In 2012, global economic growth rate was lowered several times because of the European debt crisis, US fiscal deficit and the sluggish growth of the emerging markets. Nevertheless, the Federal Reserve System of the United States has successively launched QE3 and QE4, buying up to USD 85 billion of bonds monthly until the unemployment rate dropped below 6.5%. Meanwhile, with the upturned Chinese economy, the global economy in year 2013 is expected to recover sooner.
Taiwan economy, due to the impact of global economy slowdown and domestic issues such as price increase in oil and electricity and securities trading income tax, suffered from the vulnerable consumer and investment markets. The annual economic growth rate was therefore lowered several times. Nevertheless, starting from Q3 in 2012, several favorable factors, including the electronic enterprises infused more capital expenditures and the government launched economy-boosting policies to actively lure the investment of Taiwan companies back to Taiwan, turned the monitoring indicator from the blue light to the yellow-blue light in September, and turned to the green light in December. Still, considerable attention shall still be paid to the influence of the European debt crisis, U.S. fiscal cliff and the geopolitical development in Middle East.
According to the estimation of Directorate General of Budget, Accounting and Statistics, Executive Yuan, in January 2013, Taiwan’s economic growth rate were 1.25% for 2012 and 3.53% for 2013 and will gradually stabilize.
In prospect of Year 2013, Taiwan banking sector may enjoy new momentum arising from the launching of the cross-strait currency settlement mechanism and the ratification of the Renminbi service. And the policy to raise provision for Class I credit asset to 1% can be accomplished progressively in three years. It is expected that its negative influence on the annual profit of the banking sector will descend. However, any change in the international economy still requires caution and risk must be strictly controlled.
Organizational Change
Since October 2011, the Bank has centralized the corporate banking personnel in partial areas in order to maximize the efficiency. During Year 2012, the Bank not only broadened the scope, but also established Motivation Centers in Taipei City and New Taipei City in hope for fortifying the expertise and the sales development skills of the sales personnel through experience sharing. In addition, in September 2012, private banking service teams were built to deliver professional investment consultancy and customized services to satisfy the high net worth client’s financial demands.
The service locations of the Bank are planned and deployed in correspondence with the income distribution, population, industrial development, peer’s distribution in domestic regions, and the Group’s strategy to integrate the banking and securities service. By 2012, the Bank embraced 86 domestic branches which over 45% are located in metro Taipei and 41 branches are at the same or nearby location as Yuanta Securities. The operation synergy is thus fully exercised.
Actual Accomplishments in 2012
In 2012, the Bank sustained stable scale and profit growth under the strategies focusing on both quality and quantity. As of December 2012, the Bank possessed its asset up to NT$ 554.6 billion, which grew by 9% from NT$ 508.1 billion of year 2011, the annual net income after tax was NT$ 2.087 billion, and earned per share of NT$ 0.72, which signified an increase of NT$ 381 million from NT$ 1.706 billion in 2011. The high profit growth of four consecutive years, however, the Bank’s NPL ratio of 0.19% and the coverage rate of 673.60%, continued to be significantly better then the peers. The performance of main businesses are as following:
(1) Deposits:
In addition to incessantly utilizing the superior resources in brokerage from Yuanta Securities, a subsidiary of the group, to developed security transfer deposits, the Bank, through a wide variety of promotion events, also strive to advance its demand deposits and foreign currency deposits in order to fortify its deposit structure, broaden its customer base and thus construct the base for the Bank’s business development.
In 2012, the Bank embraced total deposits of NT$ 448.9 billion, an increase of NT$ 42 billion from NT$ 406.9 billion in 2011. Meanwhile, demand deposits in 2012 increased by NT$ 15.9 billion, and time deposits increased by NT$ 26.1 billion.
(2) Loans:
To expand the business scale of corporate banking, the Bank not only strove for international and domestic syndicated loans to further its service and business with large enterprises, but also, though scrutinizing the trend of the global supply chain in the highlighted industries, focused on the development of trade finance, self-liquidating finance and related loan services.
In regard to consumer banking, premium customers were targeted for house loans. Through the development of whole-pile-single-house mortgage, the Bank was able to sustain its scale expansion in the vulnerable house sales. Also, the Bank steadily expanded its cooperation with automakers and cultivated new brand channels to effectively maximize the market share.
In 2012, the volume of the loan service totaled NT$ 364.8 billion or an increase of NT$ 47.8 billion from NT$ 317 billion in 2011. This included NT$ 242.1 billion of loans through corporate banking, or 66.4% of total loan service, and NT$ 122.7 billion through consumer banking, or 33.6% of total loan.
(3) Foreign Exchange:
Benefited by the gradual liberalization of the cross-strait finance, the Bank launched OBU Renminbi services in April 2012. Additionally, the Bank persistently executed training and seminars on foreign exchange business to escalate the expertise of its staff and solidified its foreign exchange system in order to deliver professional and convenient services to its clients.
In 2012, foreign exchange volume of the Bank reached USD 23.8 billion, a decline of USD 4.5 billion from USD 28.3 billion in 2011. Meanwhile, remittance service weighted 94.23%, with the import service standing for 4.33% and the export service for 1.44%.
(4) Trust Business:
In addition to furnishing a wide variety of trust products to meet client’s demands in financial management, the Bank aggressively expanded its trust fund and foreign capital custody business to boost its fee income. In 2012, the Bank added 3 trust funds, amounted to about NT$ 6.3 billion, 27 new custody accounts of foreign inventors, amounted to about NT$ 11.6 billion.
In 2012, the total balance of trust assets reached NT$ 99.7 billion, a decrease of NT$ 9.7 billion from NT$ 109.4 billion at the end of 2011.
(5) Wealth Management:
Through the classified deployment and diverse product selection, the Bank supplied customized financial planning, intensified its marketing to solidify the Bank’s business with its clients, and further the Bank’s promotion of Kid’s Passbook, Gold Passbook and the balanced profit products to broaden the foundation of financial services and build the stable fee income. In addition, in response to the volatility of the global financial market, the Bank adjusted the allocation of insurance products to protect client’s assets through the dispersion of the investment risk.
In 2012, net fee income on wealth management totaled NT$ 652 million, or an increase of NT$ 79 million from NT$ 573 million in 2011.
(6) Credit Card:
In order to penetrate into the premium customer segment, the Bank furnished deluxe services, including express clearance in the airport, the pickup service in the airport and upgrade to Business Car of THSRC, to holders of the VISA Infinite Card. In addition, existing cardholders of Business Signature Card/Titanium Card with medium to high consumption amounts were provided with an upgrade service and a wide variety of exclusive premium services. We also launched several preferential services such as comprehensive discount events with quality enterprises, receipt redemption, and repayment installation plans and free gifts for purchase in order to maximize the transaction amounts of cardholders.
In 2012, total credit cards in circulation reached 260,000 cards, with an active card rate of 36.64%.
Budget Implementation, Financial Status and Profitability
In 2012, the Bank received its net revenue as NT$ 7.818 billion, including net interest income of NT$ 6.011 billion and non-interest income at NT$ 1.807 billion. Compared with the net income in 2011 at NT$ 6.711 billion, net revenue increased by NT$ 1.047 billion.
Major differences explicated as follows:
(1)
Net interest income: increased by NT$ 976 million from year 2011 as a result of the increase in deposits and loans by NT$ 42 billion and NT$ 47.8 billion respectively and the increase in interest income on securities investment.
(2)
Net non-interest income: grew by NT$ 71 million from 2011 as a result of the increase in net service fee and commission income.
(3)
The bad debt expense in 2012 amounted to NT$ 481 million, an increase of NT$ 776 million in allowance for doubtful accounts from income on bad debt recovery in 2011 was NT$ 295 million. Operating expenses in 2012 was NT$ 4.976 billion or a decrease of NT$ 44 million from NT$ 5.02 billion in 2011.
(4)
In conclusion, the net income before tax in 2012 was NT$ 2.362 billion. After deducting income tax at NT$ 275 million, the net income was NT$ 2.087 billion, or an increase of NT$ 381 million from NT$ 1.706 billion in 2011.
Research and Development
(1)
Conducted the benefit analysis of joining Factors Chain International on sales growth and risk minimization.
(2)
Launched and promoted the on-line service of Fund Efficient Investment Method.
(3)
Added the subscription, redemption and switch functions for NTD funds to the mobile banking.
(4)
Added the electronic trust income notification to save resources and cost.
(5)
Completed the query function for the proceeds trust for real estate pre-construction houses.
(6)
Risk Management:
A.
Credit risk: Established the mortgage application and behavior scorecard models and persistently established the credit risk data mart and the analysis platform.
B.
Market risk: Strengthened the disassembly of derivatives, the verification of the valuation model and established the according documentation and planed to calculate the general market risk capital of options in Delta-plus Approach.
C.
Operation risk: Completed the capital requirements specified in the standardized approach for operational risk to escalate the level of the bank’s operational risk management. We also conducted the operational risk management tools including Risk Indicator System, Risk and Control Self-Assessment and Loss Data Collection to uplift the Bank’s capability in monitoring and management of the Bank’s operational risks.
(7)
Information system R&D and upgrade: The establishment of critical IT projects to enhance the system efficiency and security and support the business prosperity. These said projects included new wealth management system, new seal system, phase II of Gold Passbook, risk data mart, dashboard system for executives/ managers, new consumer credit information system, corporate banking platform (call-loan and syndicated loan management), upgrade of accounting functions for bond and note transaction dates, function upgrade of the accounting receivable system, DB centralized integration and upgrade of SQL 2000 to SQL 2008, upgrade of the school payment system, upgrade of the mobile banking system, the transformation of ODS to DW/RPS and the database audit trail mechanism.
2. Impacts of External Competitive, Regulative and Overall Operating Environment
Currently the slow recovery of Taiwan and global economy is glimpsed but abundant factors still influenced the economic development. In the meantime, even amid the business atmosphere with fierce competition and the meager interest spreads, local financial sectors all endeavor to develop their overseas businesses and enjoy ascending profit.
The launching of the cross-strait currency settlement mechanism and the approval of Renminbi services offers a more favorable environment for the operation of the banking sector. Meanwhile, in order to fortify the Bank’s ability to be prepared for the future economic downturn and realized the risk-based credit service management, the FSC implements the phased differentiated rewarding and managing measures to encourage domestic banks to heighten the ratio of provision of Class I credit asset to over 1%, in hope for the maintenance of the quality operation structure. By December 31, 2012, the coverage ratio of the Bank reached 1.13%, exceeding the 1% target set by the FSC.
Also, the effects of changes in related laws and regulations are as follows:
(1)
Implementation of Financial Consumer Protection Act:
Financial Consumer Protection Act, for implementation from December 30, 2011, falls into two main sectors, the protection of financial consumers and the ombudsman body for financial consumption disputes. In respect of protection of financial consumers, more obligations and responsibilities are imposed on the financial service enterprice, and a variety of compulsory clauses under the Financial Consumer Protection Act stimulate the protection over consumers. Such law regulates that a financial service enterprice shall bear liability without fault and that the burden of proving relief from liability shall be transferred to the financial service enterprice. The service of financial ombudsman process is free to the financial consumers under the Financial Consumer Protection Act so the financial enterprise may have to pay higher cost in the aforesaid burden of proof, labor, expenses and indemnification. To fully protect consumers’ right and minimize customer disputes, the Bank has amended internal procedures and relevant contracts in accordance with the Financial Consumer Protection Act.
(2)
Central Bank Took Cautious Practices on High-Priced Housing Loan:
The Central Bank implemented its third control measure to urge financial institutions to supervise the credit extension risk on real estate loan and to strengthen the sound development of the housing market. “Regulations of Central Bank on Land Loan and Home Mortgage Loans in Specific Areas extended by Financial Institutions” was amended on June 21, 2012 and renamed as “Regulations Governing Home Mortgage Loans and Land Loans extended by Financial Institutions”. The amendment took effect on June 22, 2012. Under this amendment, the maximum amount of high-priced housing loan shall not exceed 60 percent of the house's appraised value or its transaction price for houses over NT$ 80 million in Taipei City and New Taipei City and for those over NT$ 50 million in any area other than Taipei City and New Taipei City, provided that no grace period is allowed in such high-priced housing loan. In addition, Actual Selling Price Registry of Real Estate Transactions officially took effect on August 1, 2012. Their influences on the housing market in Taiwan and the credit extension of banks remain to be observed. The Bank has released a written order regarding the aforesaid stipulation on June 22, 2012 and all units of the Bank are required to comply with such order.
(3)
“Protection of Computer Processed Personal Data Act” amended as “Personal Information Protection Act”: Personal Information Protection Act, declared on May 26, 2010, took effect on October 1, 2012. Compared to the old laws, the codes of conduct (such as obligation of informing), the group litigation system and the increase in total compensation of infringement that the offender shall be required to pay for damages under the same fact have been introduced. This amendment leads to huge influence on the banking business, which collects, processes and utilizes a large amount of personal information. The Bank has already acquired ISO 27001, a certificate of the Information Security Management Standard (ISMS), and BS10012, a certificate of Personal Information Management System, by January and July, 2012 respectively. Internal policies of the Bank regarding personal information protection and relevant documents, such as “Letter of Declaration for Being Informed of the content contained in Article 8 of Personal Information Protection Act for Privacy Statement” and “Letter of Engagement for Sales and Marketing Channels”, have been established. The Bank, through the above information security and personal information security management systems, aims to minimize the risk of disclosing personal information and reduce any possible disputes.
(4)
Signed Memorandum of Understanding on Cross Strait Currency Settlement: Central Bank signed Memorandum of Understanding on Cross Strait Currency Settlement with The People's Bank of China on August 31, 2012, revoked The Regulations on the Conduct of Renminbi Business by Banks in the Taiwan Area on September 11, 2012 and issued Interpretation of Exceptant Regulations for Article 14 of Regulations Governing the Banking Activity and the Establishment and the Investment by Financial Institution Between the Taiwan Area and the Mainland Area. Such interpretation specifies that banks in Taiwan may use the currency issued in China, starting from September 11, 2012. Hence, Taiwanese bank’s OBU and branches located outside Taiwan and mainland area may engage in RMB services according to Offshore Banking Act and the local competent authorities, starting from September 11, 2012, without anterior approval from FSC.
The official operation of the cross-strait currency settlement mechanism not only expedites the convenience and financial cooperation of the cross-strait investment and trading, but also functions as the stepping stone to develop Taiwan to be a Renminbi offshore center. Opening the undertaken currency of OBU and signing Memorandum of Understanding on Cross Strait Currency Settlement will bring more business opportunities to banks. The Bank will seize this chance and aggressively expand various RMB services. A positive effect should be visible on the Bank’s credit granting business and profit.
(5)
Issued the amendment of “Regulations Governing Foreign Exchange Business of Banking Enterprises”: In response to the establishment of the cross-strait currency settlement mechanism, approval of RMB services for financial institutions and appropriate management, the Central Bank amended “Regulations Governing Foreign Exchange Business of Banking Enterprises” and added a chapter, “Management of Renminbi Business” on January 25, 2013. All banks shall apply mutatis mutandis to the relevant stipulations of foreign exchange services while engaging in RMB services. The DBU of the Bank started RMB services on February 6, 2013 to provide customers with handier RMB services. In doing so, the Bank is allowed to enhance its own service quality and competitive strength and be consistent with the objectives that FSC endeavors to achieve – to develop financial services with the cross-strait features and to build a Taiwan-based financial platform.
(6)
Broadened the scope of Guidelines Governing the Operation of Members of The Bankers Association of The Republic of China Regarding Credit Granting in New Taiwan Dollars to Non-resident Foreign Nationals: According to the new stipulations in the amendment of BA Letter Chuan-Sho-Tzu-1010001629A, Guidelines Governing the Operation of Members of The Bankers Association of The Republic of China Regarding Credit Granting in New Taiwan Dollars to Non-resident Foreign Nationals, issued on August 14, 2012, banks may engage in NT$ guarantee service in response to the need of foreigners without residence in Taiwan to raise fund for TWSE/GTSM Listed companies and issue corporate bonds. This ban lift expedites a closer connection between foreign enterprises and the Taiwan market and animate Taiwan security market in addition to helping broaden banks’ business scope and elevate profit.
For such service can be undertaken only through secured credit granting, which contains limited risk, the Bank targets quality enterprises with great prospect as the top customer segment. This helps the Bank plan the finance of corporate customers with higher nimbleness and flexibility, which can further the growth of credit granting business.
3. Latest Credit Ratings
Type of rating
Rating agency
Date
Latest Credit Ratings
Long-term
rating
Short-term
rating
Outlook
International rating
S&P
2013.02.04
BBB
A-2
Positive
Fitch
2013.01.15
BBB+
F2
Stable
Domestic rating
Taiwan Ratings
2013.02.04
twAA-
twA-1+
Positive
Fitch
2013.01.15
AA- (twn)
F1+ (twn)
Stable
4.Business Plan in 2013 and Outlook
With the unclear global economy recovery drives, the Bank shall, under the premise of risk control, conduct moderate operation, strive for product and service diversification, advance its customer development ability, solidify its operational foundation, and pursue a steady business growth in order to enhance the Bank’s market position. The Bank will also strengthen its comprehensive competency through adjustment of the asset and profit structure. The business plan of the Bank is summarized as follows:
(1)
Business Development:
A.
Through a variety of deposit promotion plans, reinforce the acquirement of new customers and absorb general demand deposit and foreign currency deposit in order to stabilize the source of funds and build the foundation of business development.
B.
The Bank will devote more efforts to the development of loans to small&medium sized enterprises and syndicated loans for the corporate banking services through delivering products and integrated financial services, and to maximize credit-related profit through reasonable pricing mechanisms. Consumer banking will focus on the Premium customer segments with the collateral in the urban areas while whole-pile-single-house mortgage will be aggressively developed to stably broaden the business scale.
C.
Through the classified deployment of the Bank’s wealth management teams and diverse product selection, customized financial planning will be furnished to enhance the scope of the scale of asset management and elevate the contribution to income.
(2)
Risk Management:
The Bank will enhance the bank’s monitoring ability in the credit, market and operation risk by building the risk models and risk databases. The Bank will also scrutinize the structure of industrial supply chains and the clients’ cash flow and the transactions between buyers and suppliers of customers in order to minimize the Bank’s credit risk.
(3)
Channel Development :
Domestic channels distribution are planned according to the business and group strategies, meanwhile, with overseas branches are aggressively established to grasp the fruitful opportunities in the greater Chinese market. Additionally, the electronic banking system is persistently reinforced and complemented by the physical channels to provide customers the safe and convenient services.
(4)
Personnel Training :
The Bank will reinforce the on-job training to better the personnel competence and realize the compliance of internal control.
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
