The sovereign credit crisis of Europe continued to threaten the global economy in 2011. Although the EU and IMF have launched successive bailouts, the future market development was still pessimistic, thus giving rise to the anxiety about the second global economic recession. Also, despite the moderate economic recovery in the US, as the unemployment rate was still high and the real estate market kept running low, and along with the uncertainty of the European credit crisis, there is risk of economic recession in the future. Doubts on the investment market persisted in 2011due to two unfavorable conditions: the threat of asset bubbles and inflation in emerging countries, and the financial and real estate market readjustment in China. Overall, the global economic development remained uncertain.
Domestically, overall economic development was slow as indicated by the blue light in the economic condition monitoring since November for the following reasons: the commodity price was growing moderately, export trade was unfavorable due to the slow global economic growth, and some economic indices went down continuously for months, such as the annual change rate of industrial product. The estimated economic growth of 2011 announced by the DGBAS reduced to 4.04%, and it will further reduce to 3.85% in 2012 (it was estimated at 4.19% in November 2011), suggesting a conservative forecast of the macroeconomic condition. Therefore, the development of Taiwan’s financial industry will be highly challenging in the next year as a result of various uncertainties.
Organizational Change
In order to improve the planning and promotion of the deposit service and centralize operational management, in July 2011, we adjusted the name and the duty of the Deposit and Remittance Banking Dept. and the Operation Dept Further, in September 2011, we established a Financial Products Department in charge of the development of the products related to insurance and financial management. Since October 2011, we have applied centralized management to the corporate banking personnel of certain areas, in order to enhance business efficiency.
In location planning, branches or locations have been planned and deployed according to the status of income distribution, population, industrial development, and distribution of banks in individual districts. In 2011, we established four new domestic branches, i.e. from 81 to 85 branches, increasing the proportion of branches in Taipei Area to 45%. In 2012, we will accelerate the establishment of another three branches to increase the total number of branches to 88. Also, we continued with the integration of banking and securities service, in order to demonstrate group synergy. By the end of 2011, we integrated banking and securities service with 28 Yuanta Securities branches and 6 Polaris Securities branches, and expected that there will be 6 more, in 2012.
Actual Accomplishments in 2011
Market operations became conservative in 2011 as a result of the worldwide economic instability. Upholding the principle of “quantity and quality together”, we maintained steady growth in both scale and profit. By the end of December 2011, we have a total of 85 branches, with an asset scale amounting to NT$508.1 billion, or an increase by 11% when compared with the amount of NT$455.7 billion in 2010. The net income was NT$1.706 billion (EPS was NT$0.74) and increased NT$389 million when compared with the amount at NT$1.317 billion in 2010, marking a high growth for three consecutive years. The non-performing loan ratio and coverage ratio were 0.19% and 673.57% respectively, with overall asset quality superior to the business standard.
(1) Deposits
Besides continuously exploiting the advantageous resources of Yuanta Securities, a subsidiary of Yuanta FHC, to aggressively strive for the transfer of securities, we reinforced the expansion of customers’ ordinary deposit to strengthen the saving service structure and expand customer scale, in order to set a foundation for the development of various businesses.
In 2011, the total operational volume of the deposit service was NT$406.9 billion and increased NT$77.3 billion when compared with the volume of NT$329.6 billion in 2010. This volume included an increase in current deposit at NT$22.8 billion and time deposit at NT$54.5 billion.
(2) Loans
In corporate banking, besides striving for opportunities to participate in syndicated loan projects at home and abroad, we continuously improved ICB cooperation with securities, integrated group resources, and expanded business scale. Also, we cultivated the SME market for “secure loan” and “self-liquidating trade finance” products to increase customer sources.
In consumer banking, premium customers were targeted for reinforcing the differential pricing and marketing strategy, including the provision of comprehensive products according to individual needs. Also, we expanded cooperation with automakers and cultivated new brand channels to effectively increase the market share of car loans.
In 2011, the total volume of the loan service was NT$317.0 billion and increased NT$56.3 billion compared with the volume at NT$260.7 billion in 2010. This included NT$198.4 billion of loans through corporate banking, commanding at 62.6%; and NT$118.6 billion through consumer banking, commanding at 37.4%.
(3) Foreign Exchange
We aggressively applied for accreditation of being “appointed foreign exchange bank”, enforced education and training on foreign exchange business, and continuously improved the functions of the foreign exchange system, in order to provide customers with professional and convenient financial services. By the end of December 2011, all 85 branches have obtained the license for “appointed foreign exchange branch” to operate foreign exchange deposits and general incoming and outgoing foreign exchange services.
In 2011, the sales volume of foreign exchange was US$28.3 billion and increased 37.48% when compared with the volume of US$20.6 billion in 2010. This included 93.12% from incoming and outgoing foreign exchange, 5.07% from import sales and 1.81% from export sales.
(4) Trust Business
In addition to launching a wide variety of trust products to meet the wealth management demands of customers, we aggressively cultivated the fund trust and custodian businesses to increase income on commission and service fee. In 2011, we increased 3 trust funds with a scale amounted to about NT$6.4 billion, 18 new custodian accounts with a scale amounted to about NT$6.6 billion; and 67 full fiduciary custodian accounts with a scale amounted to about NT$1.3 billion.
In 2011, the total balance of trusted assets was NT$109.4 billion, reduced by NT$1.7 billion when compared with the balance of NT$111.1 billion in 2010.
(5) Wealth Management
We provided customized wealth management planning service through arranged levels of services and diversified choices of product. Marketing effort is focused to increase stickiness with the clients. We also aggressively promoted balance-based income products and launched the “gold passbook” business to meet the investment needs of clients and create stable income on commission and service fee. In addition, to cope with the global financial market volatility, and in consideration of dispersion of investment risk, we adjusted the proportion of marketing and allocation of insurance products, in consideration of preservation of clients’ assets.
In 2011, net income on commission and service fee from wealth management was NT$573 million an increase of NT$1 million compared with the amount at NT$572 million in 2010.
(6) Credit Card
In order to cultivate the premium customer market, we provided holders of the VISA Infinite Card fast track personal service at international airports worldwide. In 2011, we also launched the Mazda Sky Card in collaboration with Mazda with a wide variety of exclusive services. We also launched comprehensive discount events with quality enterprises, receipt instant redemption, and repayment by installation and other events, in order to increase the transaction amount with customized services.
In 2011, card in force was 270,000 cards, with an active card rate of 40.34%.
Budget Utilization, Financial Status and
Profitability
In 2011, the net revenue was NT$6.771 billion, including net interest income at NT$5.035 billion and non-interest at NT$1.736 billion. When compared with the net income in 2010 at NT$6.141 billion, net revenue increased NT$630 million.
Major items different from 2010 were as follows:
(1)
Net interest income increased NT$762 million when compared with that of 2010 as a result of the increase in deposits and loans that increased NT$77.3 billion and NT$56.3 billion respectively.
(2)
Net non-interest income reduced NT$132 million when compared with that of 2010 as a result of the reduction in the income on financial instruments.
(3)
Due to the significant improvement of asset quality, the income from bad debt recovery in 2011 was NT$295 million and increased NT$120 million when compared with the amount at NT$175 million in 2010. Operating expenses in 2010 was NT$5.02 billion and increased NT$438 million when compared with the amount at NT$4.582 billion in 2010.
(4)
In conclusion, the net profit before tax in 2011 was NT$2.045 billion. After deducting income tax at NT$339 million, the net income was NT$1.706 billion and increased NT$389 million when compared with the amount at NT$1.317 billion in 2010.
Research and Development
(1)
In developing loan businesses, the stock-secured loan was introduced for overdraft line of credit in wealth management to provide more flexibility for customers holding stocks for a long-term with financial management needs.
(2)
In the car loan business, the ACH (Automated Clearing House) payment mode was added to allow customers to repay the loan more conveniently.
(3)
We signed a dealer A/R project with FORD to increase financing service platforms for upstream and downstream dealers on the supply chain.
(4)
We launched the “gold passbook” business to provide customers with more options for asset allocation.
(5)
We added the “periodic variable payment plan” service and the “Rich Land” e-banking fund performance competition events.
(6)
We reinforced the marketing and design of structured products of various new financial products integrating foreign exchange, interest rate, stock options, and credits.
(7)
We added the mobile banking channel to provide customers with real-time and convenient financial services.
(8)
Risk Management:
A.
Credit risk: We established the mortgage case acceptance and behavior scorecard models. In Q4 of 2011, these models were completed and went live. As a result, the coverage rate of the asset internal rating/scoring system for consumer banking increased more than 90%.
B.
Market risk: We set the financial trade risk limit value and assisted the IT department in establishing the counterparty settlement limit real-time enquiry system to help front business units to maintain real-time control of the transaction limit.
C.
Operational risk: We completed the capital requirements specified in the standardized approach for operational risk to enhance the level of the bank’s operational risk management. We also conducted risk indicator (RI) collection and operational risk calculation and measurement.
(9)
Information system R&D and upgrade: Financial Collection System (FCS) development, foreign currency deposit revision and batch report transfer to report system, new middle and back office functions and system version upgrade of the CBAS, bank remittance collection system upgrade, mobile banking system, new data warehouse system Phase II, new wealth management calls recording system, bank cross-business integrated platform upgrade, enterprise-wide image digitization platform function addition and integration, integration of account opening, integration of financial transaction, financial system integration of Yuanta Securities and Polaris Securities, implementation of the group budget/HR/financial systems, and reinforcement of e-channel information security protection according to the new e-channel trading security control regulation, in order to enhance system operation efficiency and support business development.
2. Impacts of External Competitive, Regulative and Overall Operating Environment
At present, it is difficult to increase spread when the economic conditions remain uncertain and domestic competition is intense. Also, as the future of the four major industries, including DRAM, panel, LED and solar energy PV industries, is obscure, and credit risk increases. As a result, the overall developmental potential of the banking industry is affected. Also, in order to assist financial institutions in developing healthy operation capacity for future economic prosperity bounce back, the FSC encourages local banks and credit cooperatives to enhance the allowance for doubtful accounts to total loan amount ratio (loan coverage ratio), in order to deduct the total loan calculation of government agencies. By 31 December 2011, the loan coverage ratio of this bank was 1.30%, exceeding the 1% target set by the FSC.
Also, the effects of changes in related laws and regulations are as follows:
(1)
Amendment to the Regulations Governing the Banking Activity and the Establishment and the Investment by Financial Institution between the Taiwan Area and the Mainland Area
Following the execution of the Economic Cooperation Framework Agreement (ECFA), and with the increasingly frequent cross-strait financial business, besides amending Article 12 of the Regulations Governing the Banking Activity and the Establishment and the Investment by Financial Institution between the Taiwan Area and the Mainland Area (Banking Activity Regulations) to release the loan restriction of Taiwanese businesses in China, the FCS further amended Articles 11 and 13 of the Banking Activity Regulations on 7 September 2011 to allow the overseas branches and OBU of Taiwanese banks to lend to PRC citizens, PCR corporations or PRC groups obtaining residence or registering in Taiwan in the same manner as for citizens, corporations, groups and other organizations in Taiwan (previously, branches of Taiwanese banks operating in China could only lend to Taiwanese business and overseas businesses in China). The deregulation of the status of loan applicants will surely favor business expansion of domestic branches, OBU, and overseas branches and affiliates of this bank, and bring a positive effect to the credit business of this Bank.
(2)
Announcement of the Regulations Governing the RMB Business of Banks in Taiwan Area
In order to enhance the business expansion of OBU and overseas branches of banks in Taiwan, the FSC and the Central Bank of Taiwan announced on 21 July 2011 the Regulations Governing the RMB Business of Banks in Taiwan Area to allow Taiwanese banks to engage in RMB business. This allows Taiwanese banks to provide a stable financing channel for Taiwanese businesses in China. To cope with the internationalization of RMB, we already obtained the RMB business license for our OBU in January 2012. The RMB business will start this year.
(3)
Revision of the Self-Disciplinary Standard for Banks Engaging in Derivatives
The Directions for Banks Conducting Financial Derivatives Businesses were revised on 31 December 2009. The Bankers Association of the Republic of China also passed the Self-Disciplinary Standard for Banks Engaging in Derivatives on 27 May 2000. The latter enacted on 16 March 2011 introduced the graded customer management system and reinforced marketing process control to increase protection for customer rights and benefits. In the future, there will be restrictions on the variety of products and marketing process for general customers. At present, we have adjusted the contracts signed with customers and updated the related processes and transaction platforms. In the future, we will develop differential businesses strategies by customer segmentation in response.
(4)
Proclamation of the Financial Consumer Protection Act and Its Bylaws
The Financial Consumer Protection Act was proclaimed on 29 June 2011. It was approved to be implemented on 30 December 2011 by the Executive Yuan. The FSC announced six regulatory orders on 12 December 2011. The Act provides a legal basis for establishing an organization for settling financial consumer disputes. The Act has also specifies that when advertizing, soliciting business, launching promotional events, financial service institutions should not make overly-optimistic, deceitful, obscure or false information to mislead the public. Before providing products or services, financial service institutions should fully understand the background information of consumers to ensure the suitability of products and services. Financial service institutions should also fully inform consumers of the important contents and related risks. This Bank has revised and updated the relevant internal provision and contracts, in order to protect the rights and benefits of consumers.
(5)
Impacts of IFRS Adoption in 2013
In accordance with the “Roadmap toward IFRS Adoption in Taiwan” announced on 14 May 2009, the Bank will be required to prepare financial reports in accordance with Taiwan-IFRS starting from 2013, restate the comparative figures in 2012 financial statements, and disclose the adoption plan, and the impacts of adoption, in 2011 annual financial reports, and in 2012 interim and annual financial reports.
In 2009, the Bank proposed an IFRS adoption plan and established a specific taskforce. The relevant information of adoption as disclosed in the financial report.
3. Latest Credit Ratings
Type of rating
Rating agency
Date
Latest Credit Ratings
Long-term
rating
Short-term
rating
Outlook
International rating
S&P
2012.01.11
BBB
A-2
Positive
Fitch
2012.01.18
BBB
F3
Stable
Domestic rating
Taiwan Ratings
2012.01.11
twAA-
twA-1+
Positive
Fitch
2012.01.18
A+ (twn)
F1 (twn)
Stable
4. Business Plan in 2011 and Outlook
As long as the global market is unstable and economic conditions remain unstable, we will continue to maintain sound business strategies this year. Under the premise of risk control, we will make aggressive innovation, be devoted to product and service diversification, improve customer cultivation ability, develop a solid foundation, pursue steady business growth, and expand customer and business scale, in order to raise our market position. We will also enrich our profit momentum by improving our pricing mechanisms. In addition, we will continue to integrate group resources and demonstrate the synergy of operation, in order to maximize the benefits for all shareholders. The business plan of this Bank is summarized as follows:
(1)
Business Development :
A.
In order to enhance the stability of funding source and further development of business basis besides aggressively cultivating new customer sources and reinforce the absorbency of general current savings to reduce capital cost, we will integrate physical and electronic channels to provide customized financial services for promoting the simultaneous growth of all businesses.
B.
We will improve the OBU functions and promote international cooperation to increase the depth of the international syndicated loan business. We will integrate the DBU and subsidiary businesses to strive for the business opportunities in Taiwan, Hong Kong and China. Also, we will promote secured loan products to premium customers, such as revolving mortgage with favorable interest rate and stock-secured loan.
C.
In addition actively build wealth management services team provides customized product planning services for clients. We will also development niche business with fee income to strengthen profit structure.
(2)
Risk Management :
We will increase the bank’s control capacity of credit, market and operational risk by building the risk model and risk database. We will also examine the structure of industrial supply chains and the top-down transaction of customers to grasp real-time movements, in order to minimize the bank’s credit risk.
(3)
Channel Development :
Physical branches will be established in the five major metropolitan areas according to the business development needs of this Bank and in coordination with the integration of securities locations. Also, we will aggressively apply to establish branches in Hong Kong and Macao to grasp business opportunities in Taiwan and China and develop our capacity for overseas development.
(4)
Personnel Training :
We will reinforce pre-service and in-service education and training for personnel according to the attributes of their business, in order to improve their professional competence and internalize the compliance concept in personnel.
All data and
information on this page is provided for informational purposes only,
and may subject to adjustment. For more details, please refer to our official
annual reports.
Copyright c 2007 Yuanta Commercial Bank Company Limited. All Rights Reserved.
No. 157, Sec. 3, Ren'ai Rd., Da'an Dist., Taipei City 106 , Taiwan
E-mail: service@yuanta.com
Service Hotline: 0800-688-168
