Dear Fellow Shareholders:
After expanding at a moderate pace for the past several years, the global economic climate maintained some of this momentum at the beginning of 2018. However, uncertainty increased starting in the second quarter as it was negatively affected by successive political and economic events. These included trade conﬂict between China and the United States, widening disparity in various countries' economic growth and monetary policy, as well as severe market ﬂuctuations. Taiwan was not immune to the volatility in the global economic environment, and local economic growth momentum waned as a result.
As a global business operator, the impact of international political, economic, and industrial changes are particularly pronounced on the financial sector, with financial holding companies encountering considerable challenges in their operations because of these uncontrollable external factors. Faced with such difficulties, however, CTBC Financial Holding Co., Ltd. maintained its outstanding performance thanks to its solid business foundation and cooperation within the group. For 2018, CTBC Holding generated after-tax profit totaling NT$36 billion, outperforming its annual operating budget estimate. Despite the market challenges and uncertainties ahead, CTBC Holding will continue to expand its overseas business depth and breadth and maximize group synergy. In addition, our brand values—being caring, professional, and trustworthy—will guide our efforts to strengthen legal compliance and corporate governance and create mutual benefts for our clients, employees, shareholders, and community. Together, these actions will further cement our position as a leading fnancial institution with world-class governance and the complete trust of our clients and shareholders.
Business plans and results
(1) Deepening our overseas business, with a focus on Asia Pacifc
Regarding our growing emphasis on overseas markets, CTBC Holding made notable progress in 2018. Across the Taiwan Strait, Xiamen Jinmeixin Consumer Finance Co., established by CTBC Bank in partnership with Xiamen Jinyuan Financial Holding Co., Ltd. and Gome Holdings Group, offcially commenced business in October 2018. Not only was it the frst-ever cross-strait joint venture consumer fnance company, it also set a record in cross-strait fnancial cooperation by achieving proftability in just its frst year. CTBC Holding also marked a new expansion milestone in China with the opening of CTBC Bank's Shenzhen Branch in January 2019. In the future, the Company will further expand its mainland business based on the customer base established by the existing branches, capturing the business opportunities in the Guangdong, Hong Kong, and Macau area. For the Southeast Asia markets, CTBC Bank had established subsidiaries or branches in the Philippines, Indonesia, Vietnam, and Singapore, and made an equity investment in Thailand. In the coming years, CTBC Holding will continue to seek opportunities to capture new customer base, networks, and complementary businesses as part of our efforts to improve our international reach and expand our regional fnancial business. Moreover, The Tokyo Star Bank in Japan has expanded its business scope by investing in private equity funds. Between 2012 and the end of 2018, it had invested in 12 private equity funds with investment totaling JPY6.46 billion and a strong investment return of 73.3%.
(2) Strengthening group-wide cooperation and harnessing new synergies
CTBC Holding provides a comprehensive suite of financial products and services, including banking, life insurance, securities and investment trust services. The group companies collaborate and share group resources to maximize group synergies. At the end of 2018, CTBC Holding completed the minority share acquisition and now wholly owns CTBC Securities. Looking ahead, CTBC Holding will continue to optimize the scale of group companies through maximizing cross-sell opportunities in order to achieve greater group synergies.
(3) Establishing digital core strengths and accelerating our digital transformation
CTBC Holding and its subsidiaries are dedicated to providing digital fnancial services with a clear blueprint and development roadmap. In addition to promoting digitalization in our processes, we are developing innovative digital fnancial services, such as applying blockchain technology in trade fnance and a platform for tracking the ﬂow of funds. Furthermore, CTBC Holding became one of the frst vendors to join FinTechSpace, a publicly funded Taipei-based incubator launched by the government as part of its efforts to encourage fntech innovation. Looking ahead, the Company will accelerate its digitalization initiatives and expand the scope of digital transformation. In doing so, we will regularly assess our progress to ensure that we adjust our strategies in a nimble, timely manner, thus achieving a steady pace of development.
(4) Enhancing corporate governance and strengthening director functions
CTBC Holding has a strong and diverse corporate governance system in place for our Board of Directors based on the unique business nature of each subsidiary. We seek candidates from different backgrounds who have strong leadership qualifications, international experiences, foresight, and effective communication skills. Currently, CTBC Holding has seven seasoned directors, including one legal professional. Most of our directors have business experience directly relevant to our subsidiaries. In addition, we were the frst fnancial institution in Taiwan to have independent directors fill more than half of its board seats. These efforts are focused on strengthening our corporate governance which we will continue to enhance as necessary.
2018 business plans, strategies, and results
CTBC Holding comprises numerous subsidiaries specializing in diverse services, from banking, securities, life insurance, venture capital, asset management, securities investment trust, security services, and lottery draws. In 2018, 99.67% of recognized proft using the equity method was contributed by the banking and insurance subsidiaries and 0.33% came from other businesses. In 2018, we recorded a consolidated after-tax profit of NT$36 billion and a consolidated after-tax return to common stockholder's equity of 12.09%, among one of the highest for Taiwan fnancial holding companies.
Moreover, CTBC Holding received substantial acclaim in 2018 for its efforts in brand value, business development, financial professionalism, digital innovation, corporate governance, and corporate social responsibility, winning 205 major local and international awards—29 more than the previous year. Among these accolades, CTBC Holding was once again ranked No. 1 in the domestic fnancial sector in the Best Taiwan Global Brands survey. Meanwhile, CTBC Bank was Taiwan's highest-ranked bank for the sixth consecutive year in Brand Finance's Global 500 Index of the world's top banking brands, demonstrating the great achievements made by CTBC Holding in building brand value. We were also highly recognized for our corporate social responsibility efforts, receiving the 2018 Taiwan Corporate Sustainability Award, among many others, in recognition of our group's successful integration of economic, environmental, and social factors into our operating model as well as our support for sustainable development. CTBC Holding is committed to maintaining TRUST— an acronym we coined to emphasize the importance of corporate governance (Transparency), sustainable development (Responsibility), human capital development (Understanding), products and services (Satistfaction), and public welfare (Together). We will honor our commitment to corporate sustainability and create value for our employees, clients, vendors, shareholders, and other stakeholders, positioning ourselves as not only a leading fnancial holding company but also one that possesses a sustainable management mindset and fulflls its corporate social responsibilities.
Latest credit ratings and effective dates
|Moody's||Baa1||Baa1||Stable||Nov. 23, 2018|
|S&P Global||BBB||A-2||Stable||Oct. 15, 2018|
|Fitch||BBB+||F2||Stable||Sept. 17, 2018|
|Fitch||AA-(twn)||F1+(twn)||Stable||Sept. 17, 2018|
|Taiwan Ratings||twAA-||twA-1+||Stable||Sept. 26, 2018|
2019 business overview
CTBC Holding is committed to pursuing stable growth on the back of strong fundamentals. We will continue to prioritize the values of our customers and offer market-leading fnancial services. The Company's future plans are as follows:
(1) 2019 operational guidelines
Expanding overseas business
Our subsidiary CTBC Bank is the most international fnancial institution in Taiwan. It will continue to expand globally, focusing on target customers, customer relationships, and cross-border fnancial services. In addition, we are dedicated to improving our backend infrastructure to enable our global platforms.
Pursuing stable insurance business growth
CTBC Holding's life insurance business has grown rapidly since we expanded into life business, becoming one of our most powerful proft engines. In the future, Taiwan Life Insurance will strengthen its infrastructure to improve operational effciency, thereby solidifying our proft structure. Moreover, by more precisely understanding customers' needs, we will cater to and optimize customer service to respond to the ever-changing business environment.
Accelerating digital transformation
In digital finance, CTBC Holding is working to transform its services and develop new business models. Combined with IT infrastructure enhancement and end-to-end digitalization, these will enable us to better serve our customers.
(2) Operational goals
- CTBC Holding: Strengthen collaboration and cross-selling between subsidiaries to enhance group synergy and provide well-rounded products and services to satisfy customers' needs
- CTBC Bank: Leverage our domestic brand strengths to maximize our competitive advantage, and strengthen our existing overseas products and services by leveraging our cross-border platforms
- Taiwan Life: Continuously enhance stable margin products and build sound investment portfolio for a solid proft foundation
- CTBC Securities: Continue to develop omni-channels and integrate physical and digital channels to increase revenue contributions and overall market share
- CTBC Investments: Expand onshore and offshore fund product lines to expand the scale of operations
- CTBC Venture Capital: Optimize financial performance by identifying companies with strong growth potential and capital market recognition
- CTBC Asset Management: Strengthen real estate management by improving occupancy rates and expand business related to urban renewal projects
- CTBC Security: Enhance management quality and continue to offer reliable service.
- Taiwan Lottery: Develop new products and highlight the public welfare value of the lottery to stimulate sales
(3) Key operational policies
- Build brand equity and promote corporate social responsibility
- Enhance risk management, reinforce legal compliance, and instill a culture of vigilance against money aundering and terrorist fnancing
- Strengthen corporate governance and follow evaluation indicator standards
- Recruit and cultivate an international talent pool and foster a healthy work environment
- Closely follow fnancial performance guidelines and optimize capital planning effciency
Impact from the competitive environment, regulatory environment, and overall business environment
As a result of the long-term low interest rate environment in Taiwan, achieving the desired proftability is challenging. This is compounded by the booming fntech industry, which is intensifying competition in the sector. In addition to this competition, the fnancial sector faced other, even more serious challenges in 2018 because of the wild ﬂuctuations in the global fnancial climate. In 2019 and beyond, we intend to ensure stable proftability by keeping a close eye on market trends and assessing risks prudently while continuing to develop our overseas business and international fnancial services.
Regarding the impact of the regulatory changes, the financial sector has been under particularly strict supervision in recent years as the competent authorities have pushed for more stringent corporate governance practices. CTBC Holding has followed this same spirit, making constant, tangible improvements to our corporate governance system. Over half of CTBC Holding's directors are independent directors, all of whom boast expertise in relevant felds such as fnance, legal and corporate management practices. Given such diverse backgrounds, they are able to supervise CTBC Holding from every aspect, which is highly conducive to the Company's business operations in the long term.
Looking ahead, CTBC Holding will continue to strengthen its twin profitability engines, namely, banking and insurance. Meanwhile, it will leverage opportunities for synergy by integrating the group's rich resources. With the ultimate aim of making CTBC Bank a key player Asia-wide, we will further enlarge our international presence, including through new branches and investment opportunities. We will also expand the scale of Taiwan Life and CTBC Securities. We are confdent that these steps will bring us meaningfully closer to our goal of establishing CTBC Holding as a leading regional fnancial institution.
Future corporate development strategy
Though the Company is faced with constant changes to the fnancial operating environment and the volatile global fnancial markets, the competent authorities have liberalized several digital fnance business initiatives. As a result, regulators have attached growing importance to corporate governance and legal compliance best practices. CTBC Holding will harness the continued concerted efforts of our subsidiary companies to track international economic developments, exploit the opportunities afforded by digital fnance, enhance our corporate governance mechanisms, and comply with all relevant laws and regulations. Going forward, we will continue to uphold our "We are family" brand spirit, be responsive to customers' needs, and develop more convenient and considerate financial services. In addition, we aspire to have the best corporate governance system in place and ultimately trust among clients and shareholders. These efforts aim to establish CTBC Holding as not only Taiwan's top fnancial brand but also a leading player across Asia.