• Net Profit: TWD120 billion for the first nine months, 79% year-over-year growth.
• Fubon Life Net Profit: TWD77.9 billion, leading among local life peers in Taiwan.
• Taipei Fubon Bank Net Profit: Over TWD20 billion, record high, driven by 9.6% growth in net interest income and nearly 40% growth in net fees.
• Fubon Insurance Profit: Over TWD3.4 billion for the first nine months.
• Fubon Securities Net Profit: Over TWD8 billion, strong growth from market strength and franchise expansion.
• EPS: TWD9.27 for the first 10 months.
• ROA and ROE: Annualized basis at 1.4% and 18%, respectively.
• Book Value Per Share: Over TWD61.
• Fubon Life Premium Growth: FYP growth over 15%, renewal premium over 7%, total premium over 9%.
• Investment Return: Annualized return over 20% from domestic and overseas equities.
• Taipei Fubon Bank Revenue Growth: 17.6%, driven by NII and fees.
• Loan Growth: 10% YTD, 11% YoY, outperforming industry average.
• NPL Ratio: 0.1%, coverage over 1,000%.
• Fubon Insurance Direct Written Premium: Up over 13%, net combined ratio at 85%.
• Fubon Securities Net Profit Growth: 48% increase.

• Warning! GuruFocus has detected 5 Warning Signs with TPE:2881.

Release Date: November 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fubon Financial Holdings Co Ltd (TPE:2881) reported a strong net profit of over TWD120 billion for the first nine months, marking a 79% year-over-year growth.
• Fubon Life achieved a net profit of TWD77.9 billion, leading among local life insurance peers in Taiwan, driven by strong investment results and underwriting premium outcomes.
• Taipei Fubon Bank's net profit exceeded TWD20 billion, setting a new record high, with net interest income growing by 9.6% and net fees increasing by nearly 40%.
• Fubon Insurance reported a profit of over TWD3.4 billion, supported by both underwriting and investment activities.
• Fubon Securities achieved a net profit of over TWD8 billion, benefiting from market strength and franchise expansion.

Negative Points

• Recurring investment income declined year-over-year, primarily due to lower cash dividends, reflecting a shift towards a growth-oriented allocation strategy.
• The recurring hedge cost increased in Q3, attributed to a higher percentage allocated in NDF and currency movements, leading to a slightly higher trend compared to Q2.
• The spread between cost of liability and total investment return remains negative, mainly due to the rise in recurring hedge costs.
• The NPL ratio for personal unsecured loans edged up to 27 bps, influenced by the expiration of government measures related to COVID.
• Credit card NPL ratios slightly increased, reflecting the expansion of the business and the scale of active cards.

Q & A Highlights

Q: Could you provide some color on the main drivers of the VNB margin improvement in the life insurance sector? Is it purely a mix impact, or is there a like-for-like increase in margin? What is the VNB margin expectation for 2025? A: The VNB growth this year is over double digits, mainly driven by the sale of health products in the second quarter, which slightly increased the VNB margin. We expect the VNB to continue growing next year, with the VNB margin remaining at a similar level.

Q: What is the guidance for hedging costs in 2025, and what drove the real estate return improvement? A: For 2025, we expect the overall hedging cost to be around 100 to 150 basis points. The real estate return improved to zero for this quarter due to upcoming lease expirations and planned renovations. We do not anticipate further significant declines as we are negotiating with tenants and expect higher rents post-renovation.

Q: Can you explain the notable increase in domestic bonds allocation and the slight decrease in foreign bonds? A: The increase in domestic bonds is due to both active position increases and price appreciation. We did not sell foreign bonds; the decrease is due to asset allocation growth and NT dollar appreciation, which diluted the foreign bond position.

Q: What are the expectations for NIM and loan growth in 2025, and how do you see the credit card NPL ratio evolving? A: We expect NIM to face pressure due to anticipated interest rate cuts, but plan to increase it through liability and asset portfolio adjustments, aiming for mid-single-digit growth. Loan growth is expected to be in the high single digits due to mortgage loan limitations. The credit card NPL ratio should stabilize next year as the credit portfolio matures.

Q: Could you confirm the hedging cost outlook for 2025? A: The hedging cost outlook for 2025 is expected to be between 100 to 150 basis points.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.