for the quarter. Also, we see credit quality of CRE loan at bank stabilized for now. Operating expense was TWD 6.6 billion, up by 5.5%, mainly because of higher compensation. Moving on to bank's loan book. Mortgage and large corp lending drove total loan to increase.
The total loan book growth to TWD 2.5 trillion, up by 5.2% year-over-year. Mortgage was up by 10.6%, driven by robust demand on government-sponsored housing programs. Large corp lending was up by 12.6%, driven by the rebound in economic activities. As post-pandemic recovery is uneven and U.S. dollar rate environment is higher for longer, loan growth in SME and FX segments were only modest this quarter. That said, we do think along with broadening recovery of export sector as well as the expected federal rate cuts, SME and FX lending can grow further into the year. Bank's loan book on quarterly basis should speak the same story in next page. Total loan was up by 3.3% quarter-over-quarter. Loan -to -deposit ratio, spread, and NIM are on page 15.
Loan-to-deposit ratio inched up to about 70%, and the dollar loan-to-deposit ratio was close to 80%. However, FX loan-to-deposit ratio remains subdued at 43%. Spread was contracted to 1.21%. NIM was down by 6 basis points- 70 basis points. Adjusted NIM was 1% after adding Forex swap gains. On page 16, we give quarterly spread data of non-dollar pool and of foreign currency pool. Moving on to the deposit mix on page 17. It was TWD 3.6 trillion for the quarter, up by 5.5% year-over-year. On the other hand, CASA ratio held at about 63%. Before moving on to discuss fee revenue, we provide data on loan concentration and mortgage business in the next two pages. Data on loan concentration by industry is on page 18. The proportions stayed more or less the same. On page 19, we deliberate mortgage business.
The bar chart of monthly new mortgage volume in the bottom gives an encouraging signal on strong demand. Weak February should be an exception, reflecting only the Chinese New Year holiday effects. In the upper left graph, we have data on new mortgages loan-to-value ratio, the average mortgages loan-to-value ratio, and the mortgage yield. For the quarter, new mortgages loan-to-value ratio stayed about 65%. On average, the mortgage loan-to-value ratio was 48%. Also, the mortgage yield was at 2.18%. In the pie chart, we show mortgage outstanding by property location. The proportion stays similar as previous quarter. Now, we talk more about bank's fee on page 20 and 21. On page 20, fee components are listed. For the quarter, out of the fee of TWD 3.3 billion, 53% was wealth management fee, 35% was loan-related fee.
Wealth management fee contributed a total of TWD 1.7 billion, up by 62% year-over-year. The business benefited from active investors. They shifted asset allocation continuously to yield products. Loan-related fee ended in TWD 1.1 billion, up by 118% year-over-year. It was because of a one-off revenue item of TWD 0.56 billion, which was related to Taiwan High Speed Rail syndication program. On page 21, TWD 1.7 billion wealth management fee was broken down into three categories: TWD 0.8 billion in front sales, TWD 0.8 billion in bank insurance, and TWD 0.1 billion in custody. Front sales for the quarter grew by 51% year-over-year, and bank insurance by 18%. Now turning to page 22, bank's operating expenses. Though the operating expenses was up this quarter by 5.5% year-over-year to TWD 6.6 billion, the cost-to-income ratio stood around 42% comparing to the same period last year.
Coverage ratio. NPL data are next on page 23. All in all, asset quality holds up well. Coverage ratio was 742.13%. NPL ratio was 0.18%. NPL ratio on specific segments maintained stable. The data on personal loan, mortgage, large corp lending, and SME financing is given in the bottom of this page. To complete our discussion of bank's results, summary of overseas operation is on page 24. For the quarter, profits from aggregate overseas operation was still hurt by the fallout of CRE backed bonds in North America. After cleaning up the balance sheet on overseas portfolio, total profits from overseas operations was about TWD 0.7 billion, comprising 9.5% of bank's pre-tax profits. We see bank CRE loan shows no further deterioration for now. Therefore, contribution from overseas operation should return to normal in coming months. To finish up, we show our capital strength on page 25. Bank's CAR was 14.54%.
Tier 1 was 12.62%. CET 1 was 10.97%. With conservative cash dividend payout plan, our earnings in store will build resilient capital base that meets the SIFI requirements ended 2024 and 2025. With this, I'll give the microphone back to Keith.
Thanks, Yating. After quarter's performance, I think some of you might think our bank's income statement looks maybe kind of different than our expectation. Let's start the questions from Peggy Shiu. She has several questions step by step. First one is by our first quarter NIM look like was different contraction in first quarter. What's the reason, and what's our target for our 2024 adjusted NIM now? Also, the combined question should be what the FX swap gains in first quarter and our outlook for 2024.
All right, Peggy, I'll start our story about our NIM projection. First, you may notice that the major loan momentum came from two sectors. One will be the mortgage, and the other will be the large corp. These two products represents not a very rosy NIM contribution for its nature, because the mortgage tend to be nearly over-collateralized. That's why the yield for the mortgage products tend to be lower than the other products that we normally focus on. One is the SME lending, and the other will be the FX loan. These two contribution from a more secure portfolio would naturally translate to not very attractive NIM contribution.
As the Taiwan Central Bank hike rate in March this year, that would help us to boost the net interest income gradually as the yield for the mortgage would also pop up a bit, even though it's still lower than the other loan contribution like SME or FX loan. This will be the major factor that impact our NIM projection. As we still continue to grow our loan book in our franchise markets, including SME and FX loan. I have to particularly highlight that the delay of the U.S. rate -cut did influence the momentum of the FX loan that reflected at our LDR for our FX loan portfolio. Still remain at low, around below 50%. That, to some extent, dragged down the NIM contribution.
After we aggressively clean up the balance sheet in the overseas loan book and also build up our new assets following the recovery of the economy, hopefully, as we continue to grow our overseas loan portfolio, it will translate to a more attractive NIM contribution in the future. We still project that our NIM can reach around 1.04%-1.05%, even though we have to revise down the NIM projection from earlier this year at around 1.09%, about 5 basis points lower than our original projection. When we turn to our FX swap gains for this year, the good story is that the delay of the rate cut in U.S. markets, even though it damp the demand of the FX loan, it also help to drive up our FX swap contribution.
In fact, in the first quarter, our swap transaction contribution amounted to nearly TWD 3 billion, which is better than our original projection. Going into the second quarter, we would see this swap gains would sustain for a while, as long as the U.S. rate remain at the high end. We actually would revise up our FX swap gains for this year, mainly thanks to the delay of the rate cut in U.S. markets. I would see that our swap gain would see a smaller contraction, maybe around TWD 12 billion-TWD 13 billion this year, which is about 10%-15% lower than our level last year. This projection is slightly higher than our original projection that about just TWD 10 billion for this year. It implies that about TWD 2 billion-TWD 3 billion higher than our original projection for FX swap.
These two are the bright side and the dark side for the rate cut. One is impact the NIM contribution, but the other would help to sustain the swap gains.
Okay. Thanks, Annie. The second question is from Peggy. She also like to know, because our SME loan book in first quarter was only growth by 1.7% YoY, less than expectation. She's like to know what is the reason for weaker SME loan growth in first quarter, and are we going to change our target for the SME book for the 2024?
Well, for SME lending, which is pretty much linked to, let's say, apart from domestic demand, the export driven related lending also plays the key role to boost our SME lending. We have witnessed that the demand from large corp, especially for the tech sector, has already moving up, pretty much help to translate the rise of the export orders. We would see this would gradually translate into the supply chain where the SME sectors plays a significant portion to boost their borrowing. For this year's SME lending, we have already recovered from a marginal contraction below or a flattish growth last year. In the first quarter, we booked around 1.7% growth that will continue migrate into a higher floor.
However, because the exporting sector still recover gradually, we would project our SME lending can resume its growth momentum to book around 3%-4% growth for the whole year. It will be migrate quarter by quarter following the AI boom and the recovering exporting sector. This is some kind of a lagger reflection following the recovery markets in the exporting sectors. SME loan for this year's target, we would maintain our 3%-4% growth for the whole year.
Okay, thanks. The follow-up questions is also from Peggy Shiu, is talk about the fee income. I think Annie has addressed some point of the fee income, she'd like to know the fee income was growth stronger than our expectation in first quarter, will this momentum be sustainable for whole year? What's our target for the 2024 for the fee income?
Well, just like I mentioned that the higher rates in U.S. markets did help the momentum for our fee revenue business, particularly for the yield chasing investors who are very keen to locking a higher yield portfolio that these retail investors are quite keen to investing some investment grade and high yield products in the overseas bond market. After we have booked nearly 60% growth in our fee revenue in the first quarter, we would see the whole year fee momentum should sustain, and we are now targeting double the projection growth around 30% for the whole year, 30%. Which implies that our total absolute volume of the fee revenue this year would actually top around more than TWD 10 billion this year. This will be a record high for the fee revenue.
Apart from the overseas bond sales, another product, a very lucrative investment target will be the bank insurance products where the protection products or the so-called the estate tax or the inheritance tax related bank insurance products are very popular in the markets. Both all booked a very good fee revenue stream. We take a more optimistic projection for the whole year's fee income to book or to generate a very high growth rate for this year, at least a 30% growth this year.
Okay. Thanks, Annie. I think this also replies for the questions from Elaine Chen from Yuanta as well. She'd like to know the fee income expectation and also the breakdown. I think Annie has already answered the question. Still, we go back to Peggy's question. She'd like to know another one, is the overseas profit contribution dropped a lot in first quarter. What's the reason? Can Annie address some more?
Still, the CRE exposure and losses that we provided represent the major fall of the overseas profits. After we charge off nearly TWD 5.5 billion credit losses in the overseas portfolio, mainly related to CRE. In the first quarter this year, we have to dispose about TWD 2.7 billion influx of the CRE exposure. We actually charge off nearly 60% of the exposure in the first quarter. This represent the major drag of the overseas profit in the first quarter. However, we also managed to recover from the disposition of this CRE collateral. In fact, in the second quarter, the prior charge -off collateral has gradually flowed back to become the recovery in our top line. We expect for this year, the recovery may amount to nearly TWD 2.5 billion-TWD 3 billion. That means a lot for the top line.
I would like to particularly stress that most of this CRE exposure were duly charged off, but that would follow up with significant recovery that can be justified by our substantial write-back in our book. We will still maintain a very clean balance sheet in the overseas portfolio, which will help us to grow our assets going forward. That implies that when the rates start to move lower and the value of the CRE recover, this legacy of the CRE losses may improve, going into the second half of this year. Also we still managed to recover from the disposal of this CRE charge -off. That will help us to maintain our projection that our net credit cost will stay around 15 basis points, which is much lower than that we had in the prior two years, more than 20 basis points.
Only 15 basis points net credit cost this year, after we charge off most of this overseas exposure.
Okay. Thanks, Annie. I think this also answers the questions from Jimmy Huang. He'd like to know the reason behind much higher new NPL influx in first quarter and also the U.S. CRE exposure update. I think Annie has already addressed the situation. Also, another question is for our credit cost. I think Peggy also like to know our target for the credit cost for 2024. Do we have any update?
Yeah. I just highlight that we still maintain 15 basis points net credit cost this year due to the recovery of significant. CRE recovery.
Oh, okay.
As most of this CRE that we charge off can be recovered up to 60%-80% up to now. We have charged off more than 80%, so it implies there will be some meaningful recovery from the NPL pool.
Okay.
We charged more than the actual losses, so it will help us to recover from this NPL losses.
Okay. Sorry, Annie has just addressed, I didn't hear that. Our credit cost was unchanged at 15 basis points for your target. Peggy's final question is about our Maybe we will like to apply for the IRB model in 2026. How much will that improve our CET1?
About 2.9%-3% after we implement IRB model, that would be postponed until two years later. That will be 2026, as we haven't actually submit our application to the regulators, and it would take up to two years to finalize the IRB approval. It will really help us to reduce our RWA down to about TWD 400 billion RWA, risk-weighted assets can be reduced. That would improve the capital base by up to 2.9%-3%, but it's still subject to the final approval of the regulators upon the coming two years.
Okay. Thanks, Annie. I think from last quarter's conference, maybe our expectation from the IRB model should be more conservative, we have recalculated for the impact. Annie just updated the new information for the IRB impact. So far, I think that's our questions. Eric Shi, he wants to have the outlook for our NIM and fee and the credit cost, some predictions.
I will address for the conclusion for Annie's new predictions for our 2024 outlook. For loan book, as of the SME loan, it should be grow by 3%-4% for full year. Our NIM, we have dropped a little bit from 1.09%- 1.04%- 1.05 % this quarter. Our fee income would increase by 30%. Our swap gains is likely to have earnings this year should be around TWD 12 billion-TWD 13 billion. Credit cost is maintained the same as 15 basis points, one five basis points. That's the update for some of our predictions for 2024. If you have any more questions, you can raise your questions at the bottom of the box, either in English or Chinese.
Okay, Keith, can I add up some more projection here?
Okay.
All right. Still, our total loan book can expand by up to 5%-5.5%. That remains the same, unchanged, because the momentum from mortgage and corporate lending still remains solid, especially for the first time home buyer, the government subsidized lending. The momentum is still quite strong. In terms of the NIM, this is pretty much linked to the timing that the U.S. Fed cut rate. If the U.S. Fed postpones its rate cut timing, then perhaps our NIM can perform better because our swap gains can be higher due to the rate gap between U.S. and Taiwan. This is pretty much subject to the projection that most people in the markets would project that the U.S. Fed will cut rates in September, or maybe going into the fourth quarter. That would actually become quite dynamic projection for the whole year.
In terms of the fee revenue stream, we are quite optimistic about the fee momentum as the front load in the markets remain quite strong, and we should see this fee momentum will quite sustainable, and that the 30% fee revenue growth can become a quite solid projection. All of this can contribute to a solid top line for this year. It's still pretty much subject to when the Fed actually cut rates. We would not project the Taiwan Central Bank would hike rate anytime soon. Based on this scenario It will conclude our projection for this year. Still, we have to proactively react to the projection in the markets anyway.
Okay. There's one more question from our guest. He'd like to know the loan growth, and Annie just answered it's 5%-5.5% for the full year. He'd also like to know the operating expense target.
Okay. Our SG&A would remain 8% growth. Our CI ratio should maintain at around 46% this year. 46%.
Okay, our CI ratio is 46%. So far, there's no more questions coming in. If you have any questions, you can raise your questions at the bottom box. If there is no more questions coming in, if you have any questions, you can just write email to either Yating or my email box after the meeting. Now, there is no more questions coming in, I'd like to turn the microphone to Annie for the conclusion.
Well, I think I've answered most of the key questions. I suppose a lot of investors are quite concerned about the CRE exposure, I have clearly stated that we are almost approaching the end of this CRE exposure now. That we will be very positive that we can recover from this overcharged CRE losses going forward. I must say that the significant fall of our credit cost will be the major positive factor for this year's bottom line. Hopefully, we can achieve our target this year by continuing to grow our loan book and maintain a stable capital base, and also the decent write-back from our CRE losses in the prior years. All right. Maybe we can just end up here, we will see you next time when we have a chance to chat again. Thank you all.
Thank you.
Thank you.
Bye-bye.
Happy Friday.