Fubon Financial

Fubon Financial Holdings Delivered Net Income of NT$9.879 billion and EPS of NT$0.97 in 2017 First Quarter

2017.05.15

Fubon Financial Holdings (2881) held an online investor conference today to announce its 2017 first quarter auditor-reviewed financial figures. Owing to the consistent growth in net interest and net fee revenues from Taipei Fubon Bank, and the success of Fubon Life's regular premium product strategies and strong investment performance, Fubon Financial Holdings was able to deliver net income totaling NT$9.879 billion and an EPS of NT$0.97 in the first three months of 2017, and once again ranked ahead of other financial holding companies in profitability. First-quarter net income represented a year-on-year growth of 12.6%, a return on assets (ROA) of 0.62%, and a return on equity (ROE) of 9.16%.

As at the first quarter of 2017, Fubon Financial Holdings managed a record-high asset size of over NT$6.3 trillion, which represented a 6.3% year-on-year increase over 2016 and placed it the second largest financial holding company in Taiwan. Meanwhile, net worth increased by 2.2% from the end of the previous year to NT$436.3 billion.

On the 10th of this month, Fubon Financial Holdings announced unaudited net income totaling NT$2.287 billion for the month of April, meaning that the organization had accumulated NT$12.166 billion in net income and NT$1.19 of EPS in the first 4 months, and continued to maintain leading position in the market.

According to Chairman Richard Tsai of Fubon Financial Holdings, Fubon Life delivered net income totaling NT$4.01 billion for the first quarter of 2017, up 88% year-on-year and accounted for 39.9% of group profit. Total premiums (TP) amounted to NT$133.2 billion in the first quarter of 2017, up 5% year-on-year; renewal premiums had grown by 27% year-on-year, and accounted for a higher percentage of total premiums at 63.7%. First-year premiums (FYP) totaled NT$48.4 billion for the first quarter of this year; they were contributed mainly by regular-premium and single-premium conventional life insurance products, which aggregately accounted for 83.7% of total FYP. Premium revenues from investment-linked policies have also increased significantly by 75.6% year-on-year due to upturn of the financial market. First-year premium equivalents (FYPE) were calculated at NT$20.94 billion for the first quarter of 2017 with balanced contribution from various channels. The value of new business (VNB) amounted to NT$9.4 billion, and the VNB/FYPE ratio increased once again to 45.1%.

The cost of debt continued to improve in the first quarter of 2017, and was reduced to 3.76%. Owing to the adjustment of new product portfolio, the company was able to reduce the cost of products sold and lower its breakeven point to 2.98% in the first quarter of this year. Fubon Life continued to adjust asset allocation in response to market changes, and had increased holding of foreign bonds for regular income. Total investment assets in the first quarter had increased by 8.8% year-on-year to NT$3,118.1 billion, and delivered strong overall returns at 3.45%.

According to Vice Chairman Daniel Tsai of Fubon Financial Holdings, Taipei Fubon Bank produced NT$4.333 billion of net income between January and March 2017, contributing 43.1% of group profits. Fee revenues increased year-on-year in the first quarter of 2017 due to growth of syndicated loan and credit card service. Fee revenues from wealth management products had also increased 36% year-on-year. Taipei Fubon Bank also experienced a recovery in the lending business; mortgage portfolio expanded 9.1% year-on-year, which was higher than the market average, while other consumer loans had also grown by 7.4%. With respect to corporate lending service, loans to SMEs accounted for 41.1% of the corporate credit portfolio, up 5% year-on-year. While banking services had grown, Taipei Fubon Bank still managed to maintain excellent asset quality by keeping overdue loan ratio at 0.2% (better than the market average of 0.3%) and NPL coverage ratio at 641.81% at the end of March 2017.

Fubon Bank (China) has been actively expanding its service network and optimizing loan and deposit portfolios in the Chinese market. Commercial loan balance as at the first quarter of 2017 had grown by 4.3% compared to the previous quarter while the weight of demand deposits increased to 21%; as a result, the lending spread increased by 39 basis points year-on-year to 2.16%. Fubon Bank (China) has been awarded the license to perform RMB services to residents in China in April this year, which makes it the first Taiwanese bank able to provide RMB services to citizens in China, and the first Taiwanese bank to be fully licensed for banking service in China. Meanwhile, the Shanghai Waitan Sub-branch began operation in April, bringing total branch count of Fubon Bank (China) to 24 (including the approved Wuhan Branch). In the future, Fubon Bank (China) will continue working with the parent company to bring to its customers the most refined financial services Taiwan has to offer.

The announcement by Fubon Financial Holdings today also put Fubon Life's embedded value (EV) at NT$463.6 billion as at the end of 2016, representing a significant 14.4% increase over the NT$405.1 billion at 2015 year-end. This increase was attributed to two reasons: 1. Net income totaling NT$28.7 billion in year 2016, and 2. Significant increase in the sale of conventional regular-premium products in 2016 that contributed NT$47.3 billion VNB or 32.9% yearly growth. This increase was particularly significant when compared to the 2.2% VNB growth concluded for 2015. Strong portfolio, reduced cost of debt and consistent investment performance had contributed to Fubon Life's continual EV growth.

In an attempt to strengthen capital structure, Fubon Life capitalized NT$12.1 billion of undistributed earnings into share capital and issued 1.21 billion new shares in 2016, which resulted in a 21% increase of share capital from NT$57.3 billion in 2015 to NT$69.4 billion in 2016.

Based on new outstanding shares, Fubon Life’s EV was calculated at NT$67 per share at the end of 2016. Without capitalized earnings, however, EV would have increased by 14.4% from 2015 year-end. When reflected on Fubon Financial Holdings, the EV amounts to NT$45.3 per share and represents a yearly increase of 14.4%. Since the merger with ING Life in 2008, the company has been presented with changes and challenges year after year. Nevertheless, Fubon Life still managed to maintain VNB, VIF and EV growth at 17%, 26% and 25%, respectively, per year, which is a remarkable achievement of its own.

In terms of appraisal value (AV), Fubon Life’s AV at the end of 2016 was calculated at NT$881.7 billion, after taking into account VNB for the next 20 years. This represented a 22.5% growth from the NT$719.6 billion estimated as at 2015 year-end, and was equivalent to NT$127 per share of Fubon Life or NT$86 per share of Fubon Financial Holdings, up 22.5% from the end of 2015.