E.SUN Financial Holding Co Ltd

TWSE:2884

Q2-2025 Earnings Call

[Unknown Executive]

Dear investors, welcome to the quarterly earnings results of E.SUN Financial Holding Company for the second quarter of 2025. At the beginning, I will invite Sarah Chen, the Vice CFO of E.SUN. She will give us a short opening note. Then I will hand it over to Martin. He will walk us through the presentation. So first, Sarah, please say some words to our investors.

[Sarah Chen, executive]

Hi, investors. E.SUN delivered a strong performance in the first half of 2025, marking a record high in net profit for any single half, solid growth across all core businesses, coupled with high single-digit growth in overseas profit. In the first half, net fee income set a new record high, growing at a rate of 7.7% Y-o-Y. Wealth management fee income also achieved a record high in which bancassurance grew by 33%. Last week, we announced the financial results of July. Growth rate of net profit for the first 7 months was 30.9%. Net fee income continued to grow. We are optimistic about our performance this year and expecting to achieve good results.

With well execution of cost management, CI ratio decreased to 46.9% in the first half. E.SUN will continue to strictly control the growth rate of expense to single digit for the whole year. For overseas expansion, overseas branches and subsidiaries net profit continue to grow, and FSC has approved the application of Toronto branch, Mumbai branch and Sales rep office. E.SUN will continue to expand our footprint across Asia Pacific. PGIM SITE has officially become the subsidiary of E.SUN in July. E.SUN is among the first financial institutions to enter the Asia Asset Management Center in Kaohsiung.

We are optimistic about the synergy between bank, securities and asset managers. Further expand the wealth management business and engagement with high net wealth individuals. Lastly, E.SUN's outstanding performance has received recognition from international institutions. We are highly commended by the asset of the [ Best ] Credit Bank for high net worth individuals in 2025. And E.SUN has been listed in top 5% in corporate governance assessment by Taiwan Stock Exchange for the 10th consecutive year. We will continue to deliver value to our shareholders. Thank you for your listening.

[Unknown Executive]

Thank you, Sarah, for the summary of the quarterly results, and then I will have my colleague, Mr. Martin Lin. He will walk us through the presentation.

[Martin Lin, executive]

Dear investors, this is Martin. And today, I will begin the presentation with the summary of E.SUN Financial Holding Company on Slide Page #4. And in the first half, both E.SUN Financial Holding Company and Bank had a very steady growth of the asset. The total asset of both Financial Holding Company and Bank exceeds TWD 4.1 trillion. And for the key financial indicators, the book value per share of Financial Holding Company is TWD 15.54 and the double leverage ratio is 114.96%.

And for the Financial Holding Company's CAR ratio, it was 133.1% and for the physical channels, domestically, now E.SUN Bank runs 138 branches in Taiwan. And for the overseas channel, we run 33 overseas operating sites in 11 countries. And for the security branch remained the same as 17 branches.

And on Page 5 is the business and financial review of Q2 2025. And for the financial performance, the net revenue of financial holding company was TWD 43.1 billion, which grew by 19.3% year-on-year and net profit was TWD 16.8 billion, which grew by 31.9% year-on-year. And for the financial holdings, EPS is TWD 1.5 and the ROE is 13.35% and ROA is 0.81%. And for the subsidiaries, E.SUN Bank net profit first half of 2025 is TWD 16.9 billion, which grew by 46%.

And move on to the business development. The loan balance reached TWD 2.4 trillion, which grew by 9.1% and in which the corporate loan grew by 12.6% and the SME loan grew by 8.4%. On the retail side, the consumer loan grew by 6.9% and on the deposit balance, which grew by nearly 8% year-on-year. And for the net fee income, the first half net income was TWD 14.2 billion, which grew by 7.7% and set a new record high for the same period. And for -- the wealth management fee was TWD 7.1 billion, grew by 12.9%, also a new record high. And for the asset quality, E.SUN keeps a very benign asset quality. The NPL ratio is 0.14% and the coverage ratio is 835%.

And for the business highlight this quarter, as Sarah mentioned, the PGIM SITE has become a subsidiary of E.SUN Financial Holding Company since July 1 and further completing E.SUN's business landscape. And also E.SUN is awarded with the Best SME Bank in Taiwan by the Euromoney for the second consecutive year. And for the ESG, the E.SUN Financial Holding Company is ranked top 5% in the corporate governance assessment by the TAIEX for the 10th consecutive year. And also, our Chairman, Joseph Huang, is awarded with Responsible Business Leadership by the Enterprise Asia for the 8th consecutive year.

On Page #6, we use 4 graphs to illustrate E.SUN's financial performance. And on the top of the slide, you can see the net profit and the EPS also set a record high on the first half of 2025. And the ROE and ROA are all the best performance in the past 5 years. And move on to Page 7 is the net income breakdown of the Financial Holding Company. As you can see on the left-hand side, the pie chart shows that E.SUN Bank remains a main contributor of the Financial Holding Company, which contribute to nearly 96% of the total profit. And the growth momentum for the E.SUN Bank is very strong. As you can see on the right-hand side, the growth rate of the E.SUN Bank was 46% year-on-year.

And next page, on Page 8 is the net income breakdown of the Financial Holding Company. And again, E.SUN follows the golden rule of the growth, which our net profit growth is larger than the net revenues growth in -- which is larger than our operating expense growth. And on Page 9 -- Page 9 shows the revenue breakdown of the Financial Holding Company. If you look at the left-hand side, the pie chart shows the net interest income accounts for 44.5% of the total net revenue and the net fee income accounts for 32.9% and the other income accounts for 22.6%. And on the right-hand side, you can see that across all the revenue sectors all delivered a very decent growth.

And on Page 10 is the net fee income breakdown of the Financial Holding Company. As you can see from the pie chart on the left-hand side, the wealth management accounts for 50% of the net fee income. And on the right-hand side, you can see the growth of wealth management, it was nearly 13%, and that was after a third consecutive year of double-digit growth. We still delivered a very decent growth in the wealth management business. And on Page 11 is the capital adequacy ratio of both financial holding company and the bank. And both financial holding company and E.SUN Bank maintained its capital ratio at a very adequate level. The CAR ratio of financial holding company is 133.12% and the Tier 1 ratio for the bank is 13.74%.

And move on to the subsidiaries. First, we'll take a look at the E.SUN Bank. And on Page 13 is the deposit and loan structure of E.SUN Bank. And the total deposit grew by 7.9% year-on-year and the total loan grew by 9.1% year-on-year. And for the foreign currency deposit, which grew by 6.4% and the [ foreign currency ] loans grew by 9.1%. And if we denominate the foreign currency deposit and loans in the U.S. dollars, the foreign currency deposit and loan grew by 15.5% and 18.4%, respectively.

And on next page, on Page 14 shows the loan profile breakdown of E.SUN Bank. And E.SUN had a very diverse loan structure and with our large corporate loan, SME loan, mortgage loan and secured personal loan, all accounts for around 20% to 25%. And on the right-hand side, you can see that across all the loan categories, we all have a very decent growth in the first half of 2025. And on Page 15, we would like to highlight the SME loan and foreign currency loan of E.SUN Bank. And E.SUN Bank is ranked the #1 in the SME loan balance among the private banks in Taiwan and the growth rate of SME loan is very steady. And for the foreign currency loan, as I just mentioned, if we denominate it in U.S. dollars, the foreign currency loan is still very strong in the first half of 2025.

And on Page 16 is the overseas development of E.SUN Bank. And the overseas branches and subsidiaries net profit grew by 9.8% and contribute to around 25% of the total net profit. And the loan balance of the overseas branches and subsidiaries grew by 6%. Again, if we denominate in the U.S. dollars, the overseas loan balance grew by 15% year-on-year. And on Page 17 shows the deposit structure of E.SUN Bank. On the left-hand side, the overall LDR is 70.5% and the LDR for the foreign currency is 38.3%, which has been increasing in the past years.

On Page 18 is the NIM and Spread. And E.SUN's NIM has remained at a very flat level in the past quarters, around 1.28% to 1.3%. And on the right-hand side, you can see that the spread has been improving over the past few quarters, and that's -- thanks to the well management of cost funding control. And the overall deposit rate, you can see at the bottom line that we have lowered our deposit rate by 16 basis points in the past year. And on Page 19 is the wealth management fee breakdown of E.SUN Bank. And the bancassurance right now accounts for 44% of the total wealth management fee income and the mutual fund accounts for around 36%.

And on the right-hand side, you can see the growth rate of the bancassurance. It was 33% in the first half of 2025. And that's also after third consecutive years of double-digit growth, and we still deliver 33%, which is a very strong performance. And on Page 20 is the Credit Card Business Breakdown. And for active card, E.SUN has 5000 and nearly [ 300,000 ] of active cards and the market share was around 13%. And for the card consumption, for the first 7 months, the consumption is nearly TWD 400 billion, which set a new record high for the first 7 months.

And on Page 21 is the asset quality of E.SUN Bank. And E.SUN keeps a very benign asset quality. The NPL ratio is 14 basis points in the first half of 2025 and which -- and the coverage ratio is 835%. And for the credit cost, E.SUN's credit cost remained flat at around 16 basis points. And the next page on Page 22 is the asset quality comparing with the market. And E.SUN keeps a very benign asset quality, which is lower than the market average. And on Page 23 is the cost-income ratio of E.SUN Bank. And thanks to the very well management of the cost control, right now, the E.SUN Bank's cost/income ratio is 46.9%, which has been improving since 2022 from nearly 6% to now -- right now it's around 46.9%.

And last is for E.SUN Financial Holdings other subsidiaries. First, on Page 25 is the E.SUN Securities. And the net profit of E.SUN Securities slightly declined in the first half of 2025, and that's due to the lower trading volume of the market. However, the ROE of the E.SUN Securities is 19.3%, which is still among the top 3 among all the security houses under the financial holding companies. And on Page 26 is the performance of PGIM SITE. And PGIM SITE has officially become a subsidiary of E.SUN Financial Holding Company in July, and it has issued 2 ETF products in 2025 and it's also one of the first foreign site company to issue such product.

And also it's one of the first SITE company to enroll in the Taiwan individual saving account class fund program. And we hope that with the join of the PGIM SITE, we can further expand E.SUN's wealth management and also our financial landscape. And on Page 27 is the sustainable development of E.SUN Financial Holding Company. So E.SUN continues its effort on the ESG, and we keep gaining recognition on the international stage, and E.SUN will continue to pioneer in the ESG development. So that will be the presentation of second quarter, and now we can head into the Q&A session. Thank you.

[Unknown Executive]

Thank you, Martin, for the presentation. Now we are entering the Q&A session. [Operator Instructions]. Hi, investors. Now we have the first question coming in. It's about if we have changed or make any revision on our guidance for this year? I will invite Sarah to answer this question.

[Sarah Chen, executive]

Since the NT dollar appreciation, so we slightly revised our guidance regarding to the loan growth was slightly revised to 7% to 8% growth. For the total deposit growth, the growth rate is around 5% to 6%. For wealth management, we still would like to maintain double-digit growth for this year. But in foreign currency loans, the growth rate is still at 18.4%. And for the foreign currency deposit, the growth rate is around 15.5%. So in foreign currency, the growth momentum is quite strong. But because of the NT dollar appreciation, there's some impact on the growth rate.

As for the rate forecast in U.S. market, we think the U.S. economic situation remains uncertain due to tariffs. And coupled with weak labor market data, we think the Fed will cut interest rates in December and -- September and December. And for Taiwan, Taiwan's inflationary pressure is mild, but tariffs will bring some uncertainties in the market. So Central Bank -- so Taiwan Central Bank is unlikely to relax its control measures in housing market. So we expect that Central Bank will remain interest rate at flat at the end of -- until at the end of this year.

So regarding the NIM, we still expected the NIM can be increased by 2 to 3 bps at the end of this year, mainly due to continued control of funding costs and the normalization of yield curve and the potential for investment book to lock in higher interest rate spreads. We will keep improving our NIM in the future. For the Q2 NIM, due to the abundancy of NT dollar bond, the market interest rate fell around 10 to 20 bps. And along with the FX swap spread is narrow, so it goes slightly down to the Q2 NIM. But we believe it can be recovered if we keep doing the 3 measures as we mentioned before.

[Unknown Executive]

Thank you, Sarah. Now we have the second question coming in is about the tariff impact and how it will impact the industries of Taiwan?

So basically, the tariff that is going to be imposed for Taiwan is going to be 20% on top of the basic tariff, which is -- which ranges from 10% to 20%. So the total number would be -- well, would be around 30%, but it varies across different industries. So we also did a survey across different industries. And for some industry, especially in the traditional manufacturing sector, including steel screws and bolts and hand tools or textile. For these sectors, these sectors are more sensitive to the tariff impact.

For some -- in this -- and also for these sectors, the manufacturing -- the exporting proportion to the U.S. are also higher, ranging from 10% to 30%. If we try to quantify the total exposure for the manufacturing in traditional industry sector for the companies whose exporting percentage to the U.S., more than 30% -- more than 30% of its revenue is U.S. exporting oriented. The credit exposure to these companies is about TWD 16 billion, and these are more sensitive -- more fragile to the U.S. tariffs. But it's only -- the number is only TWD 16 billion, which accounts for less than 0.8% of the loan -- of the total loans of E.SUN.

If we further expand the range to all the industry with -- to all the companies who have exporting -- who have U.S. exporting numbers, the total exposure -- credit exposure is about TWD 60 billion, which accounts for 2.4% of the total loan of E.SUN. But I want to emphasize, this is just a number that we try to quantify to give you a ballpark of the maximum impact to E.SUN.

But as of now, we do not see significant signs of asset quality deterioration. But at the same time, we will keep a close eye on how the asset quality changes over time, and we will monitor the development of the impact from the tariffs. But so far, the asset quality is still benign, and we do not see too much sign of asset quality deterioration. Thank you.

We have the next question coming in is about the synergies that we expect from PGIM SITE after it joins the E.SUN Financial Holding Company.

We expect PGIM to add more value to E.SUN, especially on the wealth management or the asset management business of E.SUN. With more than 30 years of history, PGIM SITE has been running in Taiwan. It has amassed a lot of experience in running asset management business in Taiwan. So we are very positive that it will bring a lot of value to E.SUN. First is on the policy aspect. The government is encouraging the asset management business to grow in Taiwan. In Kaohsiung Asia Bay District, the Asia Asset Management center, E.SUN has established the bank and the security and the asset management company in this center. So in the future, we are very optimistic in the asset management company, and it will play a more important role for E.SUN.

And secondly is that the PGIM SITE, it has a very diversified and very broad product lines, including mutual fund, ETF, discretionary mandate and advisory services. In turn, it will help E.SUN to enhance our capability in delivering more diverse services or products to our customers. And thirdly is PGIM has its legacy from Prudential Group. So it will continue to maintain a very good relationship with PGIM, and we expect PGIM SITE or in the future, it will be called E.SUN Asset Management Company to continue to leverage the resources from PGIM and to leverage its cooperation with other asset management companies in foreign countries and continue to expand the product offering for E.SUN.

And for next question, we will repeat the guidance on NIM. I will ask Sarah.

[Sarah Chen, executive]

Our NIM is expected to increase by 2 to 3 bps at the end of this year, mainly due to the continued control funding cost, and we will keep blocking the high spread both in loans and securities.

[Unknown Executive]

Thank you, Sarah. Okay, investors. Now it seems we have answered all the questions for us today. So we are going to call it a day. Thank you for your participation in the second quarter results of E.SUN, and we hope to meet you in the next quarterly earnings conference. Thank you. Bye-bye.