China Development Financial (hereinafter CDF) held an investor conference on April 15. To mitigate impact from COVID-19, CDF said the Group has judiciously formulated and implemented a number of business strategies, including conducting a comprehensive inventory checking and evaluation of the credit quality of its credit assets and investment portfolio. In addition to monitoring each existing VaR (Value at Risk) of trading positions, sensitive positon quotas, and stop-loss limits, the Group has also increased the frequency of evaluating and monitoring the impact of COVID-19 on profit/loss and book values. Meanwhile, it is conducting stress tests as well.
In 2019, CDF was dedicated to redistributing its capital and fully leveraging Group resources to boost cross-selling performance and to push for steady earnings. In 2019, CDF posted net profit of NT$12.796bn, up 63% YoY, with EPS rising significantly to NT$0.88. In 1Q20, CDF reported preliminary net loss of NT$488mn, mainly due to mark-to-market losses from direct investment positions, most of which are unrealized losses and should be written back once the market stabilizes and valuations return to reasonable levels.
In response to the COVID-19 pandemic outbreak, CDF subsidiary China Life has adopted digital tools that boost operational efficiency. KGI Bank has been shielded from strong impact as the Bank’s clients are mostly large-scale corporate business. However, the Bank remains observant of how its SME clients are being affected by the outbreak and it will go along with the government’s bailout plans that use the SME credit guarantee fund to lower its exposure to risks. KGI Securities will strictly control risk exposure and keep track of stocks’ fundamentals and credit conditions to make strategical moves. CDIB Capital might be in a good position to make bargain-price investments that should pay off in the next couple of years, as investment valuations are down significantly and small-/mid-sized venture capital firms are exiting the market.
China Life had a banner year in 2019, when it posted a record-high net profit of NT$13.6bn, up 34% YoY. China Life has adopted the strategy of focusing on high-value products in recent years. By the end of 2019, its asset size had exceeded NT$2tn and book value grew 95% YoY to NT$142.7bn. The RBC (risk-based capital) ratio maintained at a sufficient level of 305%. In 2020, China Life will continue to promote traditional and regular-premium policies and foreign-currency policies. Also, it is increasing the sales weighting of medical and protection insurance policies to boost the value of new business (VNB) growth. In 2020, the investment strategy will be maintaining its prudent risk management, searching for solid investment targets, and focusing on high-value products to enhance VNB margin.
KGI Bank’s core profits have long been growing steadily. With financial investment performance stabilizing, the Bank reported 2019 net profit of NT$3.61bn, up 68% YoY. On the Bank’s sound capital structure and stable asset quality, it will continue to focus on clients’ needs and pursue a core strategy of elevating efficiency, improving return on assets, and lowering capital costs. By utilizing digital technology, optimizing internal procedures and external interfaces, KGI Bank aspires to provide customers with more friendly and convenient user experiences.
KGI Securities posted 2019 net profit of NT$6.05bn, up 61% YoY, driven by the continued growth of its various business units. Going forward, it will continue to transform its traditional brokerage into wealth management business. KGI Securities has also used Fintech to upgrade its digital transaction platform, diversifying sources of revenue by improving regional business development. As of the end of 2019, KGI Investment Trust’s assets under management (AUM) were worth NT$169.2bn, up 451% YoY to rank 7th place in the industry.
In response to CDF’s capital plans, CDIB Capital will continue to dispose its direct investment positons. In 2019, benefiting from a stabilized capital market, the Company posted net profit of NT$2.23bn. As CDIB Capital continues to dispose of proprietary investment positions, its direct investment portfolio valuation had fallen to NT$30.86bn by the end of 2019. The Company is raising a number of forward-thinking theme-based funds, which should increase AUM. As of the end of 2019, the Company’s eleven funds had an AUM value of about NT$42.3bn.
