China Development Financial Holding Corp

TWSE:2883

Earnings Call Analysis

Company Reports Strong Q1 Growth and Positive Future Outlook

In Q1 2024, the company achieved significant financial growth with revenue up 134% to TWD 8.2 billion. Equity increased by 11% to TWD 291 billion, while KGI Bank’s pre-provision net income grew 25%. Wealth management showed substantial growth, with income up 56% and assets under management rising 38%. The company's focus on prudent investment and cost control positioned it well for future growth. Looking ahead, the company aims to expand its asset base to over TWD 1 trillion by 2025, emphasizing the importance of growing assets under management over short-term margins.

Introduction to New Leadership

The company has undergone a significant leadership transition, introducing new executives with vast experience from various esteemed organizations. Notably, the new Vice Chairman comes with substantial knowledge in Taiwan's key industries, adding strategic depth to the company.

Strong Financial Performance in Q1 2024

In the first quarter of 2024, the company reported a robust financial performance. The net income stood at TWD 8.2 billion, marking an impressive 134% increase compared to the previous year. The total equity also rose by 11%, reaching TWD 291 billion. This growth is attributed to notable performances across all subsidiaries, including KGI Bank and KGI Securities.

Substantial Growth in Wealth Management

The Wealth Management segment demonstrated remarkable growth, with client Assets Under Management (AUM) expanding by 38% and fee income surging by 65%. These significant increases highlight the company's successful efforts in enhancing their wealth management services and expanding their clientele.

Expanding Loan and Deposit Services

KGI Bank's loan and deposit activities showed strong growth. With a 9% annual increase in loan balance and a substantial rise in personal finance growth, the bank's efforts to intensify asset growth and expand consumer finance were evident.

Investment Portfolio and Strategic Focus

The company continues to prioritize a prudent investment strategy, ensuring stable returns. Notably, the pre-hedging return increased to 3.45%. The bank also plans to expand their customer base and products, targeting industries like smart manufacturing and green energy projects.

Guidance and Future Goals

The company has set ambitious goals, aiming to increase their assets to over TWD 1 trillion by 2025. Additionally, their revenue guidance includes a continued focus on premium growth, with the VNB margin growing to 48.2%. They also plan to further leverage technology and introduce more efficient online loan procedures and new digital products, anticipating a 10% annual growth in certain segments.

Challenges and Strategic Adjustments

Despite the strong financial performance, the company faced challenges such as an increase in credit costs, attributed to a specific case. Nonetheless, strategic adjustments and a focus on transforming traditional securities business into comprehensive wealth management solutions are key priorities moving forward.

Capitalization and Risk Management

The company's double leverage ratio has returned to 120%, meeting regulatory requirements. Stability in capitalization across subsidiaries is maintained, with ongoing efforts to ensure any capital raise benefits shareholders and enhances the company’s financial stability.

Enhanced Customer-Centric Services

The company is enhancing its customer-centric approach by developing high-value protection products and expanding investment in self-owned channels. They are also increasing their engagement in international markets, especially through alternative investments and leveraging their strength in Taiwan’s high-technology industries.

Closing Remarks and Future Outlook

Overall, the company remains focused on growth. With a comprehensive strategy that spans across wealth management, consumer finance, and international expansion, they aim to maintain and enhance their market position, striving for continuous improvement in service quality and financial performance.

Earnings Call Transcript 2024-Q1

[Operator]

Investors and Friends in Media. Welcome to the 1Q 2024 investor conference call. In today's call, we will have our management team and financial team to talk about strategy and financial overview. We will also talk about [indiscernible] embedded value in the next session and various subsidiaries. And in the QA session, you will be having the time to talk to our individual presidents. Now I'll hand over the floor to [indiscernible], our CEO.

[Wen-Jun Yang, executive]

Good afternoon, everyone. Welcome to the 1Q '24 investor call. First, I would like to tell you that starting from the next quarter, we will resume our in-person investors meeting after every half and full year results are available, while we'll still [indiscernible] an online call like this after Q1 and Q3 results, I look forward to seeing you in person in our upcoming meetings. Now, we have just made a significant leadership transition. Let me start by introducing our new leadership team. As shown in the charts, the team is consistent with new talent, existing talent and returning talents. We are very happy to welcome Vice Chairman [indiscernible] and joining our team [indiscernible] served several ministry level host. He is -- he has deep experience in Taiwan's key industries and unparalleled network [indiscernible] corporate executives, industrial leaders and technology innovators. I think I can speak to the team that we're fortunate to have [indiscernible] leading us from [indiscernible].

Next is CDIS's [indiscernible] Executive Vice Chairman, Mr. David [indiscernible], he joined us from Goldman Sachs, and he was a partner and Co-Head of Asia Special Investments. In his new role, he will be directly overseeing our investment activities internationally and in Mainland China, where he has more than two decades of hands-on experience at KGI Bank. I'll be working with two industry veterans, [indiscernible] Xi, our bank's President; and [indiscernible], our Head of Consumer Banking and Wealth Management.

Both of them have vast experience working for both Taiwan and international commercial markets. You will hear from [indiscernible] later on our new and [indiscernible] to say, more aggressive this plan. Last but not least, we're also excited to bring on Winston [indiscernible], our new SVP at KGI Life. Winston joined us from McKinsey & co, he was a partner leading the financial services practice. In this new role, he is tasked to further strengthen our agency force to enhance our marketing efforts and develop KGIB's long-term international expansion plan.

As for the existing talents, [Melody Chen] has been formally named President of CDIB, which is [indiscernible] served after acting in this role for more than 2 years. Under her leadership, CDIB has largely completed its first transformation from proprietary [VC] investor in QM PE/VC fund management company serving financial institutions, corporates and government agencies. We expect [indiscernible] together with David to take CDIB to the next level. You will hear from both of them later.

You also already know [ Julian Yen ] VP at the holdings effectively my number 2, Jenny Huang, our Group CFO; and William Fung, the President of KGI Securities. I don't think that needs much introduction. I would just say that we have the full confidence in them to take our franchise from strength to strength. As for the returning balance, Alan Hong and [indiscernible] are the Chief [architect] for building then China line from a second-tier insurance company to what KGI Life is today. In addition, both of them -- both of them have served CDF -- so they know all the business [indiscernible].

Last but not least, -- we have Andy Lin, CFO at KGI LIfe [indiscernible] with me, while I last served as CEO role of CDF and was instrumental in executing many of our key initiatives, including acquisitions. Since most of my team members are returning an existing talent. So we won't be having any transition per se. We fully expect to hit the ground running, and while we are still proud to have a very international team experience wise, we are all ethnically local, so we can and will be closer to our frontline colleagues and equally important to our clients in stage.

In the previous investor calls, our former CEO, Steve Bertamini, talked a lot about the ABCDE strategy update. Here, I must thank Steve and the team's contribution. I can see clear improvement in areas like corporate governance, digitization of processes, [indiscernible] adoption and ESG practices. I will continue on the journey Steve started and the ABCDE is a big part of the -- but I see ABCDE a less strategic framework for KPI targets, but rather an intrinsic part of our corporate DNA, and we will continuously optimize it. In terms of accelerated digital, we must continue to adopt new technology, including AI, but we are not doing this for the sake of keeping up with our peers, but to deepen our relationship with our clients and enhanced [client] experience.

As for becoming the employer of choice, we know that having competitive compensation and benefits are not enough.W we must create and maintain an environment that attracts and promotes the type of people who are willing to take leadership and challenges, and dare to initiate and innovate in uncertain conditions and always [indiscernible] interest as the top runner team. As for customer-centric, we need to strive for being 1 KGI to our customers, including all our products, services and solutions. It is an easy concept, but extremely hard to execute, given the regulatory constraints and different market practices among insurance, banking and security sectors.

This is a top challenge for us, and my team is working through many details that we believe will move us closer to this goal. I will elaborate driving growth in the next page in choice. We must grow our AUM across our subsidiaries for bank and our side business units. I will even say that growth is more important than margins in the near term. Lastly, execution excellence. As I mentioned when I introduced the team, we need to get closer to market and clients -- we're making some notable changes in how we run our business, that will result in a smaller financial holdings of larger subsidiaries.

We want to ensure business the system can be quickly made at a subsidiary level, and the key business units have the authority to take necessary actions to stay competitive. So while we won't be referring to [indiscernible] as much going forward in our presentation, they will be the major pillar, which we continue to shape our corporate outfit. This page illustrates our major strategic direction for the next 12 months. I will let each subsidiary to present in detail. Here, I will highlight only the key objectives with holdings in our four subsidiaries.

We're holding our top priority is to improve balance sheet. We aim to continue to improve our balance sheet in the event that raised additional capital, we'll make sure that the new capital is deployed at a credit way. We must manage distributable income carefully to ensure stable dividend policies, that needs the disputation from our shareholders. For KGI Life, we will -- we'll further develop our direct sales force and deliver products that [indiscernible] markets. And given the major shift in capital markets, we need to invest in additional resources to ensure the investment capabilities required. As for KGI as our priority is to follow our leadership positions, home and abroad, developing our wealth management business. In -- we see very interesting growth in opportunities, wealth management, prime brokerage and futures and options trading in Hong Kong and Singapore.

For KGI Bank, our goal is to grow our AUM, including corporate banking, [indiscernible] Banking, Consumer Banking and Wealth Management. Being the smallest bank among all financial holding company, it is imperative that we better leverage our larger franchise in insurance and securities. We also recognize that if we want to grow faster than the market, we will need to invest in our people and infrastructure. So what we do our best in controlling our cost, we are prioritizing growth this year.

Last, CDIB -- for our timeline business, we want to continue to work with large corporation to expand our fund management business. Our investment focus include technology, healthcare, clean energy and smart infrastructure. For overseas business, we want to leverage the strength of Taiwan industries and continue to work the best EEV simlulatior in the U.S. [indiscernible] Asia-Pacific [evolution]. Again, thank you for being with us today. Now I'll give the floor to our CFO, Jenny?

[Jenny Huang, executive]

Thank you, Paul. Next I will talk about our Q1 financial performance. Please go to Page 9. Our 2024 Q1 income is TWD 8.2 billion, up 134% last year. Live securities and bank subsidiary have all seen growth. Our Q1 OCI on realized income has grown by TWD 20 billion, so our equity also grew 11% to TWD 291 billion. Next page, in terms of the profitability of our subs, [indiscernible] income is $5.1 billion. We have seen growth -- notable growth from the previous year. This is mainly coming from the equity investment and the lower hedging cost. In terms of policy sales, VNB margin grew 48%, we will continuously should push for premium growth. Investment wise, we have a prudent investment portfolio to maintain our investment gain. The pre-hedging return is 3.45% of 5 bps year-on-year.

KGI bank's income is $1.5 billion. More provision is required because of the growth in deposits. The pre-provision net income has grown by 25%. And our total asset growth has been notable. The personal finance growth is also strong. Wealth management income grew by 55% -- 56% and P loan grew by 23%. [indiscernible] KGI, customer finance also got some good news. The profit growth is 33% and the loan portfolio growth is 47%. KGI Securities income is TWD 2.9 billion, up 53% compared to last year. [indiscernible] equity stock trading has amounted to TWD 500 billion. And with the 10% of market share of KGIS, we have received great income from brokerage. Wealth Management business is increasing as well.

Our customer AUM has grown by 38%. Wealth management fee income is up by 65%. CDIB income is TWD 129 million. This is most of the fluctuation of overseas investment portfolio -- our analog Fund 2 has completed its first closing in Q1, the AUM fund size has amounted to TWD 2.6 billion, and the total fund commitment is TWD 56 million. We also work with [indiscernible] signing an MOU to create healthcare system.

Next is on our capitalization. Our double leverage ratio has returned to 120%, meeting the regulatory requirements. Each subsidiaries has maintained stable capitalization, we will continuously do so in terms of capital raise, we will factor in, whether bring in benefits for the shareholders. So I'll hand over to KGI Life.

[Unknown Executive]

To strengthen our telephone channels and remain growth -- over the past few years, we continue to expand our selling channels, and we have some initial results. Now we need to continue to build on top of that. Therefore, we have recruited Winston from McKinsey, with his abundant experience in life insurance channels, our agency channels for percentage will increase from 42% to 60%. And agency channel will focus on high-value protection type products, and this will further increase our CSM.

We [indiscernible] our customer needs in terms of financial planning, retirement, inheritance and we will continue to offer diverse product to our customers and for IFRS 17 and ICS for the transition to the new theme, we will focus on a product transition and continue to strengthen our self-owned channels, for a long-term value. We have a dedicated team for the transition or the regulation already announced by the regulator of the -- will successfully make a transition.

And we will continue to participate in related discussions, and we look forward to the localization approach. Next, you need to increase our investment returns. In the past, overseas equity investment, especially alternative investment by small compared to that of the players. This is much good performance. We will expand and increase the percentage of this investment in order to increase the overall yield.

For ALM, we will market opportunity to remain flexible in terms of asset allocation, and continue to optimize ALM, and increase the percentage of our foreign currency policies in order to lower hedging costs and increase the overall return. Next, I will talk about our performance in the first quarter. On Page 15, you can see our premium income. Our traditional regular pay product account for 58% of FYP -- and at the same time, we continue to strengthen our agency channel, which contribute 42% of FYP. And I have mentioned that we won -- our target is 60% in the future.

Our premium income will increase quarter-by-quarter based on our plan. Page 16. We see the result of our product mix optimization. In Q1, our VNB margin has increased from 34.4% to 48.2%. And for investment spread, our CLL was 3.04% and returns is 3.77%. And spread has 73 bps, and our investment portfolio, we continue to focus on prudent ALM to have stable investment portfolio. The net worth ratio has increased from 6.7% to 7.2%. And the returns of each asset class is listed in slide for your reference. Next Slide. Our investment performance Pre-hedging recurring yield increased by 5 bps to 3.45%, benefited from strong USD hedging cost has gone down to 0.91 and the FX reserve balance is 13.9 billion. Next slide. I will then talk about our embedded value in 2023.

First Page 19. Based on market condition, investment strategy and our expected return on our asset allocation, we made assumptions regarding the return rate for NTD and foreign currency policies. Overall, the equivalent return rates, our EV is 4.24% and the risk discount rate remains at 9.5%. We have also commissioned EY to review our various actuarial assumptions.

Next. This is return curve charge for NTD and foreign currency policies for your reference. Next Slide. This is our [EV] comparison. First, adjusted net worth, due to the rebound of equities unrealized gain and the contribution of profit for the year, adjusted net worth is TWD 169.5 billion, a 31.3% increase and the value of in-force is TWD 316 billion of 3.9% increase. Therefore, our overall EV is TWD 4.7 billion, a 15% increase compared to last year. If converted based on the outstanding shares of CDF, REV per share is 25.5%. Next from Page 22 to 24. We talk about our changes in adjusted net worth value of in-force and BMD. They are listed for your reference.

Page 25. This is the sensitivity analysis. This is also listed here for your reference. So this is all for KGI Life Next, I would like to pass the floor to the President of KGI.

[Unknown Executive]

I will talk about our business strategy. We will continue to expand our deposit and loan sale. Due to the support of CDS, we will continue to expand our customer base. [indiscernible] has abundant resources, for example, the equity holder of the [indiscernible] is greater than the customer base KGIB. We want to increase our assets to over TWD 1 trillion by 2025. And in addition to business growth, we need to allocate reserves, although it will affect profit in the short term. But when we reach a certain scale, the income by cross-sell and fee income will be very considerable.

So we both swap and then lead and each quarter will be better than the last. And for our three main focuses: first, for consumer finance -- this is our main and stable engine. We will consolidate physical and digital channel and to be customer-centric -- and so as to increase the denseness of our customer. We also want to develop the industry's most efficient online loan procedures. Corporate Finance has been our strength. It responds to rapid trend of industrial development. We continue to transform and provide differentiated services, and in addition to expand our SME business, we also tend to provide comprehensive financial solutions to business owners, allowing [SMEs] to have one-stop services. [indiscernible] business, we continue to deepen our engagement with major domestic groups to simply develop various financing projects for our clients, and target emerging rapidly growing industries, such as smart manufacturing, logistics to supply financing and green energy project.

In addition, we have also apply to establish a branch in Hong Kong to provide more comprehensive overseas financial services. Number three, increasing demand deposits. This can reduce cost of fund and also enhance stickiness between the bank and customers. The improvement in fee income, particularly relatively diverse and stable income from wealth management can be effectively -- can effectively support asset growth.

We will leverage dollar retransfer accounts and also security settlement accounts, emphasizing financial management and introducing a variety of new products such as digital deposits, parts and so on. Next, I will talk about some financial figures. Our net income was TWD 3.95 billion, up 16% Y-o-Y, mainly due to a more than 50% increase in [fee], especially health management, the fee income grew by 56% compared to the same period last year, and syndicated loans also increased significantly. The spread and NIM are 2.1% and 1.2%, respectively, maintaining the same level as last year.

Next slide. For deposit and loans we will continue to intensify in asset growth, resulting in a 9% annual growth in loan balance. Mortgage increased by 8%, customer loss increased by 17%, mainly from loans which grew by 23%. We will pass the floor to KGIS.

[Unknown Executive]

Securities focus in addition to securing our business status as our CEO mentioned, would want to continuously to push the growth in brokerage and growth management. Security firms are facing pressure from competition and traditional business and the decline in rates, securities firms are transforming by accelerating development of wealth management business. KGIS continues to transform its sales force, establish expert teams to provide professional wealth management services. And this will improve the quality of service customers in order to provide best financial service to the customer, to increase the quality -- service quality.

We also continue to optimize our systems and tools and platforms, to serve both our customers and is also used to assist our sales force. Also, KGIS continues to strengthen our product market, in response to the high popularity of ETF in recent years, with prior near the online subscription of IPO ETFs through trust accounts, allowing customers to seize advancement opportunities without having to apply with the counter. We also committed to provide customers with a world of diverse services, such as notification for IPO, ETF know-how, ETF analysis reports and so on, to help customers make the most suitable investment expense so that customer can obtain key information at any time in various channels.

So for those various channels, we act in line with the trends of younger investors to launch a variety of content on social media platforms, including our user channel podcast and mine communities. At the same time, we also work with Far East telecommunication line Bank to expand our customer acquisition channels. In addition to collaborating with external resources, we continue to work closely with our life insurance and banking subsidiaries, to expand the customer position and our customer base, we have also successfully helped over 1,000 sales persons from KGI Life to obtain and register their licenses, and fully leveraging group resources to achieve synergy. Last, our focus for overseas business will be [regional] wealth management business developments.

We will leverage our successful experience in Taiwan to assist overseas subsidiaries, to build product platform to main staff and promote regional research resources. In addition to the established regional product team -- Currently, we also have professional wealth management teams in Singapore and Hong Kong, to provide us planning services for investors with overseas assets.

Next page. This is the net income for the first quarter. It has grown by 57% year-on-year, showing increase in both wealth management and other business. And the next page, the profitability and business performance are both maintaining the leading positions in the markets. The ROAE in Q1 reached the level of 18.9%, not only improved comparing to the same period, also performing better than our peers. That was all from KGIS. Next, I'll hand over to Melanie.

[Unknown Executive]

Thank you [this is David Cha], it's an honor to give you an overview of our business, months before I joined CDIB. Months after joining CDIB, we thought about our previous stock back establishment in the '90s. We focus on our proprietary investment. And later, we transited ourselves to management of assets. In the last decade, we have launched 14 different fronts. In the next 10 years, we not only want to become an asset manager.

We also want to provide alternative products, become the provider of these products to the high network individuals or the listed companies in Taiwan, provide them with comprehensive financial service. This transition is very critical. I believe -- we all believe -- we all know evaluating CDIB's performance is difficult. So we also want to grow our AUM. Currently, our AUM is about TWD 65 billion. We want to double or even triple it, so that we will have a more notable increase or stable income coming from management fee.

It sounds easy to tap into overseas markets. But in the long run, if we want to shift ourselves from Taiwan, we need to leverage Taiwan's high-technology industries, background and use the spread model to copy them overseas. We also need to leverage KGI Life's alternative investment overseas and globally, we were able to seize these investment opportunities to grow our business.

Next, I'll hand over to Melanie for more executive details.

[Yi-Chun Nan, executive]

Okay. Thank you, David. As previously mentioned, CDIB in 2023, we will enter our second phase transition. This means that although we are a [indiscernible] company, just like Paul mentioned, our goal will be more client related and should be more customized. Our services and product lines can be divided into four areas. First, our starting business, it's Taiwan Plus, is our VCMP investments in Taiwan, including innovation, healthcare, new infrastructure and Taiwan strength. For innovation, the size is about TWD 6.5 billion, and this will have a first closing of our fund, on the cross-border innovation fund working with Japan. Healthcare [services] is about TWD 6.1 billion if we add the China's part, and that month is about TWD 8 billion. New infrastructure is the new funds aligning with the energy transition.

We currently have the green energy platform and the computing center, which has also closed their first fundraising. And next is Taiwan Strength. The fund size exceeds TWD 9 billion. Currently, we have closed our [CBID] analyst Fund too. This is focused on smart infrastructure, smart city and so on. We've also noticed that general lease and companies in Taiwan want to transit themselves, in order to help them leap further through investment, we have launched CVC and family office investment service, to help them avert risks and position themselves globally. We have experienced Taiwanese team. This team have already launched PEPC and other portfolio as well as advisory services.

We've also launched eight different methods and platform to bridge ourselves with the U.S. markets. We have more than 90 investment experts allocating in Taipei, Hong Kong, Shanghai, New Zealand and Tokyo. Our proprietary fund and our investment portfolio are very flexible with CDF backing us, and also our 60-year history across different industries and the collaboration and beneficial ecosystem for our investors and customers. We will be able to become the financial hub as the government envisions.

And next page is the 2024 business focuses -- for the darker blue ones are already passed by the Board, including to the Huinelux and [Hong Hainan Energy] -- we also have other transitional-related funds. Our 2024 focus will be affecting our fund portfolio and to increase the raising of capital and increase our fund AUM and fee income. Next page. We can see that [indiscernible] has closed for the first run and the AUM increased to TWD 56 million. Our proprietary investment position amounts for TWD 35.7 billion. Next part -- the next page, lower chart shows our private credit positions. Our annual return amounts to 11.6%.

This will be our focus of business. And next, I'll hand over to our CFO, Jenny.

[Jenny Huang, executive]

Okay. Thank you, Melanie. Now we will enter our QA session.

[Operator]

[Operator Instructions] Next question, we welcome Jamie from JPMorgan.

[Jemmy Huang, analyst]

I have a few questions. First regarding KGIB -- for the cost in the first quarter is around 40 bps. Guidance was around 15 to 20 bps. I'm not sure how do we look at the -- do we need to revise the annual guidance upward because it will kind of work quarter loan growth and target is pretty much the same. So I'm not sure to look at credit cost -- or are there any special case in the first quarter?

Second, on CDIB in the slide mentioned, the profit decreased because of overseas investment portfolio, can you -- how it was affected by which one? Because the stock market in the first quarter [indiscernible] performed quite well. So I want to know what's the difference -- and next few questions related to KGI Life our VNB margin, we see a good improvement. How about [indiscernible] is the improvement as positive as VNB? And for midterm, we won agencies contribution to 60%, is kind of structural improvements or annual CSM? Our annual target what's our CSM target for the following years? Second, the new FX reserve. Are you applying for the news team and if so, how will it affect our hedging strategy? And the other two questions are regarding [indiscernible], equivalent returns 4.24%, is the curve -- what [indiscernible] this year. And if we look at EV MVM changes, the returns for EV is negative. It's impacted -- negatively impacted while EV is positively impacted -- are there a lab rate on this? And cost of capital has declined, can you talk about some of the contribution to this situation?

[Unknown Executive]

First, that's well on the bank to reply to your question regarding credit card cost.

[Unknown Executive]

For the credit cost in the first quarter and [indiscernible] life percentage is 34 bps and increases because of a single case. And you can see on Page 28. Our NPL and NPL coverage is -- the information is listed here for your reference. Second, for CDIB first quarter overseas business that was affected because healthcare overseas. Health care is one of our main focuses. In Taiwan, the performance is quite good and for overseas, because of the beginning of the year, due to geopolitical risk, therefore, overseas business was negatively impacted, but these two projects, fundamentals remain strong. So as the market continues to rebound and the profit will pick up. Now let's pass the floor to KGI Life regarding the question or [indiscernible] previously mentioned.

[Unknown Executive]

For VNB increase the first quarter depends on the [indiscernible] increased 2% Y-o-Y. And CSN also increased compared to last year. For the full year compared to last year, we will increase around 5%. And for our agency channel from increased from 40% to 60%. This is our 3-year target. We hope that our CSN goal can be reached, and we want to see double-digit growth. Third, new [indiscernible] reserve because we do not know the latest details yet, and we have been discussing internally. Once we have a clearer picture, we will decide then whether to apply for the new theme or not. Based on the discussion in Life Association for our peers, a [indiscernible] shall provide more flexibility -- and for EV I will pass this over to Rochelle.

[Rochelle Hsieh, executive]

Last year after rolling is [indiscernible], then this is -- you can see a negative impact and EMV because there is no rolling [indiscernible], therefore it reflects our asset allocation. That's why there is an increase, and so CLC for last year when we were calculating CLC, we look at the regulators increase their weight related figures, so our EV reflects the deferred effect of the latest regulation.

[Operator]

[Operator Instructions] And the next is [indiscernible] .

[Eunice Fan, analyst]

28 [indiscernible] for the bank, 28 NIM -- it did not decline, but [indiscernible] Has declined -- so what's the FX contribution? Can you provide -- the NIM on the book for our reference? And how we should look at FX and the spread? [indiscernible] the increase in first quarter is quite strong. What's the full year guidance? We see double-digit growth whether 10%, 12%. Is there a more specific guideline. Number three, -- for KGI Life the outlook for dividend income -- because now the stock market is quite high, will we focus on dividend income and will it effect our [indiscernible] recurring deal? #4, For CDIB, first quarter fee income Y-o-Y decrease. The asset size has increased. Can you further elaborate why it declined? And last for CDF, there is a capital increase of TWD 250 million. Can you further elaborate on that?

[Unknown Executive]

[indiscernible] the bank talk about spread and then its related issues. Our FX swap income is around TWD 0.7 billion. NIM increased 0.3%. And we have strong loan performance, but we still remain prudent. So we think the growth will be around 10% annually.

Next KGI Life. Regarding recurring yield and dividend income. The stock market now is [peaked] out. So we will increase stock investment because of dividends. We will look at capital gain and dividend at a whole. And second, for recurring yield in 2023. The market rate has peaked out -- our recurring yield increase is limited.

So we will maintain the recurring deal of last year. Income in 2023, this is a transition phase for our funds. Some of them have already entered the exiting period. So our fee income ratio is decreasing. But as we are raising new funds and closing new funds in 2024, the fee income will be increased.

[Unknown Executive]

Okay. Next I'll answer CDF's capital rates issue. I believe you noticed that in the recent years, we will ask for a general authorization from the AGM. This is to meet the purpose in case there is any capital raise, and this will now more flexible and [indiscernible] -- but as our CEO mentioned, our current financial indicators are on meeting the regulatory requirements. We will continuously observe and monitor, that our capital rates, we will see if the rates will be beneficial to our shareholders' equity.

[Operator]

Next was we are still having time for our investors and Analysts. [Operator Instructions] Jemmy from JPMorgan.

[Jemmy Huang, analyst]

I have a follow-up question. First, for the Bank. You mentioned in Q1, there is a specific case. Was it the same case as we mentioned in the last quarter, [indiscernible] case is provisioned by the end of first quarter. Is this sufficient enough? What is your credit cost estimation, is it still 15 to 20 bps. And then for the reports for [indiscernible] over by 10 basis points. And or the factory higher hedging costs or there's other reasons.

[Unknown Executive]

First [indiscernible] Yes, indeed, that in the single place in London, the real estate, this whole year, we will have a higher hedging -- higher cost, it will be higher than 15 to 20 bps. Equivalent returns dropped by 10 bps is affected by increasing hedging costs indeed.

[Operator]

Away from commercial times.

[Unknown Analyst]

From a performance peak, you mentioned that [indiscernible] was being able to be focusing on asset growth, will you consider any M&A? And second question, [indiscernible]. What is your last year's dividend income. Earlier, CEO talked about adding the capital gains and yield we'll look at it as a whole, will there be an increase or decrease to your dividend income?

[Unknown Executive]

I'll answer the first question. For M&A we talked about this with the media before, we will always evaluate on any opportunities that would be both our company -- this has always been our -- one of our focuses. We're not going to do M&A for the sake of M&A unless it has synergy to our company.

Regarding dividend income. We -- as we mentioned, we will not sacrifice, we won't look at dividend alone. We will look at capital gain and dividend income together as a whole.

[Operator]

Thank you for joining in today's conference, this on the end of our investor flow. If there is any more questions, please feel free to contact our IR team or our PR team. Thank you.