First Financial Holding Co Ltd

TWSE:2892

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the First Financial Holding First Quarter 2020 webcast investor conference. We'll start with our presentation for the first quarter snapshot financial highlights and operating results. Then, we will invite Annie Lee, our IR head to proceed with the presentation. [Operator Instructions] And today's presentation material is already on our IR website at www.ffhc.com.tw. Also, we will provide 1 year replay service of the webcast meeting for your convenience.

Now I'd like to turn over to Mr. Keith Ke to begin today's presentation. Keith?

[Keith Ke, executive]

Thank you. Okay, please turn to Slide 5. Let's take a quick review of first quarter's performance in 2020. As you know, coronavirus pandemic had dragged down the global economy as well as the group's performance. Our flag subsidiary First Bank only reported TWD 3.3 billion in first quarter which was almost 30% decrease Y-o-Y.

Volatility from financial markets and the continuous global lockdown drove the uncertainty for the coming quarters. As of the breakdown of bank unit, total loan improved 5.4% Y-o-Y, which was mainly driven by mortgage and the SME sector. The strong loan demand also stimulated the net interest income with 1.5% growth Y-o-Y, plus 68.5% decrease from treasury gains was the key to burn down the net income.

Taiwan was relatively successful in controlling the coronavirus outbreak compared with other countries globally. It brought some feedbacks as well. One advantage was to attract the investment or lending back from the -- from overseas.

Last but not least, with the $1.55 earnings per share, a proposal of TWD 1.05 cash dividend and the TWD 0.3 stock dividend was subject to AGM approval.

Okay, let's move to financial highlights. Please turn to Slide 7. This slide provides the group's key figures. Consolidated net income shrank to only TWD 2.9 billion, with 38.9% decrease Y-o-Y. And also affected the EPS to only $0.24 in first quarter. Other figures all showed a huge setback as well due to this coronavirus pandemic. Please take NIM as reference.

Let's turn to Slide 8. This slide shows the breakdown of gross net income. Total net revenue decreased by 12.8%, and it compressed the bottom lines to only TWD 2.9 billion, which we had mentioned.

And next slide displays the net income from major subsidiaries. Not only bank was hammered heavily by the virus with 30% recession, but both Securities and Insurance also reported negative results in first quarter.

Please turn to Slide 11. Let's move to operating results. This slide shows the group and bank's net income and ROAE. Group reported TWD 2.9 billion earnings with 5.4% ROAE. Bank posted TWD 3.3 billion net income with 6.1% ROAE. All figures were distorted in first quarter.

Please turn to Slide 12. This slide provides the breakdown of bank's earnings structure. Cumulative net revenue in first quarter was TWD 9.8 billion with 18.6% decrease, which was mainly driven by the [ strength ] from gains on investment. As for the core earnings, net interest income was relatively stable during this period, maintaining a 1.5% growth Y-o-Y in first quarter. Fee income dropped 3.2%, mainly affected by the shortage of bancassurance fee revenue.

Let's move to next slide. Total loan book increased 5.4% Y-o-Y to reach TWD 1.8 trillion. Both mortgage and corporate loans continued to drive the growth. Mortgage had a 5.8% growth. Our large corp. and the SME each had 8% and 6.4% growth, respectively. FX loan continued to shrink to -- with 1.4% downward. However, overseas branches still maintained 4% growth Y-o-Y in first quarter.

Please turn to Slide 14. This slide further shows the Q-o-Q trend of the loan book. Please take it as reference.

Let's take a look at bank's LDR, spread and NIM. Please flip to Slide 15. LDR rebounded to 76.6%. Both NT dollar and FX LDR lifted. NT dollar LDR stood at 80.1%, while FX LDR edged up to 65.7%. Loan-to-deposit spread fell to 1.51%, mainly reflected the U.S. rate cuts last year. But not much from the total 1.5% rate cuts in March this year yet. And the NIM also decreased to 1.01%.

Please turn to Slide 16. This slide shows the breakdown of Q-o-Q NT dollar spread and FX spread trend. NT dollar spread dipped 2 bps to 1.36%. FX spread stayed at 2.18% since the previous quarter spread has already reflect the rate cuts impact already. So for this quarter, it did not -- it was not impact much.

Okay. Please turn to Slide 17, the deposit structure. Total deposit increased to 6.3% Y-o-Y. NT dollar deposit grew by 6%, while FX deposit increased to 7.2%. NT dollar CASA rates slid a little bit to 66.7%.

Please turn to Slide 18. This slide shows the loan book concentration. And here, we listed the major exposures to specific industries. Please take them as reference.

Now please turn to Slide 19. This slide presents the mortgage book. We changed the outlet a little bit. Top left graph shows the mortgage yield and LTV ratios. Mortgage yield continued to dip to 1.74%. New mortgage LTV ratio was slightly up to 65.2%, while average mortgage LTV ratio stayed at 45.7%. Second bar chart displayed the monthly new mortgage lending. And the first quarter's average amount slid a little bit comparing with the average amount of last quarter.

Please turn to Slide 20. Let's move to fee income. Total net fee income was TWD 1.76 billion in first quarter 2020, which was 3.2% decrease comparing with first quarter 2019. As we mentioned earlier, bancassurance fees revenue dragged down total fees performance. And of course, the wealth management fee income also decreased to -- decreased 1.6% Y-o-Y as well. Loan-related fee income improved 10.5%. FX fee dropped 12%.

Next slide shows the Q-o-Q trend of fee income. Total fee income was down 19% Q-o-Q. And again, bancassurance was still a reason to [ shut down the ] outcome.

Please turn to Slide 22. Total operating expense decreased 2.9% Y-o-Y in first quarter of 2020. However, the weak net revenue performance in first quarter attributed to the CI ratio rising to 49.3%. We expected it would be back to a relatively normal level in second half.

Please turn to Slide 23, let's move to asset quality. We combined all asset quality contents into one slide this time. On this slide, top box shows the coverage ratio and the overall NPL ratio. Coverage ratio perked at 526%. NPL ratio slid 1 bp to 0.23%. Bottom box shows the NPL ratios breakdown. Individual NPL ratio was up to 0.25%. Mortgage NPL ratio was down 1 bp to 0.18%. SME NPL ratio also dropped to 0.37%, and large corp. NPL ratio stayed quite well with only 0.02%. For more details, you may refer to appendix on slide -- Slide 33.

Okay, please turn to Slide 24, the overseas profit. This OBU book reflected some mark-to-market treasury losses in first quarter. So the pretax profit of overseas branches over total profit distorted to only 35.2% this quarter. Top left pie chart shows the profit breakdown. Greater China, which includes OBU and Hong Kong, occupied about 32% of total overseas profits. North America and ASEAN were each occupied 20% and 30% respectively.

Please turn to Slide 28 (sic) [ Slide 25 ]. Group CAR improved to 125%. Bank's CAR and Tier 1 also rose to 13.6% and 11.7%, respectively, in the first quarter 2020.

Now let's move to Slide 29. This slide displays our dividend policy, which we had mentioned at the very beginning. Board of directors had proposed to a TWD 1.05 cash dividend and TWD 0.3 stock dividend, and it was subject to AGM approval. And our AGM will be hosted on June 19.

Okay. That's the presentation today. I will hand back the microphone to K. C. to host the QA session. K. C.?

[K. C. Lee, executive]

Okay. Thank you, Keith. Now I'd like to proceed the QA session. Before we start the QA session, I'd like to highlight one thing, due to lot of investors are concerned about our guidance for the fiscal year of 2020. So I'd like to conclude all the guidance on the QA session in the last question. So before we start with our 2020 guidance, I'd like to raise questions other than guidance, okay?

So let's move to the first question. The first question comes from [ Mr. Tan Timmy ]. We hope to know that in terms of the federal and Taiwan Central Bank's rate cuts, do you -- how do you evaluate the rate cut impact on spread and NIM this year? And how many bps, can you tell us, Annie?

[Annie Lee, executive]

For the rate cut impact from both Taiwan Central Bank and the Fed, actually -- actually lowered our projection for our NIM this year. For one -- I mean, 25 basis point rate cut for NT dollars, it would drag down our overall NIM by around -- about 4 bps until end of this year, but the 1-year impact will be around 6 bps for NIM. And in terms of the Fed, I mean, U.S. rate cuts, that actually dropped nearly 1.5%. That would represent about 2 bps of the total NIM in contraction. So overall, the impact for both Central Bank with the -- to sum up that, the impact will be around 6 bps -- 5 bps to 6 bps until end of this year. So it implies that currently, we had NIM for the first quarter, around 1.01%, which would be further down to about just 0.95% to 0.96% toward the end of this year.

The rate cut in the Central Bank in Taiwan further dragged down the rates by another 25 basis points then the NIM contraction would continue. And I just highlight that every 25 basis point cut would impact our NT dollars NIM by nearly 4 bps. So we should see how the Taiwan Central Bank will further drag down rate in order to boost the economy but currently, our NIM impact, NIM contraction projection would be somewhere around 5 bps to 6 bps lower from current level at around 1.01% at the end of first quarter.

[K. C. Lee, executive]

Okay. So a follow-up question is, do you expect Taiwan Central Bank to have further rate cut in the coming quarter?

[Annie Lee, executive]

It seems that some analysts in the market would view the room for Central Bank to chop rate, it's not that, I mean, meaningful. But still people do expect if Central Bank can do more to further lower rates then sentiment-wise, it would demonstrate that the Central Bank would do its best to try to shore up the markets. However, now that the governor of our Central Bank has already highlighted that our Central Bank would not implement the so-called 0 rate policy. So we only expect there may be one more rate cut, but no -- I mean, no more than that. So for most banks here in Taiwan, further cuts may be possible but the impact would not be so significant like that for the U.S. dollars as the 0 rate has already prevailing in the market. So yes, there may be another rate cut by Taiwan Central Bank. But that would be the end of this rate cut cycle in Taiwan.

[K. C. Lee, executive]

Okay. Thank you. And another question is from Mr. Jemmy Huang. Jemmy hopes to know that the 68% decline on investment gains, all due to the mark-to-market loss or some of them are from declining swap revenues and any split roughly to us?

[Annie Lee, executive]

Yes. The volatility in the financial markets in the first quarter did depress our treasury gains quite substantially. In terms of the split of different categories, the mark-to-market losses did exaggerated our treasury gains. But the -- I mean, most of the mark-to-market losses had already recovered up to May that the losses actually narrowed to just TWD 200 million up to end of May. So as a swap valuation, it also further move upwards to mark-to-market gains now for valuation. But actually, the narrow of the interest rate gap between U.S. dollars and NT dollars depress the opportunity gains for the FX swap transaction. So we would see for this year, the gains from the swap trading was further lower than that of last year. Probably around just 20% to 30% lower than the sites that we actually derived from our past record, 20%, 30% lower.

[K. C. Lee, executive]

Okay. And I'd like to highlight that we will update the 2020 guidance for a conclusion question. So please just wait for a little bit. And we'll start from other questions other than the guidance.

Another question is about our first quarter wealth management fee income. And [ Mr. Chan ] from Taishin hopes to know that other peers seems to have great -- better performance wealth management fee income revenue. However, First Bank only reported a 0.9% Y-o-Y growth. Can Annie tell us what's the major reason behind it? And is there any -- is there any strategy adjustment for the coming quarters? Annie?

[Annie Lee, executive]

For first quarter, we have seen the contribution from wealth management diminish about 7 -- about...

[K. C. Lee, executive]

It was 3.9%.

[Annie Lee, executive]

3.5%, yes. Up to I mean April, the gap will continue to become wide. That was mainly dragged by a lower commission revenue from bancassurance business, as we know that the regulators had imposed quite strict measures to curb the sales of the so-called higher-margin savings product and so on and try to divert the business into a more protection type. So in that sense, the bank -- I mean, the full bancassurance business did impact our overall contribution from -- for the wealth management. But fortunately, the sales of mutual fund did see a good boost that the investors were quite keen to allocate their money into the investment of the wealth management businesses. So for wealth management business, we did see more than 30% growth. However, the gap felt behind the bancassurance is quite large that the sales of funds were not able to compensate the shortfall.

Apart from the wealth management drag from bancassurance that led to nearly 3% to 4% lower comparing to last year for wealth management, other non-wealth management business were also seeing some falling of that FX and credit card and also overseas fee revenues did see some contraction. But the good thing is that the fees contribution from the loan related had seen good jump to have more than double-digit growth. So all this composition from different categories contributed to a lower fee revenue for the first quarter, but we would see that after the market become more calmed down and low rates environment to push investors to place their money into the investment parts that will help to further restore the confidence that the investor would place the money into the investment of like mutual funds and other things. Hopefully, we can start up more business with our clients to help them manage their wealth, particularly after the impact of the COVID-19. And for the FX and the credit card or other network service would also gradually resume after the first quarter fall off. So we actually see our fee revenue would gradually recover going into the second or the third quarter after the major lockdown were lifted.

[K. C. Lee, executive]

Okay. Thank you, Annie. And can you -- yes. We have investor that he hopes to have to -- reiterate the 25 bps U.S. rate cuts impact on NIM again.

[Annie Lee, executive]

Around 2 bps.

[K. C. Lee, executive]

2 bps, yes.

[Annie Lee, executive]

2 bps for U.S. dollar rate cuts and about 4 bps for NT dollars.

[K. C. Lee, executive]

He only asked to list them.

[Annie Lee, executive]

Yes. 2 bps and NT dollar, it's 4 bps. Actually we have already set some floor rate for our lending facility. So that would help to smooth out the floor of the...

[K. C. Lee, executive]

The line. Okay. And we have another question about the spread. And we saw -- it's from [ Tina Chen ]. [ Tina ] hopes to know that actually, the first quarter FX spread maintained flattish. However, the NT dollar spread slide around 2 bps Q-o-Q. However, the total spread actually declined 8 bps. What's the reason behind this situation, Annie?

[Annie Lee, executive]

Well, good question because I don't know the answer now. Can I get back to you later after which -- can I check it?

[K. C. Lee, executive]

Okay, Annie, can we get back to you. Okay. Another question from JPMorgan, Mr. Jemmy Huang. Jemmy hopes to know that for the TWD 54 billion loans in bailout, how do we perceive the impact on our asset quality and credit cost for the coming quarters. And how much is 100% guaranteed by the SMEG fund? Okay. That's a Phase I question, Annie. For the TWD 54 billion bailout loans?

[Annie Lee, executive]

Well...

[K. C. Lee, executive]

I think for corporate. Yes, it is 44.

[Annie Lee, executive]

TWD 54 billion bailout funds. It's only about less than TWD 50 billion.

[K. C. Lee, executive]

I think for corporate, yes, for corporate.

[Annie Lee, executive]

For corporate, we didn't bailout up to such...

[K. C. Lee, executive]

For corporate, we only bailout...

[Annie Lee, executive]

Less than TWD 50 billion. Up to end of May, only TWD 49 billion, yes, okay. Anyway, it's more than this -- these figures.

[K. C. Lee, executive]

That's okay. Annie, he just want to know that how's the impact on asset quality?

[Annie Lee, executive]

Let me put it in this way. For instance, if I have a borrower that actually engaged with our bank at around, let's say, TWD 500 million loan outstanding. But now they're short of cash, around just TWD 50 million. Then if we do not extend this lending, for, let's say, another 6 months, then it would turn out to be a delinquent loan. So what we can do is to help them bridge the gap for the cash flow for the moment because every single loan that we bail out now all have pledged with collateral, not to mention the so-called government-directed bailout loan for each sector. That would be fully covered or at least 80% to 90% covered by the credit insurance facility in Taiwan. That will be pretty much guaranteed or sponsored by the government. In that sense, the -- I mean, projected NPL would not be significant because I do highlight that this is -- this will be guaranteed by government or extra collateral provided by the borrower. So the rationale behind this bailout cannot be viewed as completely become a so-called delinquent in the future. But we should see after, I mean, 6 months or 12 months later, is some -- I mean, some play in each sector cannot survive this impact, then the NPL would definitely go higher. But for the moment, we should see -- it still remain quite -- I mean, quite early stage to project any potential NPL in the future.

[K. C. Lee, executive]

Okay. And another question is from [ Tina Chen ] as well. She hopes to know what's the provision plan for Powertech so far for the future.

[Annie Lee, executive]

We have already provided up to 7. -- sorry, 707 -- $770 million.

[K. C. Lee, executive]

Dollars, for Powertech.

[Annie Lee, executive]

Against our -- that represent nearly 50% of the total exposure up to 1.5%.

[K. C. Lee, executive]

50%, okay. Well, further provisioning.

[Annie Lee, executive]

It depends on the potential losses arise from the disposition of its collateral. Actually it still have collateral that we would see how much we can recover from the disposition of the collateral. So 7 -- nearly $700 million should be -- should be sufficient for the moment. But if there is any further losses from the collateral -- the value of the collateral then there may be some more extra provisioning but that would not be so significant, maybe less than $200 million. Yes.

[K. C. Lee, executive]

Okay. And another question is about our new NPL influx in the first quarter from Mr. Shi Eric. Can you break down the new NPL inflows of TWD 2.4 billion because do you see where new influx in the second quarter? Okay, second quarter. And how do you see the asset quality and the potential NPL?

Okay. That's the Phase I question for the new NPL influx.

[Annie Lee, executive]

Okay. Let's concentrate on NPL influx. For the first quarter, we had a legacy position. That is for a base metal company. And the size of this NPL is up to about TWD 1.6 billion, TWD 1.6 billion. We actually charge off this TWD 1.6 billion NPL in the first quarter. So this would constitute a major influx of NPL.

[K. C. Lee, executive]

That's before the coronavirus or after the coronavirus?

[Annie Lee, executive]

Yes. Just to -- I mean same period. Yes, that was a legacy, TWD 1.6 billion from the first quarter. Given that any potential deterioration in the loan book, I must say that it is still early that we see any potential NPL for the moment because I just mentioned that we had already extended many loans to our clients to help them, try to shore them up that they would not be shortfall for the cash flow for the moment. So we have to wait for another 6 to, let's say, 9 months to know that this -- the market coming back and do they receive sufficient cash flow to repay their loan. But we must -- I mean, admit that there may be some borrow would become a failure loan anyway. But for any projection NPL in the future, yes, that's possible, but the size is still not defined yet.

[K. C. Lee, executive]

Okay. Thank you. And another question is about our large corp. loan growth and it's from [ Mr. Ling Chan Wee ]. [ Mr. Ling ] hopes to know what's the driver -- drivers of loan growth from large corp. and SME loan growth, where are they from for the first quarter.

[Annie Lee, executive]

If we retreat back to the first quarter lending record, we can see that about 1/3 of the lending was related to the bailout program and the rest part of the 2/3 of the lending pool should be attributed to the investments for this corporate including large corp. and SME that we actually underwrote around more than 10 -- about TWD 10 to TWD 15 billion new lending to help the repatriated Taiwan business to set up their new capacity here in Taiwan. So about 2/3 of this new lending can be attributed to the back home investments that the corporate sectors will try to relocate there business or their -- expand their manufacturing site to here. And that would see continuing momentum going into the second half of this year as we know that the trade friction between 2 major countries would sustain. So that would become our future loan growth drivers, and we are quite optimistic about the new lending for this part. So I just would like to particularly address to this issue that the new lending from the repatriated capital would further help to boost our lending.

[K. C. Lee, executive]

Okay. Thank you, Annie. And another question is from [ Mr. Chan ]. [ Mr. Chan ] hopes to know that actually, China's legislature has approved a proposal to impose national security law in Hong Kong. And what the impact on newer Hong Kong branch operation for the coming years.

[Annie Lee, executive]

We have weakness our lending in our -- from our Hong Kong offices, was down around 5%. And the deposit with our Hong Kong bank also dropped around 15%. So that implies that the capital flight would further -- become more evident. But we also noticed that the newly implemented anti-money laundry program in Taiwan here would deter this fund flow for the short term. So we also view these opportunities that the -- I mean, capital flux would continue to become part of the wealth management opportunity in the future. So we would help our clients who actually place their money in Hong Kong, not just in office, but in other banks to help them relocate their fund back to Taiwan. Up to now we have accommodated around 200 million repatriated the fund from...

[K. C. Lee, executive]

From Hong Kong.

[Annie Lee, executive]

From Hong Kong or other areas. Yes, that will be the chances in the future for the wealth management as well.

[K. C. Lee, executive]

Okay. I think that we some description on our slides that the back-home investment and back-home lending will be the key for the coming quarters.

[Annie Lee, executive]

Yes, the key drivers.

[K. C. Lee, executive]

Okay. And another question that a lot of investors are asking that it is reported that First Financial was one of the 5 bidders to make an offer for the acquisition of Prudential

Life. And if it's true, is growing the life insurance operation is another strategy for the company or can Annie tell us that what's the life insurance strategy for the long term and then what's the target for your life subsidiary?

[Annie Lee, executive]

We do not comment on any specific M&A topic, that is -- that's according to applicable law. However, our plan to grow our life insurance size and to improve the profitability remain unchanged. So it means that we still set out a goal to grow our life insurance business in the future as this represent a future growth driver for the whole group. Yes.

[K. C. Lee, executive]

Okay. Sorry, we don't comment for the single case. And another question, I think that is about the 2020 guidance. Can Annie tell us that since the previous guidance is quite outdated, could you update the guidance for NIM and fee income and credit cards, and some of the investors are asking about is there any bigger default cases or what's the provisioning situation for the coming quarters. Annie?

[Annie Lee, executive]

Okay. Let's start from our loan growth this year. we -- in the previous quarters, we highlighted that we are targeting a loan growth around 8%. But after we posted around 5% to 6% growth in the first quarter, we now are slightly lower our loan growth target around 6% to 7%. That...

[K. C. Lee, executive]

6% to 7% for total loan growth.

[Annie Lee, executive]

That is more meaningful, 6% to 7% for loan growth this year, of course, include bailout plan. Bailout plan comment around -- steady to say something at least. And for the composition of our loan growth, we managed to grow our corporate lending, including large corp. and SME, about 7% to 8%. So the lending to the corporate sector would remain strong. And in terms of the individual lending, particularly for mortgage, after we -- recorded a nearly 5% to 6% growth, we are quite optimistic that our lending to mortgage would further grow 8% this year. As we were quite -- I mean, we're quite keen to further grab the chances to accommodate to more mortgage borrowers as the low rate would flock these investors back to property investment, that would help to boost the demand of the mortgage. But when you get back to once quite hot FX lending for this year due to the lockdown in major developed countries, we would not be so aggressive to grow our FX lending, even though the rate is relatively low. So for this year, our guidance for FX lending will be not so aggressive like we projected in the early of this year. We only managed to have a flattish, or just marginal growth for the FX lending. So this will be the major, I mean, revision for the loan growth. Not much growth for overseas market, flattish or marginal growth. Then for domestic market, at least 7% to 8% for NT dollars. So total lending was up to 6% to 7%.

In terms of fee revenue, after we posted slightly contraction for fee revenue, that we become a bit conservative about the fee growth. So up to the April of this year, we see our fee revenue continue to contract around 4% to 5%. So in that sense, that represents the wealth management business. We see some pressure that the bancassurance business would not be so booming like it was before. But our efforts to put -- to place into our sales of mutual funds, hopefully, that will help to compensate a part of the -- fall out of the bancassurance business. So for the wealth management business, we hope that the gap will not be so huge, less than -- I mean, mid-single digit. As for the non-wealth management business, the fee -- sorry, the loan-related revenue -- fee revenue appears quite strong that we recorded about 22% to 23% growth for fee-related -- fee revenue, that can justify the strong growth in the loan lending book. So in terms of the non-wealth management fees, the loan-related fee revenue will continue to grow. Apart from that, the FX, credit card or other channel service fee may not be so rosy. So the overall fee revenue, we see slightly contraction, I mean, up to the first 4 months of this year. For this year, the fee revenue growth may be quite challenged for us. So I mean the fee revenue maybe just see some slight contraction.

In terms of the treasury business, this is one of the most volatile category for our top line. After we posted quite a big decline around 68%, the market gradually recover and the valuation and also the trading gains also improved. So up to April, the contraction of the treasury business has already narrowed down to less than 30%, around just 20%, 25% something. So we hope that the gap will further improve when the market becomes more calmed down and the contraction in the treasury business would gradually improve. However, the gains from the FX swap should not be recovered based on narrowing interest rate gap. So we see the contraction in the treasury should continue anyway.

In terms of the cost for the OpEx. For this year, we should see some lower cost. Up to April, our OpEx spends for a 3% reduction. So we project the lower cost maybe some way to help -- I mean, mitigate the impact of the falling net revenue. When we get back to another -- a major cost of credit charge, we actually add up some more provision against any potential NPL in the future. So the adjusted net credit cost would be higher up to about 25 bps, including the already mentioned, the Powertech exposure. So for cost part, OpEx will be lower about 3%, net credit cost will be higher from -- for our original projection, around 22 bps up to 25 bps. That will be the current projection for the moment and mainly based on the results of the -- up to April this year. So we should further update with the view about our future projection once we finalize the second quarter results.

[K. C. Lee, executive]

Okay. Thank you. It's a very clear expression. Okay. And another question is about our First Life. May we know the net worth recovery for First Life in April or May? Okay, I think May is impossible. Today it's only June 2nd.

What's the net worth recovery for First Life in April? Annie, do you have the exact figure for First Life's net worth?

[Annie Lee, executive]

Net worth?

[K. C. Lee, executive]

Recovery because it is declining.

[Annie Lee, executive]

Yes. Its net worth was down, about TWD 800 million and yes, it's now going to recover at least 60% to 70% something, which we recover from the low then TWD 800 million up now.

[K. C. Lee, executive]

At least TWD 800 million.

[Annie Lee, executive]

Yes. Yes. 60 -- 60%, 70%.

[K. C. Lee, executive]

Because it's mark-to-market. So we still waiting to see for the second quarter. Okay.

The second question is any asset allocation adjustment to control the market swing impact to net worth? I think it's about the First Life. How do First Life to do asset allocation adjustment?

[Annie Lee, executive]

Actually, the portfolio investments from the insurance limit, what we -- I mean we shift from more volatile equity investment to more fixed income part that they lowered the exposure to the equity investment from as high as more than 30% or 40% down to just less than 8% to 9% already. But they will continue to lock in some higher cash dividend yield target like cash to improve their return. So this will be the major asset allocation policy or strategy for the Life unit, lower the more risky equity exposure but still target higher dividend, higher cash dividend yield investment target.

[K. C. Lee, executive]

Okay. And another question is, what's the reason behind it, that the core CI ratio is higher in the first quarter? Any particular reason?

[Annie Lee, executive]

That was mainly because lower net revenue. We didn't restore the efficiency ratio back to 44%. I think that I missed the guidance of CI ratio. Yes, 45 to 46. 45, so our ratio is 45 to 46 bps.

[K. C. Lee, executive]

Percent for the 2020? Okay.

[Annie Lee, executive]

Yes. Because the OpEx is also lower.

[K. C. Lee, executive]

Okay. And another question is around about -- JPMorgan, Mr. Jemmy Huang. Jemmy Huang hopes to know that the provision in April also related to Powertech energy?

Yes, I think.

[Annie Lee, executive]

Yes.

[K. C. Lee, executive]

And is there -- another question from Ms. Peggy. She's asking that is there any bigger default cases exposure that the First Bank has?

[Annie Lee, executive]

For this year?

[K. C. Lee, executive]

Yes.

[Annie Lee, executive]

Yes. There might be some default case in the pipeline, but not yet.

[K. C. Lee, executive]

Too early to say.

[Annie Lee, executive]

There may be some delinquent loan, but not yet. Some of that will be from, let's say, overseas markets. And we cannot rule out the possibility that there may be some default case from overseas market, particularly from the U.S. or European market that was hit hard by the COVID.

[K. C. Lee, executive]

Okay. Another question is from First Life. The first quarter -- the expense is higher in the first quarter of First Life only, is talking about the First Life subsidiary.

[Annie Lee, executive]

Well, that was also because of lower revenue.

[K. C. Lee, executive]

Okay. Same reason because we don't do any pay hike or any...

[Annie Lee, executive]

No, no.

[K. C. Lee, executive]

No. Okay. I think costs to be quite fixed and flattish. The main reason for any heightened cost structure all can be contributed to lower revenue.

Okay. Okay. I think we have covered all the questions that we have so far. And is there any conclusion that, Annie, you want to say?

[Annie Lee, executive]

I must address to one point that due to -- still -- I mean, not very stable market for the moment. So we actually are trying to reset maybe our projection this year, but that will be until the end of second quarter after most of the markets had, I mean, become more normalized, and that will be, I mean, meaningful for us to make a decent, I mean, revision of the projection. So let's wait till next quarter, that we can have a more -- I mean, we defined targets that we can have some discussion about that. So I mean, until the end of next quarter, that -- the projection for the moment is still quite preliminary anyway.

[K. C. Lee, executive]

Okay. Thank you, Annie, and thank you for your participation today. We hope you enjoy your day. Thank you. Bye-bye.

[Annie Lee, executive]

Thank you. Bye-bye.