CTBC Financial Holding Co Ltd
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CTBC Financial Holding Co Ltd
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Welcome, everyone, to CTBC Financial Holding Co.'s 2018 First Quarter Earnings Conference Call. [Operator Instructions] And today's host will be Ms. Yaling Chiu, Executive Vice President and Deputy Spokesperson of CTBC Financial Holding Company; and Mr. Pai-Hung Yeh, Executive Vice President of Taiwan Life Insurance Company. The presentation will begin now.
Thank you, everyone, for joining CTBC's 1Q '18 Earnings Call. Please turn to Page 3 for financial highlights.
At a holding level, net income reached $12.2 billion, increased 97% Q-on-Q and 20% Y-o-Y. Revenue growth was driven by growth in lending fees and trading income. Operating expense growth was contained. Cost-income ratio was 56% in 1Q '18. ROE was 16.1%, and ROA was 0.91%. EPS was $0.63.
Life insurance net profit grew Q-on-Q and Y-o-Y due to increased investment income, improved loading gains and declined cost of liability.
Board recently approved to distribute cash dividend of $1.08 per common share, implying a dividend yield of 5% based on the closing price on April 27.
On asset quality. NPL ratio remained steady at 0.41% with NPL coverage ratio of 301% in 1Q '18. Credit costs were benign at 7 basis points.
Capital position remained strong. Group CAR was 131%, and double leverage ratio was 116%. Bank CAR stood high at 14.6%, while common equity Tier 1 was 11.9%. Taiwan Life RBC was 318% as of 1Q '18.
On corporate governance. In order to further strengthen business integrity, the board has recently adopted 3 new measures. First, the board set up Ethics & Integrity Committee. Together with other functional committees, including Audit, Remuneration, Risk Management and Nomination, the board will continue serving the best interests of shareholders. Second, the board stipulates a limitation on length of service of independent directors. The maximum tenure for independent directors is kept at 3 terms, and each term is per year of service. Third, the board approved to implement the whistleblower program. Whistleblowers, who can choose to be anonymous, can report complaints to an independent committee designated in the compliance department.
Page 4 and 5 on profitability. Net profit reached $12.2 billion, up 97% Q-on-Q and 20% Y-o-Y. EPS was $0.63. Group ROE was 16.1%, and ROA was 0.91%.
Page 6 on capital ratio. We remain well capitalized with group CAR at 131%, bank CAR at 14.6% and Tier 1 ratio at 13.1%. Life RBC ratio was 318%.
Page 7 on holding's net profit breakdown by entity. Bank profit reached $9.1 billion, up 19% Q-on-Q and up 9% Y-o-Y. Life profit reached $2.7 billion, up 98% Q-on-Q and 93% Y-o-Y. Holding's net profit came in at $12.2 billion.
In terms of profit breakdown. Bank and life contributed 75% and 22%, respectively. 48% of bank profits came from overseas.
Page 8 on net profit movements. Operating revenue in the first quarter was up 11% Q-o-Q on better fee income and trading gains. Provisions were down 46% Q-o-Q. Credit cost was 7 basis points. Expense dropped 4% Q-o-Q. Insurance pretax profits were up 33%, supported by increased investment income.
On the bottom, operating revenue grew 8% Y-o-Y from higher net interest income, fees and trading gains. Provisions increased due to recovery at TSB last year. Expense growth was contained at 2% Y-o-Y, and cost-income ratio dropped to 57 -- sorry, 56%. Insurance pretax profits were up 71% Y-o-Y due to improved investment income and loading gains. Overall net profits reached $12.2 billion.
Page 9 on revenue breakdown. Total revenue increased 11% Q-o-Q and 8% Y-o-Y. Net interest income was down 1% Q-o-Q on narrow spreads. NII was up 9% Y-o-Y due to loan growth and NIM improvement. Fee income was up 16% Q-on-Q, driven by better credit card, corporate and lottery fee. Fee income was up 2% Y-o-Y on sustained wealth management fee and better retail and corporate fee. Combined derivative, FX and trading gains were up 62% Q-o-Q and 16% Y-o-Y from interest rate swaps, FX and equity trading gains.
Page 10 on loan breakdown. Total lending with credit card revolving at the end of March was $2.2 trillion, representing a growth of 2% Q-o-Q and 8% Y-o-Y. NT dollar corporate loan was up 4% Q-o-Q from manufacturing, government and construction loans. Corporate loan was up 11% Y-o-Y, mostly from government loans. Foreign currency loan was up 2% Q-o-Q and 7% Y-o-Y. Excluding currency fluctuation, foreign currency loan was up 2% Q-o-Q and 8% Y-o-Y.
Mortgage continued to grow 3% Q-o-Q and 11% Y-o-Y due to recovery of property market and our exclusive government contract for lending to civil servants. Unsecured lending was flat Q-o-Q and up 2% Y-o-Y. Credit card revolving was up 1% Q-o-Q and 11% Y-o-Y on increased consumption supported by LINE Pay card.
Page 11 on foreign currency loan breakdown. Total foreign currency loan was $996 billion, which is around 45% of total loans. Overseas subsidiaries accounted for 60% of total foreign currency loans with TSB being the majority. Overseas branches accounted for 28%. OBU plus DBU, 12%.
If excluding FX impact, foreign currency loan at overseas subsidiaries was up 6% Y-o-Y, supported by growth at TSB, U.S., Philippines and Indonesia subsidiaries. Overseas branch loan was up 12% Y-o-Y, driven by further client penetration in Hong Kong, Vietnam, New York, Tokyo and China branches. OBU plus DBU loan was up 8% Y-o-Y, driven by growing loan demand for working capital, CapEx and trade finance.
Page 12 on deposit mix. Total deposit as of March reached $3 trillion. NT dollar deposit was flat Q-o-Q and up 6% Y-o-Y, with savings accounting for 57%. On the right, foreign currency deposit was up 4% Q-on-Q and 11% Y-o-Y, with savings accounting for 50%.
Page 13 on loan-to-deposit ratio. Overall LDR decreased to 74%. NT dollar LDR was 81%. Foreign currency LDR was 67%.
Page 14 on NIM and spreads. NIM was down 1 basis point Q-o-Q to 1.48% on lower LDR, but improved yield on marketable securities and interbank loans partly offset negative impact from narrow spread. NT dollar spreads were up 1 basis point to 1.6%. A slower mix in government loan led to better loan yield.
Foreign currency spreads were down 5 basis points Q-o-Q to 2.3%, reflecting higher U.S. dollar rates and rising mix in time deposit. The bank utilized excess U.S. dollar funding in capital market in order to enhance operating revenue. Overall spreads were down 2 basis points to 1.9%.
Page 15 on fee breakdown. Total fees were up 16% Q-o-Q and 2% Y-o-Y. Wealth management fee was down 2% Q-o-Q as mutual fund fee growth was offset by declines in bancassurance fee. Mutual fund fee was up 38% Q-o-Q, thanks to recovered market sentiment. Bancassurance fee was down 24% Q-o-Q due to high base in 4Q '17.
Wealth management fee was up 5% Y-o-Y, driven by sales of mutual fund and investment-linked policies. Mutual fund fee was up 51% Y-o-Y. Bancassurance fee was down 17% Y-o-Y, mainly due to late booking of insurance policy sales in 1Q '17.
Credit card fee was up 23% Q-o-Q due to low base in 4Q '17. And credit card fee was down 6% Y-o-Y due to higher redemption of LINE Pay card reward. However, consumptions were boosted by LINE Pay card. Revolving balance was up 11% Y-o-Y, and interest on revolving increased 8%.
Retail business was up 7% Q-o-Q and Y-o-Y, mostly due to loan-related and ATM fee. Corporate business was up 11% Q-on-Q and 12% Y-o-Y due to stronger syndicated loan trust and custodian fee.
Overseas subsidiaries fee was up 11% Q-o-Q and 3% Y-o-Y due to increased loan-related fees at TSB. Lottery fee was up 100% Q-on-Q on seasonal effect.
Page 15 on wealth management fee mix. On the right, bancassurance accounted for 49%, and mutual fund accounted for 48% of total wealth management fee.
Page 17 on cost-income ratio. Expense growth was contained Q-o-Q and Y-o-Y. Cost-income ratio improved to 55.5% in 1Q '18.
Page 18 on asset quality. Asset quality remains benign with NPL ratio at 0.41% as of 1Q '18. NPL coverage ratio was 301%.
Page 19 on credit costs. Credit cost was 7 basis point in 1Q '18, lower from 14 basis point last quarter since additional provisions were provided for specific cases.
Moving on to our Life business. Page 20 on total premiums. Total premiums reached $68.1 billion in 1Q '18, down 16% Q-o-Q and 12% Y-o-Y. Market share was 8%, ranked #4 in the industry.
Page 21 on first year premium. FYPs reached $36.1 billion, down 12% Q-o-Q and 17% Y-o-Y. FYP market share was 10%, ranked #4 in the industry.
Page 22 on FYP breakdown by channels and products. In terms of channels, [ 37% ] FYPs came from CTBC bank, 35% from external banks, 17% from tied agents and 10% from insurance brokers.
On the right is the product breakdown. Interest sensitive accounted for 70%, and investment-linked products accounted for 28% of FYP.
Page 23 on FYP breakdown by types of payment and currency. On the left, mix of regular paid products increased Y-o-Y, rising to 33% of FYPs in 1Q '18. On the right, mix of foreign currency policy increased to 32% in 1Q '18. In terms of product strategy, Taiwan Life continues focusing on high-margin and investment-linked products in order to enhance mortality, morbidity and loading gains.
Page 24 on FYPE. FYPE reached $6.5 billion. Market share was 7%, ranked #5 in the industry. On the right is the FYPE breakdown for your reference.
Page 25 on life insurance -- life investment portfolio mix. Total investment asset reached $1.5 trillion in 1Q. Taiwan Life reduced cash position and increased overseas fixed income and equity holding. In terms of portfolio breakdown, cash accounted for 4.9%, domestic fixed income, 10%; overseas fixed income, 64.3%; equities, 7.8%; real estate, 5.4%; mutual funds, 4.3%; mortgage and policy loans, 3.3%.
Page 26 on investment yield, cost of liability and hedging mix. 1Q '18 investment yield was 3.72%. Cost of liability dropped to 3.65%. In terms of hedging, 65% of overseas investment assets were NT dollar policies, of which 77% were fully hedged. Hedging cost was 140 basis points.
Next, we move on to Taiwan Life and 2017 EV Report. Page 28 on EV. EV reached $174.2 billion, of which adjusted net worth was $71.8 billion. Value of in-force business before cost of capital was $131.5 billion, and the cost of capital was $29.1 billion. EV is $54.5 per Taiwan Life share and $8.9 per CTBC Holding share.
Page 29 on EV assumptions. Investment yield for NT dollar policies started from 3.8% in 2018 and will rise gradually to 4.38% in 2037. Investment yield for U.S. dollar policies started from 4.63% in 2018 and will rise gradually to 5.48% in 2037. [indiscernible] apply was 10%. RBC capital requirement remain at 200%.
Page 30 is EV sensitivity and Page 31 is EV comparison provided for your reference.
Page 32, our adjusted net worth movement. Adjusted net worth increased to $71.8 billion, mainly due to profits of $10.2 billion in 2017.
Page 33 on VIF movement. Increasing VIF was due to VNB of $17.7 billion, release of 2017 expected profits and interest rolling forward of $4.1 billion and investment yield assumption change of $10.7 billion, offset by other changes of $1.1 billion.
Page 34, our VNB movement. The increase in VNB was driven by sales volume change of $0.5 billion, product mix change of $0.2 billion and investment yield and other assumption changes of $0.5 billion.
This will conclude the presentation, and we can now open for Q&A.
[Operator Instructions] And our first question is coming from Jemmy Huang from JPMorgan.
A couple of questions, if I may. The first one is on net interest margin. It's now 1 basis point quarter-on-quarter, and you specified the reason. So I just want to check whether you still maintain your guidance of 3 to 5 basis point expansion year-on-year or where we may see better growth on the investment and trading cycle compensate on the NIM. Second question is could -- recurring yield of Taiwan Life, could we get the recurring yield before hedge in first quarter this year? And then I think VNB margin is down year-on-year last year. Just wonder, when you look at your FYP mix this year, would you expect VNB margin to improve or to deteriorate further this year? And then the last question is on investment yield. I think you revised up your investment yield assumption for the Taiwan Life EV. So could you tell us roughly by how much basis point you have been revising up for the yield -- for the investment curve? And then what's the rationale behind?
This is Yaling. For NIM trend, we just explained the reason is to earn more swap point instead of net interest income. So if we strip out this impact, if we don't do swap point, then the NIM on first quarter will be 1.1 -- 1.51%. So compared to last year first quarter, it will be around 2 to 3 basis points widened if we don't do swap point. So this trend is quite in line with our outlook guidance given in the first -- in the beginning of this year. But going forward, for this year's outlook, it really all depends on the swap point. If the interest trend, the interest gap between U.S. and Taiwan dollar continue to widen, then we still will do swap point. We still will continue doing swap point. Then the NIM you see on the book will -- probably will not be under same trend as we provided outlook guidance. But on top line for revenue is definitely will be unchanged as our guidance. So that's for our view on NIM. And Pai-Hung will talk about recurring yield on Life side.
The recurring yield for first quarter is 3.37%, decreased 3 bp compared to first quarter of 2017. The...
Sorry, the 3.3%, before hedge or after your hedge?
Before hedge, 3.37%. The main thing is that we realized as our sound capital can in first quarter, and the second one is NT dollar appreciation. So the increased income changed to NT dollar impend, there is impact on the investment year. And for the second question, right now, we focus on product mix improvement. It means that we focus on selling more investment-linked product and foreign currency product due to the swap cost and hedging cost increased that in the first quarter. It's a strategy direction for -- we like to have more stable profit, so we choose to sell more investment-linked product. But investment-linked product margin is [ stored ] in NT dollar policy based on current embedded value assumption. The third one question is EV investment assumption. We base on U.S. Congressional Budget Office. They have forecasting for the 10-year treasury bond for the next 10 years. Compared to last year, the yield increased 70 basis point to 130 basis points. If we use a simple number to compare to last year, we use the equivalent yield. The investment equivalent yield for this year is 4.45%. And for last year, it's 4.30%. It means 15, 1-5, basis point up than last year.
So some follow-up question. I think for VNB margin, you mentioned you try to maintain stable profits. So when you say you try to maintain stable profits, you refer to the P&L profits. So instead, you may need to sacrifice some of the VNB margin. Is my understanding right? And then the second one is for investment yields. So you mainly revised up your overseas investment yields. Is there any change about Taiwan dollar yield?
Please hold on a second. We will get back to you on your question.
We sell more investment-linked product to stabilize the profit, I mean, the accounting profit. You mentioned about the -- that we sell more investment-linked product but less NT dollar product, well, in terms of VNB. For the 10 FYP, that's right, it will impact the VNB value. However, it's based on the assumption, investment yield assumption, it means 3.8% to 4.38% still have some -- it's a best assumption, best estimate assumption, but it still have some uncertainty. So -- because for the first quarter, right now, we know that hedging cost is increasing. So we try to stabilize our strategy, so stabilize accounting profit.
And next, we'll have Yafei Tian from Citigroup.
I also have a couple of questions, if I may. The first one is on the funding cost guide, particularly the U.S. dollar funding. We see that this quarter, the yield on the U.S. dollar funding has increased somewhat from a very stable level for a few quarters. You mentioned about increased competition in this space. But how -- question number one is, how was CTBC able to maintain a relatively flat funding cost until now? And what is new to you? Do you see this tightening funding cost, the higher funding cost going to trend up going forward? And number two question is on the fee income side. You mentioned about mid-single-digit fee income growth for this year. But for the first quarter, I think the number was relatively subdued, only at 1.5% year-on-year. What give you the confidence that the fee income is going to meet the guidance in coming quarters? What are the key drivers that could be a surprise positively for the later part of the year? One more question on the Life side. In terms of hedging cost and the hedging cost outlook for the remaining year, if you could give some color around that, that would be very helpful. And the final question, on the dividend that CTBC declared this year, obviously, it's a very strong DPS number this year. And I was wondering, is there a change in terms of payout strategy for the group? What is the dividend outlook in coming years? Can this EPS level or payout ratio be maintained? That's all.
For your first question, the trend of funding cost, I think for the short term, because the U.S. funding liquidity is tight, so we do see the funding cost is going up for the short term. But the effect of the tax reform in U.S., we see it will stabilize. And so if the liquidity -- the funding coming -- going to U.S. could be stabilized, then the liquidity of the U.S. funding can be stabilized in the second half. That's our view. And the second question for the fee income outlook. First quarter total fee income growth rate is 1.5%. It's mainly driven by the lottery fees. For wealth management fee, it's 4.5% year-on-year. And for syndication loan fee, it's 7% year-on-year. And first quarter is the peak season for lottery, so that's why lottery fee -- the weighting of the lottery fee will be higher in first quarter. But for next quarter, the weighting of lottery fee will be much lower than first quarter. And then if our wealth management and syndication loan fee can remain the same momentum as first quarter, then we believe for the rest of the year, total fee income will be pretty much on check, in line with our guidance -- outlook guidance. And then I answer dividend question first, and then Pai-Hung will explain questions on Life side. For dividend policy, for the next 3 to 5 years, our policy maintain the payout ratio above 50%, 5-0%. So it was quite similar this year and last year. Under the adequate [indiscernible] ratio, we tend to pay out in cash. And then we will see -- based on our 5-year plan, we will see going -- in the next 5 years, payout ratio will above 50% and dividend yield will remain between 4% to 5%.
For the hedging cost for Taiwan Life, hedging cost is 1.4% for the first quarter. And the hedging costs compose 2 parts. The first one is appreciation or depreciation. We think NT dollar would not appreciate more than the end of first quarter, it means an increase more than 29.12. So -- and the second one is instrument cost like a swap cost or [ NDF ]. The swap cost may increase according to the U.S. interest hike. So the second part was -- may increase a little bit. For the 2-part [indiscernible], we think our budget is -- target 1.3% for this year. We think there is a high possibility to change the budget.
Okay. Clarification on the payout ratio more than 50%. I assume that 50% is cash payout and CTBC is moving away from noncash dividend. Is that right? Just to clarify on that.
Yes, that's right. That's our plan.
And the next question is from Anthony Lam from HSBC.
Firstly, as a follow-up on the dividend policy, and I think not sure whether you mentioned in the Chinese session that you revisit the expansion into Malaysia. So is that policy already in view of the potential expansion you may carry out? So that's the first one. And the second one will be on the cost-income ratio on the bank side, second. I think, previously, you've given the guidance of somewhere between 55% and 60%. But I think we saw some improvement from last quarter and seeing a pretty good number this quarter. Just trying to understand what's the -- what's your thought on cost-income this year going forward. That's the second one. And third one would be on the wealth management fee. I think, in the presentation, you mentioned something related to the first quarter numbers with regard to bancassurance. And I also noticed that the reliance on CTBC to distribute Taiwan Life products is also increasing. Just trying to understand whether that's actually placing some negative pressure on wealth management fee because of the lower feeling and that kind of explain your improved loadings for your Taiwan Life business.
To answer your question, first one, in our 5-year plan, there is no big M&A assumption there. So if we -- because we focus more on our organic growth and to deliver synergies from our big M&A case in less -- in 2 to 3 years, the goal one is Tokyo Star Bank and the other one is Taiwan Life. So in our 5-year plan, 5 years plan, we don't have any assumption to merge and acquire other entity, big -- I mean, big M&A case. The second question, cost-income ratio. Our plan is to gradually improve our cost-income ratio in next 5 years. But first quarter, our top line performance is quite good, and that's the major reason to drive down our cost-income ratio in first quarter. But in next -- in second quarter, we foresee our momentum will -- if go back to our normalized momentum, then the cost-income ratio will be around 58% or 59%. That's our view for this year in terms of cost-income ratio. And for wealth management fee, we always maintain an open platform, meaning that we don't intend to sell Taiwan Life product on purpose. That all depends on the products from different life companies and to see which product provide better benefits for our wealth management clients. So we don't have any pressure from Taiwan Life to sell their product intentionally.
[Operator Instructions] And the next question is coming from [ Kathy Fan ] from Citi.
I have 2 follow-up questions. The first one is on the cost-income ratio. So you just mentioned it's 58% to 59% for this year, right? I think, last year, it was 58%. So you don't expect any improvement from that level? And what is the main source of your increased expenses, infrastructure costs or other like technology method? The second question is on swap. So I understand that you swap U.S. dollar into Taiwan dollar and earn the swap point from the trading income. But I see from your trading income that the absolute amount itself is not significant at all versus your net interest income. So what is the rationale behind the strategy? My understanding is that in first quarter of '18 that LIBOR has been up by 31 basis points. So if you just deploy your excess U.S. dollar liquidity into this high LIBOR market, you should have earned better return than the swap point. So may I understand a little bit more about the rationale behind this strategy?
In terms of cost-income ratio, 58% is on banking side, is for bank, this entity. And when we talk about cost-income ratio is for holding company exclude Taiwan Life. So last year, on holding company-level, exclude Taiwan Life, is 61% of cost-income ratio. And this year, our plan is to lower down to 59% or 60%. But since our first quarter result is good, so I think we can improve our cost-income ratio more than our plan. This is the first question. And second question, in terms of swap point, actually, our internal calculation to swap U.S. liquidity into NT dollar, we earn more than 31 basis point. So that's the rationale that why we keep doing -- keep swapping the foreign currency funding into NT dollars.
Understood. So -- but when I -- just a second. So when I see your P&L, in which line -- it will go through the trading income right away. So it should -- just a second, let me -- is it like derivative or an FX? Or which one is it?
It will mix. So you see, for accounting treatment, it will go to derivatives. But derivatives will mix with trading because, for example, if we have foreign currency bonds, then we will hedge the FX rate. So -- but I suggest you look at the mix of this derivative and trading gain. There will be Y-o-Y -- it will be -- grew by 15% Y-o-Y. So mix derivative and trading gain, this is the other income -- other noninterest and fee income, then it increased. It grew dramatically.
So like you said it's 50% or 15% year-on-year? I didn't hear it.
1-5. It's on our presentation, Page 9. This add up for -- this sum of derivative and trading year-on-year, 1-5, 15.6%.
And the next one is from Anthony Lam from HSBC.
Just got a technical question [indiscernible]. In January, you talked about [indiscernible] in terms of gains from tax rate change. Just wondering, I think that's on the holding level and just wondering how that's [ split ] across the bank and Taiwan Life and what lines does this gain go into.
The total benefit from tax reform is -- on holding level is $1.1 billion and about $800 million for Taiwan Life and $300 million for bank. And it goes to tax, the line of tax. It's...
The line of tax. Okay.
The line of tax, so it is spread in after tax, not before tax.
[Operator Instructions] And the next one is from Frank, Daiwa Capital Market.
I was wondering if there are any remarks that you can give about the drop in investment yield at Taiwan Life. It was 3.78% last year, and it's down 6 bps this quarter. Is there anything you can talk about?
The main reason is hedging cost has improved from 1.34% last year to 1.4% this year. And also, the cost of liability decreased from 3.75% to 3.65% for your reference.
Okay. So is it safe to say that most of the influence is from foreign exchange? And is there other factor?
The main factor is hedging cost.
And the next question is from Yafei Tian from Citigroup.
I have a quick one on the AFS gain, and maybe now it's called FVOCI and FVTPL, those things. The -- so the equivalent of AFS gains for this quarter, do you mind giving us some color around the absolute level? And another one would be, what is the unrealized gain that would fall under the previous inactive or hold to maturity category, in other words those that are under amortized cost category under the new IFRS 9 definition?
Unrealized gain or loss for FVOCI is negative $3.4 billion for the end of first quarter. For -- among these numbers, the fund is unrealized gain. There is $1.2 billion.
Positive?
Positive, positive. For -- yes, go ahead.
Yes. Just to follow up on matter FVOCI negative $3.4 billion. Our number from end of fourth quarter was a positive TWD 2 billion number. So there has been a bit of decline Q-on-Q. Is that because that we have recognized some of those FX gains in the quarter? Or is that due to market movements?
For the change in number, part of realized gain and part of -- in terms of valuation.
Would it be possible to let us know how -- what is the realized gain to OCI this quarter for the Life business?
Sorry, I don't have the number on hand.
No worries. We will follow up with the IR team.
[Operator Instructions] And next one is from Anthony Lam from HSBC.
Just, I think -- just a very, very quick follow-up for me. I think just went back to my follow-up notes, and I think you did mention that you tried to give us some sort of follow-up guidance for the VNB growth. So appreciate any number this year. Just trying to give -- especially on the back half that you probably foresee lower VNB number this year. Just trying to see what kind of VNB you are budgeting for this year.
For the VNB number for 2017, it's $16.3 billion compared to 2016 is $14.1 billion, so the increase 8.5%, 8.5%. For this year, we did not calculate the VNB number for the first quarter. I mentioned earlier it's our strategy direction. But because we sell more foreign currency policy and we still have 3 seasons to sell more markets, so it's hard to say the VNB number this year will go down.
So can I -- I mean, how should we read into that? Can I take that as no guidance or just flat VNB? Or -- I'm not sure how to interpret this.
We expect to increase VNB.
Oh, still increase VNB on volume growth. Is that correct? But I mean, we have seen decline in first year premium this quarter, and there's probably decline in VNB margins. Just trying to get my head around this. Could you try to help us understand how you can achieve, I mean, higher VNB with...
I mentioned that the foreign currency -- because the foreign currency policy have higher VNB margin.
Okay. So much higher than what you saw in last year. Correct?
Yes.
There appears to be no further questions at this point. We thank you for all your questions, and that would be the end of the conference. Thank you for your participation in CTBC Financial Holding Company's conference call. You may now disconnect. Goodbye.