Dear Fellow Shareholders:

2019 was a year marked by uncertainty in global political-economic conditions, with factors such as the U.S.–China trade war, Hong Kong protests, and Chinese government takeover of small and medium-sized banks, followed by the COVID-19 pandemic in early 2020. Collectively, these events have had a dramatic impact on the global financial industry. However, due to the monetary easing implemented by major central banks worldwide, the financial market has seen some bullishness, with Taiwan's equity market reaching a 30-year high at the end of 2019.

Operating in this globalized economy, the financial holding industry has been greatly impacted by the aforementioned international political, economic, and industrial changes, particularly the pandemic, which clearly poses a dramatic challenge to the industry. We quickly implemented various measures to counter the outbreak and live up to our responsibility as a leading Taiwanese financial institution and a global corporate citizen. During this crisis, we have maintained sound business operations while supporting government relief program and policies by launching financial assistance measures for affected customers. We will continue working hand in hand with the government to provide a public safety net and together overcome the challenges ahead.

There is no doubt 2020 is going to be a difficult year, but we will continue to provide the most comprehensive financial services by expanding our international business and the cross-selling efforts of our subsidiaries as well as by further strengthening our risk control, regulatory compliance, and corporate governance. Building on our well-established foundation, we will continue to work in the common interests of our customers, employees, shareholders, and community to cement our status as a financial service institution that is trusted by all.

2019 business plans, strategies and results

We have subsidiaries in banking, securities, insurance, venture capital, asset management, securities investment trusts, security, and administering the national lottery. In terms of our 2019 profits, 99.65% of investment gains and losses recognized using the equity method came from our banking and insurance subsidiaries, and 0.35% came from other businesses. Our consolidated after-tax net profit totaled NT$42.9 billion, outperforming its annual operating budget estimate, while our consolidated after-tax return on common shareholders’ equity was 13.04%, one of the highest rates among all publicly listed financial holding companies.

In addition, we made substantial progress in the following areas in 2019:

1. Overseas business expansion

The expansion of overseas business is a main focus of CTBC Holding, and we made strong progress in our overseas development strategy last year. Notably, our new branch in Shenzhen, China, was officially opened in February. With the solid foundation laid by our branches in Hong Kong and Guangzhou, the Shenzhen Branch is primed to seize opportunities in the Guangdong–Hong Kong–Macau Greater Bay Area and has a firm grasp of the financial markets in South China. In the future, Greater China will become one of CTBC Holding's main sources of overseas profit.

In Southeast Asia, we have made great progress in our expansion strategy, with branch offices in the Philippines, Indonesia, Vietnam, and Singapore as well as a large stake in a local financial holding company in Thailand. As we continue to make inroads in Southeast Asia, we will localize our business further by searching for more local strategic partners in countries where we have already established branch operations.

In regions where we have yet to establish branch offices, we will continue searching for suitable target areas to extend our international network. Regarding our subsidiary Tokyo Star Bank’s private equity fund investments, which started in 2012, the bank held 12 funds totaling JPY 6.82 billion as of December 2019, bringing the overall cumulative investment return to 75.7%.

2. Stable insurance profits

CTBC Holding has experienced rapid growth since entering the insurance business, and the life insurance sector is now an important profit engine for us. In 2019, the Financial Supervisory Commission (FSC) announced that Taiwan would implement International Financial Reporting Standard (IFRS) 17 starting in 2025 as well as establish new regulations regarding the sale of insurance products.

Taiwan Life has already started implementing business transformation measures to prepare for possible future changes to its business operations. By optimizing its product mix, it is ensuring a stable life insurance profit base with which to cope with the changing business environment to come. Driven by this transformation strategy and the seizing of market investment opportunities, Taiwan Life's after-tax net profit reached NT$13.1 billion in 2019—a new record high for the 73-year-old company.

3. Digital transformation and innovation

The development of digital finance is critical to the future growth of CTBC Holding and our subsidiaries. We are committed to becoming a regional leader in digital finance through digital transformation initiatives that enhance customer experience. To this end, we worked tirelessly in 2019 on the development of innovative digital financial services. For instance, for our global letter-of-credit blockchain platform, which reduces transaction time substantially for importer and exporters, we made a critical advancement by conducting the world’s first ever blockchain letter-of-credit transaction to span Asia and Europe. In addition, we have developed innovative financial services, including an AI-powered chatbot, AI credit document review service, and bill deposit machine, and are optimizing our digital service processes and actively engaging in fintech digital lab experiments. Going forward, the Company and its subsidiaries are determined to push ahead with their digital transformation, deliver improved fintech-based service experiences, and combine AI, Big Data, blockchain, and cloud services to offer customers the safest and fastest financial services available.

Moreover, we received substantial acclaim in 2019 for its excellence in brand value, business development, digital innovation, corporate governance, and corporate social responsibility (CSR), winning 199 major local and international awards. With an estimated brand value of US$604 million, our Company ranked No. 1 among all Taiwan financial institutions in the 2019 Best Taiwan Global Brands report.

Our CTBC Bank subsidiary was ranked 148th among the global top 1,000 banks by The Banker, taking first place in Taiwan for the third consecutive year and marking the first time a Taiwanese financial institution has ranked in the global top 150. The Bank was also selected as the Best Bank in Taiwan by The Asset, Euromoney, Asiamoney, and FinanceAsia.

Meanwhile, Taiwan Life was ranked 49th by Brand Finance in its index of the world’s 100 most valuable and strongest insurance brands, and received Risk Management, Insurance & Finance magazine’s Best Quality Awards of Insurance and its Honorable Mention award in both the Highest Reputation and Best Agent categories.

As well as being recognized for its business performance, CTBC Holding was highly commended last year for its efforts integrating sustainable economic, environmental, and social development into its operating model, including with a 2019 Taiwan Corporate Sustainability Award. And already in 2020, we have established a dedicated Corporate Sustainability Office to further support our CSR initiatives.

Our entire sustainability policy is guided by TRUST—an acronym we coined to emphasize the importance of corporate governance (Transparency), environmental sustainability (Responsibility), employee welfare (Understanding), customer service (Satisfaction), and community engagement (Together). We strive to 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 financial holding company but also one that possesses a sustainable management mindset and fulfills its corporate social responsibilities.

Latest credit ratings and effective dates

Rating agency Credit rating Outlook Publication date
Long-term Short-term
Moody's Baa1 Stable Dec. 18, 2019
S&P Global Ratings BBB A-2 Stable Oct. 17, 2019
Taiwan Ratings twAA- twA-1+ Stable Oct. 17, 2019
Moody's Baa1 Baa1 Stable Dec. 18, 2019
S&P Global Ratings BBB A-2 Stable Oct. 17, 2019
Taiwan Ratings twAA- twA-1+ Stable Oct. 17, 2019


Impact from the competitive environment, regulatory environment, and overall business environment

Faced with a long-term low interest rate environment and the entrance of new fintech firms following the regulator’s issuance of three digital-only bank licenses, banks have encountered new challenges in the already oversaturated market. We will continue to expand our overseas business, actively invest in fintech, build sustainable insurance business operations, and promote cross-selling efforts among our subsidiaries. With this strategy, we hope to maintain our leading market position.

The financial industry is highly regulated. In 2019, under the continued strict supervision and control of the competent authorities, Taiwan rose to the leading anti-money laundering review category of the Asia-Pacific Group on Money Laundering evaluation, namely the regular follow-up list. In response to the increasingly stringent supervision, CTBC Holding has continued to improve its corporate governance mechanisms. In Taiwan, we were the first financial holding company with over 50% of its board seats filled by independent directors; in addition, each specializes in business management, accounting and finance, risk management, or the law. To further operate according to corporate governance standards appropriate for an international company and to ensure board independence, we have placed a three-term limit on independent directors. With our sound corporate governance system, we are operating in line with international corporate governance best practices, facilitating our sustainable development.

In response to the pandemic, governments worldwide have implemented mandatory measures to minimize the spread of disease, such as stay-at-home orders and non-essential business closures. The global economy has been severely impacted, with the IMF forecasting it to contract 3% in 2020, and oil prices are continuing to plunge. Although Taiwan’s swift and effective response to the virus has so far prevented mass transmissions and avoided major disruptions, businesses and consumer spending have still been considerably affected. As of writing, there remains no clear end to the crisis in sight and the eventual global economic recovery is clouded with uncertainty. Due to this economic landscape, the Company’s performance in 2020 may be impacted, but this will not draw our attention from prioritizing the health of our employees and giving our customers the assistance they need. Here’s how we are mitigating the shock to our operations in these three key areas:

  1. Business operations: To ensure the continuity of each of our business lines, we have defined various scenarios and conducted resilience stress tests. We have also accelerated the deployment of online and digital services in order to capture new contactless business opportunities, and have realized investment gains from market swings.
  2. Workforce health: Our first priority is the health of our employees. To this end, we have implemented flexible work schedules and moved some staff to remote workspaces to reduce crowding. We have also prepared a work-from-home plan to be instituted if the situation requires it. Outside Taiwan, all of our overseas branches and subsidiaries are maintaining only the minimum operations necessary to meet customers’ needs. As the pandemic evolves, we are ready to adjust as need be to ensure the health and safety of our employees.
  3. Customer support: Our subsidiaries have introduced a range of support measures, including adjusting the interest rates of personal and corporate loans, deferring payment deadlines, and canceling life insurance waiting periods.

2020 business overview and strategies

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 financial services. Our future plans are as follows:

(1) 2020 operational guidelines

  1. Strengthening overseas business and seeking strategic partners

    CTBC Holding is the most internationalized financial institution in Taiwan. In terms of overseas business development, we will continue to provide comprehensive cross-border financial services and strengthen our overseas operation and management capabilities to improve our operating efficiency. We will also continue to evaluate investment opportunities in overseas markets and actively seek strategic partners to further improve our existing business, and will search for targets suitable for M&A and equity investment to further expand new business.

  2. Transforming our insurance business and building a stable foundation for profitability

    Our holding company has grown rapidly since launching our insurance business, which has since become an important profit engine. We are working to ensure it is a healthy insurance company impervious to large-scale fluctuations in net value and profit caused by market changes. To achieve this, we will optimize our overall product mix, strengthen asset–liability matching, improve stable income, reduce net worth fluctuations, understand our clients' needs, and optimize the customer experience and operating efficiency. Furthermore, we will leverage Big Data and build new core systems to achieve competitive and stable profitability.

  3. Strengthening digital resources and integrating and speeding up financial digital transformation

    For CTBC Holding and its subsidiaries, the Chief Technology Officer will lead integration of the group's digital resources in the development of digital finance. Building on our existing digital transformation, which focused on platform optimization, our innovation efforts moving forward will lead business units to use fintech to develop products and services, optimize processes in client and employee experience, and gradually build a foundation for data intelligence and a new generation of information system reengineering. In addition, we will continue to reinforce a culture of innovation within CTBC Holding as well as through interfacing with external third parties.

(2) Operational goals

  1. CTBC Holding: Strengthen collaboration and cross-selling between subsidiaries to enhance group synergy and provide well-rounded products and services to satisfy customers' needs.
  2. CTBC Bank: Maintain its leading position in the domestic market, strengthen the financial services of overseas operations, improve cross-border platform linkages, and expand international business.
  3. Taiwan Life: Continually optimize its product mix and investment portfolio, and lay a solid foundation upon which the company can generate stable profits.
  4. CTBC Securities: Actively expand its digital channels, both online and offline, and increase revenue growth and overall market share by realizing capital gains and assessing opportunities in overseas markets.
  5. CTBC Investments: Design products based on the needs of investors and leverage affiliate companies to drive business expansion.
  6. CTBC Venture Capital: Optimize financial performance by identifying companies with strong growth potential and high market recognition, and actively participate in fintech investment opportunities.
  7. CTBC Asset Management: Strengthen real estate management by improving occupancy rates and expanding business related to urban renewal projects.
  8. CTBC Security: Enhance management quality and continue to offer reliable service.
  9. Taiwan Lottery: Continue to develop new products with creative marketing strategies to promote public welfare and vitalize the lottery market.

(3) Key operational policies

  1. Implement risk management and adhere to laws and regulations.
  2. Improve corporate governance and strengthen our brand value.
  3. Train high-quality talent and foster a comfortable workplace environment.
  4. Emphasize financial discipline and enhance capital utilization efficiency.
  5. Understand customer needs and provide comprehensive financial services.
  6. Actively participate in social welfare and emphasize CSR.

Future corporate development strategy

Myriad political and economic uncertainties will remain in 2020. With supervisory authorities becoming increasingly strict, emerging fintech players entering the market in large numbers, and COVID-19 influencing the global economy and financial industry, the overall business environment is still downbeat. Facing this rapidly changing external environment, CTBC Holding will adhere to the principle of sound operation. In addition to continually improving our existing business, we will also actively operate in accordance with the Company's strategies, namely expanding our market share in overseas markets, accelerating our digital and IT transformation, and stabilizing the profit stream from our insurance business.

Going forward, we will continue to uphold our "We are family" brand spirit, engage with our community, and stand together to overcome the challenge. We aspire to have the most robust corporate governance system in place and maintain the complete trust of our customers and shareholders. Together, we are confident these efforts will cement our Company’s status as a leading regional financial institution.