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 businesses. In addition, stagnating global economic growth has slowed Taiwan's export trade. Although the country's economy is recovering, financial holding companies still face many challenges. For example, the banking industry is being dampened by the subdued housing market and low interest rate, whereas the securities sector is being affected by the stock market's diminishing trading volume.
Despite these challenges, CTBC Holding persevered and was able to sustain outstanding performance in 2016. Thanks largely to the exceptional performance of 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 government's New Southbound Policy by continuing to expand its business operations and to extend its presence in the China and Asian markets, building a dense global network to provide global ﬁnancial services. Internally, our group has always adopted cross-selling as its business orientation in order to maximize the beneﬁts offered by ﬁnancial holding groups. CTBC Holding will continue to uphold its brand spirit of "We are family," corporate mission to "Protect and Build," and brand values of "Caring, Professional, and Trustworthy" as we strive to strengthen corporate governance, fulﬁll corporate social responsibility, and create value for customers, employees, shareholders, and society as a whole. We aim to become a "Taiwan Champion, Asia Leader-a leading brand with the best governance and the ﬁnancial institution most trusted by customers and shareholders.
Business Plans and Results
(1) Continue to integrate life insurance resources and facilitate rapid growth by utilizing CTBC group resources
CTBC Holding completed its acquisition of Taiwan Life on January 1, 2016. Through the comprehensive integration of CTBC's resources and use of its existing channels, CTCB Holding assisted with the growth of Taiwan Life and developed numerous products to provide customers with a one-stop service platform to ﬁll their ﬁnancial needs. In the future, CTCB Holding will continue to reinforce its existing organizational scale, boost the growth of Taiwan Life's assets, and maximize the synergies of CTBC group through cross-selling opportunities with CTBC subsidiaries.
(2) Support government policies and strive toward becoming a regional financial institution
CTCB Bank launched its third branch in China in July 2016. This branch, in the city of Xiamen, will be linked to 258 of CTBC's branches in Taiwan and Hong Kong as well as overseas branches to build a full-range crossborder ﬁnancial platform that offers a comprehensive array 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, as well as M&A that target speciﬁc customer bases, networks, and complementary services. For example, CTBC Holding signed a memorandum of understanding with LH Financial Group (LHFG) in Thailand to acquire 35.6% equity in LHFG and seats on its board through equity investment. This investment has been approved by the Financial Supervisory Commission. In the future, CTBC Holding will develop regional ﬁnancial services in accordance with the Taiwan government's New Southbound Policy. The Tokyo Star Bank has also expanded its business scope by investing in private 3 equity funds. As of the end of 2016, the Bank had invested in 12 private equity funds, including ones covering funds in leasing, manufacturing, retail sales, and IT. The investment amount totaled 4.58 billion yen, with a strong investment return of 20.7%.
(3) Reinforce corporate governance and enhance brand value
In response to the severe penalties frequently imposed on large international ﬁnancial institutions by local authorities, foreign companies have successively increased the stringency of their corporate governance and regulatory compliance, particularly regarding money-laundering prevention, which is now included as the main target for improvement. CTBC Holding has been among these businesses in responding quickly to the need for organizational reform. The extraordinary general meeting of the shareholders in December 2016 approved changes to the board's structure that require more than half of all seats to be given to independent directors. This change enhances board independence, ensures balance of power, and encourages board decisions to be made transparent, thereby positively inﬂuencing the company's future governance and performance. We are 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 international trends but also highlights the value we place on corporate governance in seeking to establish CTBC Holding 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, and asset management to investment trusts, security services, and lottery draws. In addition, 99.7% of revenues and proﬁts are recognized using the equity method and are mostly contributed by the banking subsidiary, with the remaining 0.3% coming from other income. In 2016, CTBC Holding recorded a consolidated after-tax profit of NT$27.9 billion and a consolidated after-tax profit of 9.98% on return to ordinary shareholders—the most among all ﬁnancial holding companies.
Moreover, CTBC Holding achieved 167 major local and international awards in 2016—20 more than the previous year. Of these awards, 147 were for outstanding performance in corporate governance, brand image, corporate social responsibility, personal banking, wealth management, institutional banking, digital payment, and innovation. For the ﬁrst time, we were named among the Best Taiwan Global Brands and, for the 15th time, recognized as the Best Bank in Taiwan by FinanceAsia. This scale of categories and number of achievements are unmatched in Taiwan's banking industry and are the best testament to CTBC Holding's outstanding performance. Additionally, we were included as a component of the Dow Jones Sustainability Index for the ﬁrst time last year—an acknowledgment of our sustainable international-standard corporate management and an indication of the global acclaim earned by our economic, environmental, and social performance.
This recognition did not breed complacency, and we have continued striving in terms of finance, risk management, information, human resources, and branding strategies to explore new means of improving performance and maximizing group synergies to yield an economy of scale providing a broad variety of services. Internally, we are also seeking to further tighten our policies governing regulatory compliance and to comprehensively raise employees' awareness of 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 will continue relying on its sustainable practices as it works to strengthen its financial structure and establish the most appropriate capital allocation. Realizing these goals will enable us to build long-term customer relations and a solid foundation for the future development of CTBC Holding. Below is a summary of our plans for 2017:
(1) 2017 business plans
- Target the international market and expand our presence in Asia.
- Reinforce corporate governance and manage brand value.
- Integrate group resources and create synergies for the group.
- Listen to customer needs and co-create customer value.
- Enhance risk control and implement risk management.
- Increase sources of income and control asset quality.
- Upgrade digital banking services and become the industry leader.
(2) Expected accomplishments
- Become the most trusted and efﬁcient ﬁnancial institution—and the one 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, with the banking business focusing on both proﬁtability in Taiwan and growth overseas.
- Improve the insurance business by developing the customer base, adopting a consultative selling approach, and providing the best service to be customers' ﬁrst choice.
- Reinforce the international development of the securities business and develop a digital broker model centered on customer service and performance.
- Transform investment trust business into a private bank-grade investment management company.
- Build an open digital banking platform to develop a new operating model and maintain innovation capacity for integrating various new technologies.
(3) 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 mechanisms.
- Recruit transnational talent to extend global presence.
- Expand overseas locations to improve operating efﬁciency in the international market and increase related business activity.
- Develop digital banking infrastructure to provide a smoother user experience.
Impacts from the Competitive Environment, Regulatory Environment, and Overall Business Environment
Taiwan's banking industry has been plagued by excessive competition and a low-interest environment that is largely due to the global economic slowdown and global uncertainty. Furthermore, the international community is increasingly aware of the importance of anti-money laundering mechanisms and oversight. The inﬂuence of local authorities and international law regarding this issue has resulted in the gradual increase of operating costs. Despite such intense environmental challenges, we are continuing to strengthen our home base, expand regionally, and extend into other businesses by combining systems and resources across subsidiaries and maintaining our leadership position by offering diversiﬁed, innovative, and enriched products and services.
We are also committed to ﬁntech development. This is demonstrated through efforts such as establishing a designated digital banking ofﬁce as well as a CTBC Block Chain Laboratory, which incorporates the world's biggest block chain alliance, R3, to actively develop relevant services and technology. We expect these efforts to earn us market-leading status in Taiwan's ﬁntech industry.
Going forward, 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, we anticipate effectively capturing growth opportunities in the Asia-Pacific region, with the hope of helping subsidiary CTBC Bank gain stature as a regional bank and assisting Taiwan Life Insurance and CTBC Securities in expanding their operational scales.
Future Corporate Development Strategy
Reflecting on the changes seen last year, particularly the fluctuations in the global financial environment, further emergence of digital trends, and amendments to legal regulations, CTBC Holding will harness the continued concerted efforts of its professional staff 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 to yield a corporate advantage.
- Broaden the concept of compliance to reinforce corporate governance.
- Manage capital effectively to improve utilization efﬁciency.
- Seek spontaneous growth through M&A.
- Establish the core focus of digital banking and integrate group developments.
- Concentrate on improving our life insurance business to create a powerful proﬁt engine.
- Support government policy to develop business in South and Southeast Asia.
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, we will continue to target increasing value for shareholders as an expression of gratitude for their support.