Brexit, the election of president of the United States, and numerous other material events impacting the international financial market have elevated the risk of uncertainty in the market, substantially increasing the difficulty for global financial companies to manage their business. Due to the stagnating global growth in the global economy, Taiwan’s export trading slowed. Although the country’s economy is recovering, financial holdings are still faced with many challenges. For example, the banking industry is influenced by the subdued housing market and low interest rate; the securities sector is affected by the diminishing trading volume in the stock market.
However, despite these challenges, CTBC Holding had persevered and was able to sustain outstanding performance for the year. Thanks largely to the exceptional performance of its subsidiary CTBC Bank and CTBC Holding’s prominent performance after acquiring Taiwan Life, CTBC Holding generated after-tax profit totaling NT$27.9 billion, indicating favorable management of its income and expenditure budgets. Going forward, CTBC Holding will be looking to support the New Southbound Policy, continue to expand its business operation, and extend its presence in China and Asian markets and join them in a global network to provide global financial services. Internally, CTBC group has always adopted cross-selling strategy as its business orientation to enhance the effectiveness of cross-selling strategy and maximize the benefits offered by financial holding groups. CTBC Holding will continue to uphold its brand spirit of “We are family”, corporate mission of “protect and build, and its brand features of "Caring, Professional, and Trustworthy" as we strive to strengthen corporate governance, fulfill corporate social responsibility, and create values for customers, employees, shareholders, and society as a whole. We aim to become “Taiwan Champion, Asia Leader”- a leading brand with the best governance, and the most trusted financial institution by customers and shareholders.
Business Plans and Results
(1) Continue to integrate life insurance resources and facilitate rapid growth with CTBC group resources
CTBC Holding completed the merger with Taiwan Life on January 1, 2016. Through comprehensive integration of CTBC's resources and use of its existing channels, CTBC Holding assisted with the growth of Taiwan Life and also developed a multitude of products in order to provide customers with a one-stop service platform on which their financial needs are sated. In future, CTBC Holding will continue to reinforce its extant organizational scale, boost the growth of Taiwan Life’s assets, and maximize the synergies of CTBC group through cross-selling opportunities of CTBC subsidiaries.
(2) Support governmental policies and strive toward becoming a regional financial institution
CTBC Bank launched the opening of its third branch in China, Xiamen Branch, in July 2016. The Xiamen Branch will be linked to 258 of CTBC’s branches in Taiwan and Hong Kong as well as overseas branches to build a full-range cross-border financial platform that offers a comprehensive range of financial products and services, including trade financing and international insurance and finance. In addition to preparing to establish joint-venture consumer finance companies in China, CTBC Holding is also intensely seeking potential investment opportunities in Southeast Asian countries, such as strategic investments, share investments, or merger and acquisition that target specific customer base, network, and complementary services. For example, CTBC Holding can sign a memorandum of understanding or an equity contract with LH Financial Group Public Company Limited (LHFG) in Thailand, to acquire 35.6% equity in LHFG’s and seats on the Board through equity investment. This investment has been approved by the FSC. In the future, CTBC Holding will develop regional financial services in accordance with the government’s New Southbound Policy. The Tokyo Star Bank also has established another business scope in investing in private equity funds. As of the end of 2016, The Tokyo Star Bank has invested in 12 private equity funds which covers funds in leasing, manufacturing, retail sales, IT, etc. The investment amount totaled to JPY 4.58 billion with a total strong investment return of 20.7%.
(3) Reinforce corporate governance and enhance brand value
As a response measure to the frequently occurring cases of severe penalties imposed upon large international financial institutions by local competent authorities, foreign companies have successively increased the stringency of their corporate governance and regulatory compliance, particularly with regards to money laundering prevention, which is now included as the main target of improvement. CTBC Holding responds quickly to the need for organizational reform. The extraordinary general meeting of the shareholders in December 2016 approved the changes made to the Board structure, in which more than half of the total number of seats is given to independent directors. This change serves to enhance board independence, ensure balance of power, and encourage board decisions to be made transparent, thereby generating a positive influence on the company’s governance and performance in the future. CTBC Holding is the first financial institution in Taiwan to have more than half of its board composed of independent directors, which is not only in keeping with the international trends, but also highlights the value CTBC places on corporate governance to establish itself as a credible financial institution.
2. 2016 Business Plans, Strategies and Results
CTBC Holding has many subsidiaries that specialize in a broad variety of services from banking, securities, life insurance, venture capital, asset management, investment trust, security service, to lottery. In addition, 99.7% of revenues and profits are recognized using the equity method and are mostly contributed by the banking subsidiary, whereas other income made up the remaining 0.3%. In 2016, CTBC Holding concluded a consolidated after-tax profit of NTD 27.9 billion and a consolidated after-tax profit of 9.98% on return to ordinary shareholders, which ranked top among all financial holding companies.
Moreover, CTBC Holding achieved 167 major awards local and abroad in 2016, 20 more awards from last year. Of these awards, 147 were for outstanding performance in corporate governance, brand image, corporate social responsibilities, personal banking, wealth management, institutional banking, digital payment, and innovation. For the first time, CTBC Holding was rated as the 2016 Best Taiwan Global Brands and, for the fifteenth time, recognized as the Best Bank in Taiwan by FinanceAsia. These categories and number of achievements are unmatched in Taiwan's banking industry and are the best testament to CTBC Holding's outstanding performance. Additionally, CTBC Holding was included as a component of the Dow Jones Sustainability Index (DJSI) in 2016 for the first time, which is an acknowledgment of CTBC’s sustainable corporate management at the international level and indicates that CTBC Holding’s economic, environmental, and social performance have been affirmed as an internationally acclaimed brand.
Nevertheless, in terms of finance, risk management, information, human resource, and branding strategies, CTBC Holding has taken a number of initiatives to explore ways of improving performance and maximizing group synergies that would lead to an economy of scale providing a broad variety of services. Internally, the Company also improves upon the concept and policy of regulatory compliance to comprehensively raise employees’ awareness on legal compliance.
Date and Result of the Latest Credit Rating
|Standard & Poor’s||BBB||A-2||Stable||2017.4.17|
|Fitch||AA+ (twn)||F1+ (twn)||Negative||2016.9.21|
3. 2017 Business Overview
CTBC Holding continues relying on its sustainable practices, and aim to strengthen its financial structure and establish the most appropriate capital allocation in order to build long-term customer relations and a solid foundation for the future development of CTBC Holding. Below is a summary of the company's 2017 business plans:
(1) 2017 business plans
- Target the international market and expand present in Asia.
- Reinforce corporate governance and manage brand value.
- Integrate group resources and create the synergies of financial holding groups.
- Listen to customer needs and co-create customer value.
- Enhance risk control and implement risk management.
- Increase source of income and control asset quality.
- Upgrade digital banking service and become the industry leader.
- Becoming the most trusted, most efficient financial institution that best understands customers' needs.
- Implement post-M&A management that actively integrates the group's business activities and system.
- Enhance collaboration between subsidiaries to deliver greater group synergy.
- Deepen business expansion and profitable businesses, where the banking business will focus on both profitability in Taiwan and overseas growth.
- Improve the insurance business by fostering customers, adopting consultative selling approach, and providing the best service to be customer's first choice.
- Reinforce the international development of the securities business and develop a digital broker model that centers on customer service and performance.
- Transform investment trust business into a private bank-grade investment management company.
- Build open digital banking platform that develops new operating model for maintaining innovation capacity to integrate various new technologies.
Key operational policies
- Provide financial holding resources and practice corporate social responsibility.
- Ensure information transparency as a means of stronger corporate governance.
- Create long-term value by ensuring asset quality and operational stability.
- Implement risk management and strengthen compliance management mechanism.
- Recruit transnational talents to extend global presence.
- Expand overseas locations to improve the operating efficiency of the international market and increase business activities.
- Develop digital banking to provide greater user experience and service for customers.
Impacts Due to the Competitive Environment, Regulatory Environment, and Overall Business Environment
Taiwan's banking industry has long been plagued by excessive competition and a low-interest environment that is largely due to the slowdown in the global economy and global uncertainties. Furthermore, the international community is increasingly aware of the importance of anti-money laundry. The operating cost is gradually increasing, largely due to the influence of competent authorities and stringent international laws. Despite such intense environmental challenges, CTBC Holding will continue to strengthen its home base, expand regionally and extend into other businesses by combining systems and resources across subsidiaries and maintaining its leadership position by offering diversified, innovative, and enriched products and services.
In a digital banking environment, CTBC is also committed to Fintech development by setting up designated digital banking office as well as a CTBC Block Chain Laboratory, which incorporates the world's biggest block chain alliance, R3, that actively develops relevant service and technology, with the expectation of gaining a leading status in Taiwan's Fintech industry.
Going forwards, CTBC Holding will continue expanding its global presence in response to the government's New Southbound Policy, and replicating past successes to capture development opportunities. As CTBC Holding perfects its overseas platform, the Company anticipates to effectively capture growth opportunities in the Asia Pacific region, with the hope of helping its subsidiary CTBC Bank establish stature as a regional bank and assisting Taiwan Life Insurance and CTBC Securities in expanding their operational scale.
Future Corporate Development Strategy
Reflecting on the changes last year, fluctuations in the global financial environment, emergence of digital trend, and amendments to legal regulations, with the concerted effort of its professional teams, CTBC Holding will continue to focus on international and cross-strait affairs and developments, actively participate in digital banking development at the international level, and commit to complying with relevant laws and regulations as a means of global expansion. CTBC's future development strategies are as follows:
- Boost brand image that creates corporate advantage.
- Broaden the concept of compliance to reinforce corporate governance.
- Manage capitals effectively to improve utilization efficiency.
- Seek spontaneous growth through merger & acquisition.
- Establish the core focus of digital banking and integrate group developments.
- Concentrate on improving life insurance business to create a profit engine.
- Support governmental policy to develop southward.
For the past 50 years, CTBC Holding has continued to explore growth, monitor market trends, and seek new business opportunities, in an effort to build an international financial brand that employees, shareholders, customers and the global Chinese population can feel proud of. In the future, CTBC Holding will continue to target increasing value for shareholders as an express of gratitude for their support for CTBC.