Balanced growth of four engines contribute to CDF 1Q-3Q19 net profit growth, up 26% YoY

Oct 16, 2019

On October 16, China Development Financial (hereinafter CDF) held an investor conference to report 3Q19 results. Despite facing the Sino-US trade war and the Hong Kong protests, 1Q-3Q19 net profit came in at NT$10.69bn, up 26% YoY, surpassing net profit for the full year of 2018. Alan Wang, President of CDF, pointed out that the four profit engines of insurance, banking, securities, and venture capital & private equity are in place. China Life accounts for 31% of 1Q-3Q19 net profit, KGI Securities 26%, KGI Bank 24% and CDIB Capital Group 18% respectively. Meanwhile, FINI holdings rose from 26% at the start of 2017 to 27.5% in October 2019. Looking forward, CDF will continue to strive for a higher ROE.

President Wang indicated that CDF had reshuffled key executive staff so as to meet its strategic needs and recruited professional personnel of international caliber into the management team this year to lead business forward, including Amy Tsao as new President of KGI Bank, Osama S. Abbasi as new Vice Chairman of KGI Securities, and William Ho as new President of CDIB Capital Group.

China Life focuses on asset and liability management and maintains a positive spread, and generates long term profitability. Net worth of the Company was boosted by the rebound of unrealized gain of financial assets, and the net-worth-to-total-assets ratio increased to 7.26% as of the end of September. Meanwhile, the Company maintains a sufficient RBC ratio at 319% as of the end of June. Looking forward, China Life will persistently enhance product mix by promoting traditional and regular-premium policies to grow value of new business and long-term embedded value.  To strengthen distribution channels, China Life drives the transformation and digitalization of agency organization, and integrates the Group’s resources to increase cross-selling. Further, the Company has initiated the system implementation to prepare for the adoption of IFRS 17.

Thanks to strong core income growth and stable financial investment operations, KGI Bank posted 1Q-3Q19 net profit of NT$2.869bn, up 15.2% YoY. In terms of deposit and loan structure, SME loans grew rapidly. KGI Bank will optimize its deposits mix to reduce funding costs. While the NPL (non-performing loan) ratio has been in a downtrend, NPL coverage ratios also remain solid. KGI Bank will continue to increase its net fee income shares. In the face of digitalization, the bank will adopt a two-pronged approach – optimizing internally and opening externally – and better utilize the technology to improve financial service efficiency.

KGI Securities has maintained a stable brokerage market share. Benefitting from the market expectations for rate cuts, both KGI Securities’ bond and investment businesses delivered stellar profits, driving 1Q-3Q19 net profit up 26% YoY to NT$4.55bn. In 1Q-3Q19, overseas businesses contributed 21% to overall profit. KGI SITE kicked off a transformation plan in early March, 2018. Since then, its AUM has grown exponentially to NT$150bn at end-September, 2019, up 1,502% from the end-2017 level. This is also the first time that KGI SITE made into the industry’s top 10 in terms of AUM.

CDIB Capital Group has achieved the scale of NT$41.1bn of its private equity fund assets under management at end-September, 2019. CDIB Capital Group has completed the final round of fundraising for its Global Opportunities Fund with US$136mn of committed capital as well as its first-round fundraising for CDIB Yida Private Equity Healthcare Fund with RMB$760mn of committed capital. In addition, CDIB Intelligence Partners has been launched and focused on global AI-related investment opportunities with a targeted fund size of US$75mn starting from July, 2019. CDIB Capital is also actively raising funds for a second NT dollar-denominated healthcare fund, targeting NT$3bn.

President Wang emphasized that the company will actively promote corporate governance and sustainable development and fully incorporate ESG issues into its investment analysis and decision-making processes. CDIB Capital, KGI SITE, KGI Bank, China Life and KGI Securities have signed the Stewardship Code for Institutional Investors, released by the TWSE. Notably, China Life is the only financial service provider in the world (and the first in Taiwan) to win the Corporate Register Reporting Awards (CRRA) as the second runner-up. China Life has also been ranked in the top 5% in the Corporate Governance Evaluation by the Securities and Futures Institute for five consecutive years. For its future business strategy, CDF will focus more on businesses that can bring recurring revenue, complimented by those that generate capital gains, to create sustainable and stable earnings growth for CDF shareholders.

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