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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome, everyone, to Shin Kong Financial Holding Company's 2022 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcast live over the Internet. Webcast replay will be available within an hour after the conference is finished. Please visit www.skfh.com.tw under the Investor Relations section. And now I would like to introduce Mr. Stan Lee, Senior Vice President of Shin Kong Financial Holding Company. Mr. Lee, please begin.
Thank you, moderator. Good afternoon, ladies and gentlemen. Welcome again for joining Shin Kong Financial Holding 2022 Fourth Quarter Analyst Call. Before the meeting starts, I would like to introduce my colleagues who are with me today. Here in the meeting room, Hanwei Lin, Chief Actuary of Shin Kong Life; [indiscernible], Head of the investment team of Shin Kong Life; Isabella and Christine, Members of our IR team.
The presentation we are about to go through was sent out 2 hours ago. You may also download it from our website or participate through this webcast. If you do not have the presentation, please let us know now. The lines will be muted when we are presenting. If you are cut off, please dial back in or call Christine at (886) 968-929-230 for assistance. Now please turn to Page 4.
I SKFH recorded a consolidated after-tax profit of TWD 2.17 billion for 2022. Earnings per share was TWD 0.1. Consolidated share equity at the end of 2022 was around TWD 212.1 billion. And book value per share was TWD 13.41. Our subsidiaries maintained positive business momentum for the past year, which will be covered later in the presentation. I would like to highlight that Shin Kong was selected again as a constituent stock of DJSI World Index in 2022, and this has reflected the company's continued commitment on corporate sustainability development. Also, the company was recently included in Bloomberg Gender-Equality Index for supporting gender equality, diversity, inclusion in the workplace. Page 10. FYP for 2022 grew 1.7% year-on-year to TWD 53.7 billion, securing a market share of 6.9%. Shin Kong Life product strategy aimed to offer foreign currency policies and value-focused product, which creates stable interest spread, better asset liability matching and CSM. FYP of foreign currency policies was TWD 41.3 billion, accounting for 76.9% of total FYP. FYPE reached [ TWD 19.3 billion ] and FYPE/FYP was 35.9%, beating the industry average. As for cost of liabilities, it decreased 4 basis points year-on-year to 3.69%. Page 13 presents the overall view of Shin Kong Life Investment portfolio. Investment return for 2022 was 3.21% due to lower capital gains and fixed incomes amid global market volatility and mark-to-market loss on Investment property. The breakdown of investment returns for different asset classes were: real estate, negative 0.6%; mortgage recovery loans, 1.9%; policy loans, 5.3%; overseas investment, 3.5%; [ MasterLink Securities ], 3.2%, cash, 1%. Page 14 shows the portfolio of our foreign exchange that's picked up. At the end of 2022, overseas fixed incomes topped TWD 2.3 trillion. The funds were mainly deployed in investment-grade corporate bonds. As a result, corporate bonds accounted for the largest share, representing 48.7% of the total, followed by international bonds at 26.3%. Corporate bonds accounted for 24.7%. Over 90% of the overseas fixed incomes position was deployed in U.S. dollar-denominated bonds. You may also have a look at the chart of overseas fixed income portfolio by region in the upper right corner. North America and Europe accounted for the majority of overseas fixed income, showing combined share of 62.6%. Page 16. The pie chart on the left-hand side shows the mix of hedging instruments. At the end of 2022, hedging ratio was 82.4%, including CS, NDF and then showing hedged foreign currency policies. CS and NDF accounted for 53% and 47%, respectively, of traditional hedges. As the cost was 27 basis points for the past year, that balance of foreign currency volatility reserve reached TWD 27.3 billion. In order to better control hedging cost, Shin Kong Life will flexibly adjust the hedging ratio by using [indiscernible] to promote foreign currency policies. I will now hand over to Isabella, who will take you through the results of Shin Kong Bank and MasterLink Securities.
Thank you, Stan. Please turn to Page 21. Shin Kong Bank delivered a stable performance in 2022 with good momentum and solid asset quality, driven by moderate loan growth and rate hikes. Net interest income grew 8.8% year-on-year to TWD 13.7 billion. Net income fell 7.3% year-on-year to TWD 3.2 billion on the back of decline in wealth management fee. Provision expense decreased [ 40.7% ] year-on-year to TWD 870 million, reflecting good asset quality control. Consolidated net income reached TWD 6.9 billion, up 4.7% from a year earlier. Page 22. The bank's loan balance grew 4.7% year-on-year to TWD 754 billion. Consumer lending grew 4.8% year-on-year, representing 62% of the loan book. Unsecured consumer loans and other consumer loans increased 13% and 11% year-on-year, respectively. As for corporate lending, SME loans remain a core focus and grew 4.3% year-on-year. Page 23. Net interest margin and net interest spread for the fourth quarter came down to 1.15% and 1.56%, respectively, due to upward pressure on funding costs caused by rapid rate hikes. However, the bank managed to enhance its annual net interest margin by 2 basis points year-on-year to 1.26% and the annual net interest spread by 3 basis points year-on-year to 1.68%. Page 25. Wealth management income for the past year was around TWD 2.6 billion, which was similar to 2021. The fee income from mutual funds decreased [ 2% ] year-on-year as clients were sensitive towards market volatility. As a result, the bank continued to grow the contribution from bancassurance overseas security and structured products. Page 26. Asset quality remained solid with NPL ratio at 0.12% and coverage ratio higher than 1,000%. Both ratios were better than the industry average. Page 29. MasterLink Securities generated a brokerage income of TWD 4.9 billion for 2022, which was down by 29.7% year-on-year due to lower daily turnover in the stock market. Prop trading business turned into profits in the fourth quarter and consolidated net income was TWD 362 million for 2022. So that concludes the presentation for today. Moderator, please start the Q&A session.
[Operator Instructions] Now our first question is coming from Jaime Huang of JPMorgan.
Thanks for the presentation. Two questions from me. First one is could we get some color about the unrealized gains or losses for the equity portfolio and also the fixed income portfolio at Shin Kong Life as of fourth quarter last year? And also, if there is any disclosure regarding how the unrealized situation for the bond portfolio that has been reclassified in the fourth quarter last year. How the unrealized situation has been migrating because that pie is already in the amortized cost portion. And then second question is on the bank side. Could you give some color in terms of how you expect the fee income growth momentum would look like for this year? And also on the trading side, should we expect 2022 as a more normalized level for we to refer in terms of the forecast for this year?
Thank you, Jaime. For the first question on unrealized gains side. As of the end of last year, we still has around TWD 50 billion as the loss of SKL. About 30% is equity position, among which 70% is on the bond portfolio. But as you also mentioned, most of the bonds has been reclassified. So the remaining portion on largely ETF because ETF according to IAS 39 cannot be classified as the amortized cost that according to -- sorry, I have to correct, as far as -- cannot be classified as amortized cost. That's why it still remains in the OCI position and still carry some of the mark-to-market loss. About the reclassification part, we reclassified most of the bond portfolio and TWD 38 billion was removed from the OCI positions and now is accounted into the [ AC ] position, which is not shown in other comprehensive income. For the fee income momentum, I would say, we have a relatively positive view on our -- on the business for wealth management, right? And for the others, I would say, last year, it was also challenging to grow in the loan side. But as I said, in the Chinese session, President Lee has shared with you that some restructuring efforts made. We will focus a little bit more on the smaller-sized retail loans and also the SMEs. I think both segments can contribute into the world of the loan income as well. Well, I don't have a very clear guidance on that, but we are remaining on a relatively positive views on the growth, both on the loans and on the wealth management for the bank.
So should we say at least positive fee income growth for 2023 as you were talking?
Yes. Yes. Definitely.
I see. And how about the investment trading income for Shin Kong Bank?
Thank you for the remainder. For 2023, I would say, well, also, as we discussed in the Chinese session, I think the spread between U.S. policy rates and [ NTs ] policy rates remain high. And that means it will not be easy for the bank to be able to harvest any significant capital gains for the bond portfolio. And that will also put out some pressures on the bank's capital gain side. Well, relatively helpful for the bank to invest in new bonds. But again, that's a slow and smaller, while we can still see some pressures on the difficulties managing the capital against the CSI will remain, say, probably relatively conservative in terms of giving you any guidance on the improvement of the bank's trading position.
[Operator Instructions]
Operator, I believe we have a very comprehensive discussion in the Chinese session. And also thank you for your questions in English session. If there's no further questions, let's close the meeting now.
Thank you, Mr. Lee. And ladies and gentlemen, we thank you for your participation in Shin Kong Financial Holding Company's conference call. There will be a webcast replay within an hour. Please visit www.skfh.com.tw under the Investor Relations section. Should you have further questions, please don't hesitate to contact the IR team of SKFH by phone or by e-mail. You may now disconnect. Thank you, and goodbye.