Shin Kong Financial : SKFH Announces Results for Q2 2021

August 24, 2021, Taipei

Shin Kong Financial Holding Company Limited ('Shin Kong', 'SKFH', or the 'Company', TWSE: 2888) announces consolidated results of the Company and its subsidiaries for the second quarter of 2021.

HIGHLIGHTS

 SKFH recorded a consolidated after-tax profit of NT$13.62bn for 1H 2021, up 74.0% YoY. EPS was NT$1.04. Total group assets amounted to NT$4.6 trillion, up 8.2% year-on-year. Consolidated shareholders' equity reached NT$248.04bn, and book value per share was NT$18.60.

 Shin Kong Life continued to promote foreign currency policies and value-focused products, with first year premium (FYP) of NT$21.90bn. Cost of liabilities decreased 4 bps year-to-date to 3.79%. Consolidated after-tax profit for 1H 2021 was NT$8.49bn, up 77.8% year-on-year. Consolidated shareholders' equity amounted to NT$162.79bn, and equity-to-asset ratio was 4.93%.

 Shin Kong Bank sustained growth momentum over the past quarters. Net interest income and net fee income grew 9.9% and 2.1% year-on-year, respectively. Consolidated after-tax profit reached NT$3.06bn, up 3.4% year-on-year. Asset quality remained solid with NPL ratio of 0.18% and coverage ratio of 732.24%.

 MasterLink Securities delivered strong brokerage performance, with brokerage fee income increasing 82.5% year-on-year to NT$2.88bn. Capitalized on market trends, proprietary trading income grew 115.6% to NT$1.98bn. Consolidated after-tax profit was NT$2.22bn, up 287.1% year-on-year.

SHIN KONG LIFE: STRATEGIC PRODUCTS REMAINED FOCUS AND COST OF LIABILITIES CONTINUED TO DECLINE

Boosted by higher investment income and lower cost of liabilities, Shin Kong Life posted a consolidated after-tax profit of NT$8.49bn for 1H 2021, which was 77.8% higher year-on-year. Consolidated shareholders' equity increased 8.7% quarter-on-quarter to NT$162.79bn, and equity-to-asset ratio was 4.93%.

Shin Kong Life continues to promote foreign currency policies and value-focused products to acquire stable interest spreads, optimize asset liability matching, stabilize VNB margin, and accumulate CSM. FYP of foreign currency policies for 1H 2021 amounted to NT$16.87bn, accounting for 77.0% of the total. First year premium equivalent (FYPE) reached NT$8.53bn, and FYPE/FYP increased from 36.7% in 1H 2020 to 39.0% in 1H 2021. Cost of liabilities decreased 4 bps year-to-date to 3.79%.

As of the end of June 2021, Shin Kong Life's overseas fixed incomes position topped NT$2.0 trillion, and the funds were mainly invested in USD-denominated bonds. In order to control hedging cost, Shin Kong Life has flexibly adjusted the hedging ratio and proxy basket. Recurring yield before hedging was 3.08%, and annualized investment return was 3.84%.

SHIN KONG BANK: PROFITS CONTINUED TO GROW AND ASSET QUALITY REMAINED STRONG

Loan balance grew 5.5% year-to-date to NT$689.29bn. Consumer loans registered a robust year-to-date growth of 7.6%, primarily driven by mortgage and other consumer loans, up 8.3% and 9.3% year-to-date, respectively. Shin Kong Bank will continue to promote balanced growth in corporate and consumer loans with stringent credit risk control. Loan growth is targeted at 8% for 2021.

Deposit balance grew 8.4% year-to-date to NT$986.92bn. Demand deposit ratio increased from 44.6% to 45.3% in 1H 2021, reducing cost of funding. With downward repricing of deposits and improved deposit structure, NIS for Q2 2021 increased 2 bps quarter-on-quarter to 1.67%. NIM for Q2 2021 was 1.24%, broadly flat compared to the previous quarter.

Wealth management income for 1H 2021 grew 5.4% year-on-year to NT$1.29bn. Momentum mainly contributed by fee income of mutual fund sales, up 46.6% year-on-year. Investment products are expected to be sales focus in 2H 2021, along with stable contribution of regular premium and FX insurance policies, to increase wealth management income. In response to digital finance development, Shin Kong Bank has launched intelligent robo-advisory to provide better customer experience. Also, online marketing campaigns are conducted to attract new funds and client base; AUM grew 4.3% year-to-date.

Asset quality remained solid. NPL ratio improved 1 bp to 0.18% and coverage ratio increased from 712.77% to 732.24%. Both ratios were better than the industry average. Shin Kong Bank will continue to monitor its asset quality to stabilize profits.

MASTERLINK SECURITIES: BROKERAGE BUSINESS INCREASED AND PROPRIETARY TRADING GAIN SURGED

Fueled by a stellar growth in brokerage business, MasterLink Securities generated brokerage fee income of NT$2.88bn for 1H 2021, 82.5% higher year-on-year. Proprietary trading income increased 115.6% year-on-year to NT$1.98bn, driven by disposal gain from equities, which was NT$1.01bn higher year-on-year. Consolidated net income grew 287.1% year-on-year to NT$2.22bn.

In July, MasterLink Securities won three special prizes for its 'Quick Win App', 'Smart Customer Service Chatbot' and 'Win Win Go' in the best product category of National Brand Yushan Awards, showing excellent results for product development.

OUTLOOK

SKFH will continue to leverage the strengths of company subsidiaries, integrate resources, and develop cross-subsidiary synergies to maximize value for shareholders. The company's future development strategy will be guided by the following five main principles:

 Stabilize profitability to increase shareholders' equity

 Integrate resources to deepen synergies

 Optimize customer experience through digital transformation

 Create profit sources and expand markets

 Focus on compliance and risk control, implement corporate governance, and promote sustainable operations

Disclaimer:

This document and the attachments distributed herewith include forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that Shin Kong Financial Holding Company expect or anticipate will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. Shin Kong FHC's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to price fluctuations, actual demand, exchange rate fluctuations, market shares, competition, changes in legal, financial and regulatory frameworks, international economic and financial market conditions, political risks, cost estimates and other risks and factors beyond our control. In addition, Shin Kong FHC makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.