LOOKING FORWARD WITH VISION, CLARITY AND CARE
Chinatrust Financial nan nc Holding ding i Co., Ltd Ltd. td. d
ANNUAL REPORT 2007
Chinatrust Financial Holding Co., Ltd.
Financial Highlights
01
Letter to Shareholders
02
Company ProďŹ le
10
The Organization
22
Business Overview
30
Social Responsibility
46
Financial Report
50
Special Notes
62
Financial Hightlights
In millions, except per share date
2007 Consolidated
2006 Consolidated
NT$
USD
NT$
USD
(Loss) Income before Income Tax
(14,758)
(453)
20,541
625
Net (loss) Income
(10,200)
(313)
16,120
491
1,706,521
52,354
1,714,591
52,195
123,318
3,783
145,597
4,432
Earnings per share-before income tax
(2.02)
(0.06)
2.83
0.09
Earnings per share-after income tax
(1.46)
(0.04)
2.20
0.07
11.513
0.35
14.814
0.45
ITEM븋 FOR THE YEAR
AT THE YEAR END Total Assets Stockholders' Equity
PER SHARE
Stockholders' Equity per Share-common stock
Group Capital Adequacy Ratio
121.11%
139.44%
Return on Equity-after income tax
(11.82%)
15.88%
Return on Assets-after income tax
0.68%
1.02%
1. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$1 2. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$1 3. (123,317,876-30,000,000-1,432,290)/7,986,083 4. (145,597,270-40,000,000-612,000-8,630)/7,090,749
This annual report is a simpliďŹ ed version of its full conrent. Please referthe annual report in Chinese or visit our website at www.chinatrust.com.tw for complete discourse required by the regulations.
1
L e t t e r To S h a r e h o l d e r s
In 2006, the global economy was challenged by hikes in crude oil prices and interest rates, yet at the same time witnessed a booming European economy and robust growth in China and other emerging markets. Forecasts by leading international institutions, such as GII, IMF, EIU, and the United Nations in August, September, and October, revealed that the global economic outlook for 2006 was reviving, with a growth range of about 3.8 to 5.1 percent. Meanwhile, due to continued relaxed monetary policies in many countries, there was an abundance of liquidity, which led to rising prices in financial stocks, bonds, raw materials and real estates and therefore making global financial assets market prosperous. Unfortunately, the situation in Taiwan’s financial industry was not as positive. Taiwanese banks went through a period of cutthroat competition a few years ago, which forced them to adopt more lenient loan policies. The inevitable result was significant damage to financial institutions, particularly because of the “dual card crisis” in 2006. In turn, banks adopted increasingly stringent policies for granting unsecured loans. In an attempt to solve the insolvency problem caused by over-extended credit, Taiwanese government developed an “Interbank Debt Relief Program” to address these liabilities, which gradually helped bring the consumer credit crisis under control. On the other hand, banks committed themselves to writing off bad debts and improving asset quality, which helped move Taiwan’s consumer finance market closer to normalization. Faced with such a competitive marketplace, Chinatrust has adopted a bank-centric strategy, featuring an innovative range of financial products and services that are more customeroriented. Attributed to the concerted efforts of its management and entire staff, Chinatrust Financial Holding Co., Ltd. (CFHC), as in the past, has been able to continuously grow shareholder value. Although it reported the first loss in company history in 2006, as a result of the consumer credit crisis, the bank persevered with the strategies of “Strengthening Asset Quality”, and “Diversifying Profit Sources”. Through it all, CFHC managed to achieve a remarkable performance both in corporate banking as well as in wealth management, while making vast improvements in unsecured loans asset quality. All of these have cemented a stronger foundation for CFHC, and paved the way for a brighter future.
2
Adjusting profit sources, diversifying operating risk Taiwanese corporations have increasingly tried to develop their business in overseas markets over the past few years. Overbanking in Taiwan and an over-supply of funds led to reduced profits from the domestic corporate loans sector. To cope with the rapidly changing economic climate, Chinatrust Commercial Bank (CTCB), a subsidiary of the CFHC, embarked on an aggressive project several years ago to diversify its financial undertakings. CTCB tried to reduce its dependence on the lending business by generating additional fee income. Meanwhile, it made a concerted effort to diversify its operating risks in the hope of delivering investment returns for shareholders amidst a challenging financial industry stry climate with tough competition. In corporate banking services, CTCB took advantage of its ts enormous customer base to boost its Cross-Sell Ratio. It started to build ld closer tie with its customers through more comprehensive financial services, ervices, and augment its revenue from sources other than loans to achieve eve a win-win payoff. Attributed to this foresight and strategy, CTCB produced uced d strong non-spread income in 2006; virtually triple the spead ng income. Moreover, CTCB remained the leader in the factoring and syndication businesses. In the years ahead, CTCB will continue to offer a variety of products and focus on “Customer-Oriented” services. er When it comes to retail banking, CTCB remains the leader in Taiwan. It has been awarded the ultimate accolade of “Taiwan’s Best Private Bank” by “Euromoney” for three consecutive years (2004, 2005, and 2006). This honor is further evidence of how much clients and the market have approved of and supported CTCB’s wealth management services. CTCB has also launched its “Financial Advisory System” in 2006, which offered one of the most ents. analytical and effective asset allocation services to its VIP clients.
3
Over the past twenty-two years, through the “Light up a Life” fund-raising charity campaign, the foundation has contributed to 28 social welfare organizations. With over $480 million raised for charity so far, Chinatrust Charity Foundation has helped put a smile on the faces of nearly 80,000 children. In 2006, Chinatrust Commercial Bank won the bid to run Taiwan’s official public lottery. CTCB has pledged to contribute NT$2 billion to the government every year to run this public welfare program. The public lottery business offers thousands of job opportunities to underprivileged people island-wide. Today, the lottery business is run through over 5,000 computerized outlets and more than 12,000 traditional and instant lottery outlets.
Growing earnings, creating sharholder value and aiming to be a top-notch international financial institution Chinatrust will focus on the following areas in 2007: Cultivate company culture and create value to customers. Improve asset quality and implement risk-based pricing policies. Expand presence in Greater China and accelerate overseas business expansion. Enhance brand value and strengthen corporate governance. Fulfill corporate responsibilities by showing greater support to underprivileged citizens. CFHC is committed to lead the industry by best practices and capture opportunities from new businesses and markets. Starting from the strength of our home base in Taiwan, Chinatrust will continue to penetrate into the Greater China region, expand in Asia, and extend its network on the globe. Through our dedication and unyielding efforts, we envisage a worldclass brand for Chinatrust and create sustainable value for shareholders.
Jeffrey L.S. Koo Chairman
6
7
L e t t e r To S h a r e h o l d e r s
Chinatrust Financial Holding Company Chinatrust Financial Holding Company (hereafter “the Company” or “CFHC”) was founded on May 17, 2002 to provide integrated services to its customers and to establish an international and multi-faceted financial entity. With Chinatrust Commercial Bank (CTCB) as the flagship organization, Chinatrust Securities Company (Chinatrust Securities) and Chinatrust Insurance Brokers Company (Chinatrust Insurance) were amalgamated into a single new organization in the initial phase. Subsequently, other subsidiaries of CFHC, Chinatrust Venture Capital Corp. (Chinatrust VC), Chinatrust Asset Management Company (Chinatrust Asset), Chinatrust Bills Finance Corporation (Chinatrust Bills), Chinatrust Security Company (Chinatrust Security), and the Taiwan Lottery Corporation (TLC), were also included within the Company. The business activities of member companies are classified into three major categories, namely retail banking, consumer finance, and institutional banking. This integrated matrix structure, comprising both divisions and subsidiaries, will enable resource sharing and cross selling among each unit. It will also ensure the provision of multi-faceted finacial services to customers. also ensure the provision of multi-faceted financial services to customers. The main objectives of CFHC include the following: To establish CFHC as the leading and most trustworthy financial institution. To provide the most comprehensive and one-stop financial services that lead to complete customer satisfaction. To be the leader and pioneer in providing new financial products and solutions, and serve as a bellwether in the financial sector. To be the best run Chinese financial institution in the world. Chinatrust Financial Holding Company will continue to uphold its tenet “to maximize value for its shareholders”. The company will map out its strategic business plans, strengthen its competitiveness, and provide more convenient the industry, as well as the best run Chinese financial institution in the world..
8
Credit Rating Types of credit rating
Chinatrust Financial Holding Company Names of credit rating agencies
Credit rating level
Outlook
Additional notes
Effective date
Long term Short term
Foreign currency
National
Moody’s
-
-
Stable
Issuer Rating: Baa1
2006.12.01
Standard & Poor’s
BBB
A-3
Positive
-
2006.10.04
Fitch
A-
F2
Negative
Individual: B/C Support: 5
2006.11.22
Taiwan Ratings
twAA-
twA-1
Stable
Credit Worthiness: Very Strong
2006.10.04
Fitch (twn)
AA (twn)
F1+ (twn)
Negative
Individual: B/C Support: 5
2006.11.22
Honor/Awards
Chinatrust Financial Holding Company Items
Name of agencies
Asia’s Best Companies 2006 - The Best Managed Company, Best Corporate Governance & Best Investor Relations in Taiwan, Best Investment Bank in Taiwan &
FinanceAsia
Chinatrust Commercial Bank Originally known as the China Securities Investment Corporation (CSIC), the bank was established back in 1966, and became the Chinatrust Commercial Bank, or CTCB, in 1992. Its extensive range of services include savings deposits, loans, guarantees, foreign exchange, OBU, trusts, credit/debit cards, securities, bonds, financial derivatives, factoring, safe deposit boxes, electronic banking, and others. To expand its operations, CFHC acquired Grand Commercial Bank in December of 2003, while its subsidiary CTCB acquired Fengshan Credit Cooperative in October 2004. As of December 31, 2006, CTCB had 111 domestic outlets and 71 overseas outlets, with 3,399 domestic ATMs. Total deposit balances reached NT$1.24 trillion, while total assets exceeded NT$1.6 trillion, thereby firmly positioning it on top of the list of all non-government banks in Taiwan.
9
16
17
M a n a g e m e n t Te a m
Chinatrust’s amangement team has long been recognized international. Foreign ownership accounted for over 50% of our common shares at the end of 2006. this raito was the highest among domestic financial institutions.
Jason Wang
Julie L. Yang
James J. Sheu
Oliver Shang
Current Position: Chief Strategic OfficerChinatrust Financial Holding Company Executive Vice PresidentChinatrust Commercial Bank Significant Experience: Senior Vice PresidentChinatrust Commercial Bank Education: Master of Public Finance, National Chengchi University.
Current Position: General AuditorChinatrust Financial Holding Company Executive Vice PresidentChinatrust Commercial Bank Significant Experience: Senior Vice President-Chinatrust Commercial Bank Education: MBA, The City University of N.Y. Baruch College, USA
Current Position: President & Chief Risk Officer-Chinatrust Financial Holding Co. Deputy PresidentChinatrust Commercial Bank. Significant Experience: Executive Vice PresidentChinatrust Commercial Bank. Education: MBA, Wharton Graduate Division of
Current Position: President of Retail GroupChinatrust Financial Holding Co. Executive Vice PresidentChinatrust Commercial Bank Chairman-Taiwan Lottery Corp. Significant Experience: Chief Administrative OfficerChinatrust Financial Holding Co. Senior Vice PresidentChinatrust Commercial Bank Education:
MBA, University of Delaware, U.S.A.
Jack T.K. Cheng
Charles L.F. Lo
Connie Lin
Current Position: Chief Credit OfficerChinatrust Financial Holding Company Executive Vice PresidentChinatrust Commercial Bank Significant Experience: Senior Vice PresidentChinatrust Commercial Bank Education: Bachelor of Business Administration, National TaiwanUniversity.
Current Position: President of Consumer Finance GroupChinatrust Financial Holding Co. Chairman & President of Retail Banking GroupChinatrust Commercial Bank Representative of R.O.C. Product Development & Marketing CommitteeVISA Int’l Organization. Significant Experience: PresidentChinatrust Financial Holding Co.
Current Position: Chief Human Resources Officer-Chinatrust Financial Holding Co. Senior Vice PresidentChinatrust Commercial Bank. Significant Experience: Vice PresidentChinatrust Commercial Bank Education: Shin-Ming High School of Commerce
Education:
Bachelor of Economics, National Chung Hsing University. Bachelor of Economics, National Chung
20
Consolidated Balance Sheet
CHINATRUST FINANCIAL HOLDING COMPANY LIMITED AND SUBSIDIARIES
Expressed in Thousand of New Taiwan Dollars
December 31, 2007 & 2006
2006
2007
LIABILITES AND STOCKHOLDERS EQUITY
Amount
Amount
Change in %
Liabilites븋 Deposit from Central Bank and other Bank
$
(453)
27,456,799 (313)
Earnings per share-before income tax Earnings per share-after income tax Stockholders' Equity per Share-common stock
$
27,456,799
1,204,227,308
1,204,227,308
-
28,345,123
28,345,123
216
116,345,566
116,345,566
14
23.455,456
15
52,354
Group Capital Adequacy Ratio
(58)
23.455,456 3,783
Return on Equity-after income tax
27,456,799
27,456,799
13
Return on Assets-after income tax
1,204,227,308
1,204,227,308
16
Financial liabilites measured at fair value through profit or loss Stockholders' Equity per Share-common stock
28,345,123
28,345,123
5
116,345,566
116,345,566
(20)
3,456.455,456
3,456.455,456
1
(0.06) (0.04)
Total liabilities
0.35
Deposit from Central Bank and other Bank Earnings per share-before income tax TOTAL LIABILITIES AND SHOCKHOLDERS’ EQUITY
27,456,799
27,456,799
12
1,204,227,308
1,204,227,308
(24)
$ 3,456.455,456
$ 3,456.455,456
(15)
1. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$1 2. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$1 3. (123,317,876-30,000,000-1,432,290)/7,986,083 4. (145,597,270-40,000,000-612,000-8,630)/7,090,749 5. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2006 of NT $32.596=US$1 6. U.S. Dollars amounts are converted at the prevailing exchange rate on Dec.31, 2005 of NT $32.850=US$1 7. (123,317,876-30,000,000-1,432,290)/7,986,083 8. (145,597,270-40,000,000-612,000-8,630)/7,090,749
54
Consolidated Balance Sheet
CHINATRUST FINANCIAL HOLDING COMPANY LIMITED AND SUBSIDIARIES
Expressed in Thousand of New Taiwan Dollars
December 31, 2007 & 2006 LIABILITES AND STOCKHOLDERS EQUITY
2007
2006
Change in
Amount
Amount
%
Liabilites븋 Deposit from Central Bank and other Bank
$
(453)
27,456,799 (313)
Earnings per share-before income tax Earnings per share-after income tax Stockholders' Equity per Share-common stock
27,456,799
(58)
1,204,227,308
1,204,227,308
-
28,345,123
28,345,123
216
116,345,566
116,345,566
14
23.455,456
15
52,354
Group Capital Adequacy Ratio
$
23.455,456 3,783
Return on Equity-after income tax
27,456,799
27,456,799
13
Return on Assets-after income tax
1,204,227,308
1,204,227,308
16
Financial liabilites measured at fair value through profit or loss Stockholders' Equity per Share-common stock
28,345,123
28,345,123
5
116,345,566
116,345,566
(20)
3,456.455,456
3,456.455,456
1
(0.06) (0.04)
Total liabilities
0.35
Deposit from Central Bank and other Bank Earnings per share-before income tax Earnings per share-after income tax
27,456,799
27,456,799
12
1,204,227,308
1,204,227,308
(24) (15)
28,345,123
28,345,123
116,345,566
116,345,566
Group Capital Adequacy Ratio
23.455,456
23.455,456
54
Return on Equity-after income tax
27,456,799
27,456,799
34
Return on Assets-after income tax
1,204,227,308
1,204,227,308
(160)
28,345,123
28,345,123
Stockholders' Equity per Share-common stock
Financial liabilites measured at fair value through profit or loss
116,345,566
116,345,566
2
Return on Equity-after income tax
3,456.455,456
3,456.455,456
13
Return on Assets-after income tax
116,345,566
116,345,566
(33)
23.455,456
23.455,456
-
27,456,799
27,456,799
12
1,204,227,308
1,204,227,308
3
28,345,123
28,345,123
15
116,345,566
116,345,566
Stockholders' Equity per Share-common stock
Financial liabilites measured at fair value through profit or loss Stockholders' Equity per Share-common stock Subtotal Stockholders’ Equity for Parent Company Miority interest Total Shareholder’s Equity Commitments and contingencies TOTAL LIABILITIES AND SHOCKHOLDERS’ EQUITY
55
3,456.455,456
3,456.455,456
$ 3,456.455,456
$ 3,456.455,456
-
Chinatrust Financial Holding Company 18F, 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 72 22 20 02 www.chinatrustgroup.com.tw
Chinatrust Commercial Bank 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 72 22 20 02 www.chinatrust.com.tw
Chinatrust Securities Company 10F, 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 87 80 88 67 www.win168.com.tw
Chinatrust Insurance Brokers Company 13F, 16 Young-ji Road, Taipei, Taiwan ROC. Tel: 886 2 27 68 05 05 www.ctbrokage.com.tw
Chinatrust Venture Capital Corporation 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 27 22 20 02 www.chinatrustgroup.com.tw/group/investment.htm
Chinatrust Asset Management Company 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 72 22 20 02 www.chinatrust.com.tw
Chinatrust Bills Finance Corporation 11F, 98 Nanking E. Road, Sec 2, Taipei, Taiwan ROC. Tel: 886 2 25 22 22 22 www.ctbf.com.tw
Chinatrust Security Company 15F, 3 Sung Shou Road, Taipei, Taiwan ROC. Tel: 886 2 72 22 20 02 www.chinatrust.com.tw/group/safe.htm
Taiwan Lottery Corporation
Designed: http://www.newyorkdesign.com.tw
9F, 133 Minsheng E. Road, Sec 4, Taipei, Taiwan ROC. Tel: 886 2 21 75 19 15 www.taiwanlottery.com.tw
China Trust Holding Co., Ltd. Annual Report 2007