First Financial Holding Co Ltd

TWSE:2892

Earnings Call Transcript 2020-Q3

[K. C. Lee, executive]

Thank you for waiting. The meeting will begin shortly. Good afternoon, everyone. I'm K. C. Welcome to join us for First Financial Holding Third Quarter 2020 Webcast Investor Conference.

Before we proceed today's presentation, I'd like to disclose the following information. Starting from December 2015, in order to improve corporate governance costs, First Financial has set up ethical corporate management best practice principles and conducting procedures and guidelines. For more information, please refer to our website.

Okay. Let's start with our performance presentation. Today's material can be downloaded from our website, and 1-year replay will be available today after today's conference.

And after today's presentation, we will invite Ms. Annie Lee, our IR Head, to proceed the Q&A session, and we will talk about 2021 outlook as well. [Operator Instructions]

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

[Keith Ke, executive]

Thank you, K. C.

Okay, please turn to Slide 5. Let's summarize First Financial Holding's performance in first 3 quarters 2020. After finishing a [ review ] by second quarter, the group faced another headwind in third quarter again and ended with an ordinary cumulative earnings of TWD 13.4 billion, which was 13% decline Y-o-Y.

Despite domestic activities was relatively solid, overseas was still facing the severe coronavirus pandemic, which impacted bank's third quarter earnings. However, insurance and the securities had a good time this year to pick up some earnings this year.

The good news is that both NIM and spread were expected to rebound from fourth quarter 2020 since the subsidized rate cut over retail lending would be ending. Loan demand was pretty strong this year, especially for SME sector, especially for the tech industry. We do expect it would continue booming in coming year.

Coronavirus vaccine is expected to launch soon, and the trade war was also expected to ease up post the United States presidency election. We look forward to a more positive outlook in 2021.

Okay, let's move to financial highlights. Please turn to Slide 7. This slide shows group key figures. Similar with last quarter, most of the figures still showed contractions comparing with the same period last year, including net income, EPS, ROA, ROE, et cetera. Please take those figures as reference.

Let's turn to Slide 8. This slide shows the breakdown of group's net income. Total net revenue was TWD 43.4 billion, which was 7.8% decline Y-o-Y. And as we mentioned before, total net income of first 3 quarters was TWD 13.4 billion with 13% decrease Y-o-Y.

And Slide 9 displays the net incomes of major subsidiaries. Bank reported a TWD 12.6 billion net income, which was 16.2% decline Y-o-Y. However, securities and insurance both made progress comparing with the same period last year. We had already mentioned this before.

Okay, let's move to operating results. Please turn to Slide 11. On this slide, it shows group and bank's net income and ROAE. Group's ROAE was 8.19%, and bank's ROAE was 7.75%. Both were still lower than prior years.

And Slide 12 provides the breakdown of bank's earnings structure. Cumulative net revenue of first 3 quarters was TWD 33.5 billion, which was 6.7% decrease Y-o-Y. 23% reduced the gains on investment was the key issue to drive down the net revenue. As of the core earnings, strong loan demand offset weak margin to make net interest income slightly improve 0.9% Y-o-Y. Fee income dropped 4.6% Y-o-Y, which was mainly impacted by the depressed bancassurance fee income.

Please turn to Slide 13. Loan book showed strong demand in third quarter. Total loan book came to TWD 1.88 trillion, which was 8.6% growth Y-o-Y. SME loan was still a key for the growth, which increased 11.4% Y-o-Y. Mortgage also had a 6% growth, but we expected a moderate growth at the end of the year due to the stricter policy against the property market in fourth quarter. FX loan was 5% decline, which was mainly dragged by the OBU book. Overseas loan books stayed stable relatively.

Please turn to Slide 14. This slide shows Q-o-Q trend of loan book. Not only SME loan continued to increase 3.9%, FX loan also bounced back with 2.8% growth. Please take this graph as reference.

And Slide 15 shows the trend of LDR, spread and NIM. LDR continued to decline to 73.1%. NT dollar LDR was down to 77.3%, while FX LDR slid to 59.7%. Although loan-to-deposit spread dropped another 3 bps to 1.41%, however, the NIM stabilized the falling trend to keep at 0.99%. That's a good news.

Please turn to Slide 16. This slide shows the breakdown of Q-o-Q trend of NT dollar spread and the FX spread. NT dollar spread dropped another 2 bps to 1.22%. On the other hand, FX spread slightly improved 1 bp to 1.93%.

And Slide 17 presents the deposit structure. Total deposit increased 15% Y-o-Y. NT dollar deposit had 16.8% growth, while FX deposit also grew by 9.7%. Both explained why loan-to-deposit ratio was trending down. On the other hand, NT dollar CASA rate still stayed high at 68.5%.

Please turn to Slide 18. Here shows the loan book concentration of major exposures of specific industries. Please take it as reference. Most are similar as the last quarter.

Let's move to Slide 19. This slide shows the mortgage book yield and the LTV ratio. Mortgage yield stayed at 1.35%. Both new mortgage and average mortgage LTV ratio kept at certain levels of 64.9% and 46%. Bottom bar chart displays the monthly new mortgage lending, and the average amount of each quarter was stable as well.

Please turn to Slide 20 for the fee revenue. Total net fee income was TWD 5.43 billion in the first 3 quarters of 2020, which was 4.6% decrease Y-o-Y. Wealth management net fee income dropped 8.5% Y-o-Y, and the shrinking bancassurance fee income was the major reason, which we mentioned before. As of the non-wealth management fee, loan-related fee income increased 26%, but the FX fee income decreased 13.7% Y-o-Y.

Please turn to Slide 21. This slide shows the Q-o-Q trend of fee income. Again, it's clear to see that bancassurance fee income shrank rapidly to add the total fee revenue.

Okay, let's move to next slide to take a look at the cost side. Total operating expense was TWD 15.3 billion in first 3 quarters 2020, which was 1% decrease Y-o-Y. And the cost-to-income ratio stayed at 45.7%.

Please turn to Slide 23 for the asset quality. Top chart shows the coverage ratio and the overall NPL ratio. Coverage ratio was back to 515%, which was similar to the level of first quarter. And NPL ratio improved to 0.23% as well. Both figures shows that the asset quality was controlled well. And the bottom chart shows the breakdown of NPL ratios. Large corp. NPL ratio was down to 0.35% due to partially write-offs of Powertech energy we mentioned last quarter.

Please turn to Slide 24, the overseas profits. The pretax profits of overseas branches over total profit dropped to 40.5%, which was impacted largely by New York and London branches, the serious disaster area from COVID-19. Top-left pie chart shows the profit breakdown. As we said, North America was strengthened by New York branch. [ Solar ] occupation was down to 9%. While ASEAN and Greater China was relatively normal, which was about 20% occupation.

Okay, please turn to Slide 25. Group CAR [ parked ] at 121.3%, and bank's CAR and Tier 1 were also stable at 13.2% and 11.2%, respectively, in first 3 quarters 2020.

Okay, that's the presentation. I will turn back the microphone to K. C. to host the Q&A session.

[K. C. Lee, executive]

Thank you, Keith. Okay, now I'd like to proceed the Q&A session.

[K. C. Lee, executive]

I think some of the investors are asking about our 2021 outlook. I just put it on the last part, and the first part will be on our third quarter performance first.

Okay, so let's start with the first question from Mr. Jemmy Huang of JPMorgan. Jemmy wants to know for the TWD 2.1 billion decline on investment income in third quarter, how much is related to swap revenue if any?

[Annie Lee, executive]

Actually, for the whole year, from our treasury gains, the swap gains was one of the parts that fall behind and a very huge part. Up to the third quarter of this year, the swap gains actually diminished nearly TWD 2.4 billion. And this was part of the reason that the narrowing spread between U.S. and NT dollars, actually, I mean contribute -- attributed to the big loss and fall behind our projection. And another projection for next year will be the swap gains will further drop another TWD 2.2 billion after we decreased nearly TWD 2.4 billion swap gains this year.

So we will see that the swap transaction will become more normalized, that the extra or the excess liquidity will go back to the interbank lending instead of the swap trading. And you can see that actually our net interest income gradually moved upward to become a positive growth. So in that sense, the -- I mean in the past 2 years, the once very juicy swap gains would no longer exist as long as the U.S. rates remain low. So for -- I mean the swaps opportunities should not exist anymore. So I'll highlight the figures for the whole year for swap, we project for this year is TWD 2.4 billion, and next year will be another TWD 2.2 billion diminution of swap gains.

[K. C. Lee, executive]

Okay. Thank you, Annie. And I hope her answer has answered your question, Jemmy.

Okay, the next question is about our NIM performance. There's a question from [ Ken ] and from [ Gina Chen ] of President Securities. They hope to know what is the reason behind the performance that why NIM stabilized despite the lower LDR ratio and spread in third quarter, which means that we see that the spread of third quarter is declining, but the NIM remained flattish. I think...

[Annie Lee, executive]

Yes, I know what you -- yes, okay. The thing is that we witnessed the falling spread due to competition in the market. So actually, we strategically, I mean, hiked our loan yield over our lending. It implies that we become more picky to select customers, actually price higher loans yield on our lending starting from the mid of this year. It implies that once very attractive -- the FX spread no longer supports our NIM like it did before. So we managed to hike our NT dollars loan yield in order to bottom out the impact of the NIM. So in that sense, even though the LDR moved lower but our spread managed to move upward, this is something that we try to do.

And after the subsidized lending cut -- lending yield cut for the mortgage and other retail lending ends in the third quarter this year, it also helped to stabilize our NIM. So these 2 major factors can attribute to the stabilized NIM. But I must say that going forward, due to the still very fierce competition in the market, so our projection for NIM will not be very aggressive anyway. Yes.

[K. C. Lee, executive]

Okay. Thank you, Annie. And we have another question. It's about our October spread and how it may look like after the third quarter. We have strategically policy waiver for the retail...

[Annie Lee, executive]

Well, fortunately, our most updated spread turned more stabilized, and the NIM seems also stabilized around 0.99%. But the thing is that because the demand for FX loan remain subdued, so the NT dollar spread still remain quite -- or still under pressure. So for our projection of next year's NIM, we're still under -- I mean below this year's level. Actually, our projection for next year NIM will be slightly lower than the level that we have this year, maybe another 2 to 3 bps lower, yes, because the loan demand from FX lending still remains sluggish anyway.

[K. C. Lee, executive]

But the October spread, I remember that the NT dollar spread actually went up for 3 bps for the...

[Annie Lee, executive]

Yes, 2 to 3 bps.

[K. C. Lee, executive]

Yes, 2 to 3 bps comparing with September spread.

[Annie Lee, executive]

Yes. Yes, stabilized here.

[K. C. Lee, executive]

Okay. Thank you. I hope the answer --this answered your question.

Okay. Let's go to next question from Jemmy Huang. And Jemmy hopes to know what the NIM in fourth quarter that we have observed so far. And what's the recurring trend that we expect to see in the first half of 2021 NIM?

[Annie Lee, executive]

For our NIM projection going into the final quarter this year, it still remain, I mean, remain low. A similar level with what we have seen in the third quarter, still around 99 bps or somewhere just around this level. But for next, I mean, for next year, at least for the first half of next year, we will still see no aggressive NIM expansion. We're still expecting a weak NIM contraction or marginal contraction around 2 to 3 bps. So it implies that it may be another 2 to 3 bps lower for the first half of next year.

[K. C. Lee, executive]

Okay. And also there's another question. It's about the spread decline by another 3 bps in the third quarter, but why is our NIM is maintaining stabilized?

And I think I can answer this question. It's because in our slide, our spread actually shows the quarterly result, but our NIM is full year results. So that's why the NIM actually needs to be divided by the full year from the first quarter to the third quarter. So that shows a stabilized NIM. But however, our spread actually is calculated by quarterly. So when it shows the another 3 bps, it reflects the policy rate cut for the retail borrowers in the third quarter, especially in the third quarter.

Okay. I hope that answers the question from guest. And let's move to the next question. What's the updated guidance on wealth management fee growth for the full year of 2020, Annie?

[Annie Lee, executive]

For the fee revenue this year, it was not that promising due to the sales of the bancassurance business did not perform that well. The only bright side would be the sales of mutual funds. But unfortunately, bancassurance dominates half of the revenue for the wealth management. Therefore, after we've seen the nearly 40% bancassurance fee drop, the overall wealth management fee actually dropped nearly 8.5%. So in that sense, we would see -- next year, we are targeting a more aggressive fee revenue growth, up to 10% to 11%, because the base period seems relatively low for us.

And for the fee revenue, the major drawback that we encounter will be, apart from the change of the regulation and also because of the very volatile capital market in -- that disturbed our consultant -- financial consultant to approach our clients to deliver decent products that help them gain something from their investments. But looking forward into next years, we would see that the demand for the investment products is still there. The bank rates will remain low. So we would target a more aggressive fee revenue growth, particularly from the wealth management.

Actually, our projection for the fee revenue next year hopefully will be 10% to 11% for the wealth management. And for the non-wealth management, particularly for loan, it will continue to maintain a strong stance to grow up to 13%, 1-3 percent. So it implies that this year, our fee revenue will be a negative performance. But next year, we would target double-digit growth for wealth management, 10% to 11%. And non-wealth, particularly for loan-related, the target will be 13%.

[K. C. Lee, executive]

Okay. Thank you. And let's move to the second part. I think every investor is concerning about our 2021 guidance. So let's move to the guidance of our 2021 for our business in terms of our business part.

Okay. So let's start from our loan growth projection. Okay, can Annie give us some picture about our loan growth structure for 2021?

[Annie Lee, executive]

If we look at this year's growth pattern, it pretty much mirror the structure of different markets, I mean, home and abroad. In the past, overseas market took a lion's share to grow up to, let's say, 11%, 20% or even higher growth rate. But this year, the once very booming overseas market actually see a negative growth.

However, the 2 major pillars: one is our niche market, the SME growth -- SME lending. We managed to grew up to 11 -- more than 11% to 12%, which is pretty much subject to, one, is the relocation of the supply chain. And another thing is that the domestic investments. And of course, some of the bailout plan will be included.

And the other pillar came from now very attractive property investment, which will translate to the mortgage lending. Our mortgage book advanced by 6% this year. And this is purely very organic style because a lot of investors, they poured their money into risk investment to gain higher return than the other financial investments. So these 2 markets will continue to boom next year. So for our projection for the total loan book structure, we will continue to expand our lending in the SME markets and the mortgage book as well.

For next year, our total lending would continue to expand by another, let's say, 6% to 7%. We will see that would not be a problem because up to the end of October this year, our loan book will be -- booked a growth rate up to nearly 9%. In terms of the GDP projection next year, around 4% in Taiwan, we would see this 6% to 7% should be quite achievable.

And given the overseas market remains not very stable after the pandemic spread across the whole region, we still managed to grow our overseas lending, particularly in the ASEAN countries. So we set up a goal that we would grow our FX lending by around 6% to 7% after it recorded a very weak negative 5% growth this year. So next year, overseas market, particularly for FX lending, we will still manage to grow by 6% to 7%. So for total lending, total loan book, we would target 6% to 7% growth.

SME market continued to boom. We managed to book another 7% to 8% growth. FX loan, we would grow by 6% to 7%. And the mortgage book will be one sector that we will be more cautious due to that our ceiling for the...

[K. C. Lee, executive]

Bank Act.

[Annie Lee, executive]

The Bank Act, the 72.2 that we would have to prepare sufficient deposits before we can further expand our mortgage. So next year, our mortgage lending would contract a bit from 6% this year to be lower to 6 -- 4% to 5%. So for loan book, next year is still quite a bright projection.

[K. C. Lee, executive]

Okay. Let me summarize the loan book for everyone in case that you ask again. For the total loan book, we project 6% to 7% for next year. And in terms of the sectors, in SME, we project 7% to 8%. And as for FX lending, we project a 6% to 7% growth. And for mortgage, that's more moderate, that we project a 4% to 5% growth for the next year.

Okay. Let's move to the next part of our fee revenue. And given a pretty low rate period for this year, how does Annie project for the next year's fee revenue performance?

[Annie Lee, executive]

I think I just mentioned a bit, okay, fee revenue next year.

[K. C. Lee, executive]

Oh, okay. In terms of the fee revenue, Annie just projected 11% to 12% for the total fee revenue growth. And how about the wealth management and the non-wealth management part?

[Annie Lee, executive]

We target fee revenue growth over wealth management up to 10% to 11%. 10% to 11% wealth management.

[K. C. Lee, executive]

10% to 11% for the wealth management part. And for non-wealth?

[Annie Lee, executive]

Non-wealth, 13%.

[K. C. Lee, executive]

13%, 1-3, okay, 13%. A pretty low base and also a declining base period for this year.

Let's move to the third part, it's our treasury gains. And how would, first, take a look the treasury gains for next year, given a pretty low base, low rate environment continuing, that the Fed will continue the low -- actual low environment until 2025?

[Annie Lee, executive]

Well, it's not very promising because the shrinking swap gains that I just mentioned will persist. So I just highlight that the swap gains for next year will continue to shrink by TWD 2.2 billion after we had lost TWD 2.4 billion swap gain this year. And apart from that, our investment in the U.S. dollars fixed income portfolio would also shrink a bit. Even though our trading gains was up nearly 16%, but the yield, the loss on the yield will continue. So in that sense, next year's treasury projection would continue to form another 20% decrease for treasury...

[K. C. Lee, executive]

Okay. So the swaps are booming...

[Annie Lee, executive]

No, no.

[K. C. Lee, executive]

Okay. Go back to the core business, then...

[Annie Lee, executive]

Yes, the lending and the fee revenue.

[K. C. Lee, executive]

Lending and fee revenue will be the major 2 drivers for next year's performance. And the treasury will just gradually strength because of the actual low rate period and the capital market. And the swap revenue will continue to shrink.

[Annie Lee, executive]

Yes.

[K. C. Lee, executive]

Okay. Let's move to the expense side. How is the credit cost will look like next year?

[Annie Lee, executive]

We actually suffer a bit for the surge in credit cost this year, particularly from overseas markets, that we talked about our 2 major profit source: one is the U.S. and the other is London, 2 cities hit hard by this pandemic impact. So in that sense, we would see that -- sorry, K. C., would you repeat the question again?

[K. C. Lee, executive]

Okay. So let's move to the credit cost side next year. How does First Bank...

[Annie Lee, executive]

So this year, our strategy lies on that any NPL surface in the overseas market, we would immediately charge off the losses from the overseas market, especially for the 2 major financial hubs. And fortunately, for domestic NPL, apart from the legacy of Powertech and another legacy SME portfolio, we did not witness any surface of the NPL influx. So in that sense that going into next year, we would see a falling credit cost, net credit cost to below 20 bps from the high of this year's around 24 bps to just 17, 1-7 bps.

[K. C. Lee, executive]

1-7 bps for the total credit cost.

[Annie Lee, executive]

1-7 bps next year. Yes.

[K. C. Lee, executive]

That's net, right? We're talking about net?

[Annie Lee, executive]

Yes. Net, yes. Yes, yes. After we posted a relative high net credit cost, around 24 bps this year, mainly driven by the overseas and the legacy Powertech.

[K. C. Lee, executive]

Okay. And we have a follow-up question from Gina Chen. She hopes to know that, how is your Powertech situation after we have set aside a provision for it? And is there any actual provision for Powertech or for the domestic steel factories or for the overseas health care? Or are you talking -- oh, we're talking about the NMC. Is there any actual provisioning for these 2 big cases?

[Annie Lee, executive]

For Powertech exposure, we have set aside around TWD 1 billion against the total exposure TWD 1.5 billion. Because the Powertech steel, we still own some collateral. It takes time to dispose the collateral before we can recover. So out of this TWD 1.5 billion, we have set aside TWD 1 billion. So the -- actually, provision ratio is up to nearly 70% -- no, 66%. So nearly resolved most of the legacy.

And in terms of the NMC, the total exposure is up to 30 billion, yes -- sorry, USD 30 million. USD 30 million, we have charged off all of this exposure. We have set aside 100% of this exposure.

[K. C. Lee, executive]

So all of the cases are ending up or set in the third quarter, right? Right, in the third quarter?

[Annie Lee, executive]

Yes, yes, yes.

[K. C. Lee, executive]

Okay. So we have ended up with provisioning for NMC and Powertech in the third quarter. And there is no actual provision...

[Annie Lee, executive]

No, no need.

[K. C. Lee, executive]

Yes, to be provide -- to be set aside on the next following quarters for these cases.

[Annie Lee, executive]

Yes. I'll also add up one thing that I understand that some investors is concerned about the bailout program that we actually engaged quite a bit. But we must explain a bit to this -- the risk associated with all this bailout program will be up to 80% to 100% guaranteed by government credit insurance fund. So in that sense, the charge-off or any NPL influx will not be a huge impact to us.

[K. C. Lee, executive]

Okay. And let's move to the last part of our SG&A and the CI ratio part. And how is the outlook of our CI ratio for the next year?

[Annie Lee, executive]

After we recorded nearly 46% CI ratio, we would manage to -- I mean maintain -- try to maintain the level that we used to be. But for next year, due to the still relatively low interest rate spread and the just-recovered fee revenue and the still weak treasury gains, the revenue source -- I mean the total net revenue growth would not be that strong like it did in the past. So in that sense that we would see that the CI ratio would move up a bit. So our target for next year's CI ratio will be content below 48%, low -- I mean higher, about 2% higher than this year's level.

[K. C. Lee, executive]

48% for the CI ratio.

[Annie Lee, executive]

For next year's projection, yes, from 46% to 48%.

[K. C. Lee, executive]

All right, from 46% to 48%. Okay. Let's move -- we have Annie up with our projection for the next year.

So let's move to the next question, which is about the LTV method adoption that 3 investors are asking, from Jemmy Huang and a guest and Michael. And they hope to know, after the new revised LTV-based risk weight method adoption, how would it impact our lower mortgage risk weight asset? How would it impact our CAR ratio, CET1 ratio and Tier 1 ratio in the coming 2021?

[Annie Lee, executive]

Okay. After we made some simulation against the revised LTV method, our risk-weighted assets, we had a conclusion that for our total CAR would have extra 93 bps, 9-3 bps. And in terms of Tier 1, it will be an extra 87 bps. And for the CET1, it would be 83 bps. So all up to 83 bps something.

[K. C. Lee, executive]

Okay. I hope that -- so let me repeat again. For the CAR ratio, it will be a lift of around 9-3, 93 bps. For the CET1, it's -- for the CAR and for the Tier 1, it's about 87 bps. And for the CET1, around 83 bps or about 80 bps.

Okay. I hope these 2 figures that have answered your question. But let me state again, it's just a simulation results based on our second quarter 2020. So we will adopt the all-new LTV method from 2021 after the second quarter. So basically, it will recalculate your gains. So it will be...

[Annie Lee, executive]

Yes. Overall -- I mean roll over another plan. Yes.

[K. C. Lee, executive]

Okay. There is another question, and it's about our strategy of our next year. How would your group continue -- or especially the bank, how would it -- how will you look at your depository and your lending strategy? And what it will be look like? And how would you take on the duration of the SME lending as your most important part of your loan book?

[Annie Lee, executive]

Given that we act as a niche player in the domestic loan market, our core business is focused on our relation with SME and also our retail clients from mortgage and the -- and also these corporate clients when they operate in the overseas market. So we would manage to expand our loan book, I mean, via a more, what we will say, value-added service to them to help them expand or relocate their business in Taiwan that help them capture the opportunities in this trade war between 2 big countries.

We have seen a strong demand that a lot of this manufacturer, they try to expand their expansion in Taiwan or in ASEAN countries post the trade tension. So we would see that our lending activities will continue to boom, particularly for the SME sectors as the most of the large corps or some blue-chips company can easily tap the capital market by issuance, relatively cost-effective bond issuance. So we were quite optimistic that we can help to serve these SME sectors via our franchise to help them.

And in terms of our business with mortgage or other secured personal lending, it will be a new start that we detected new -- I mean fresh demand by this year's retail bailout plans that some new customers actually approach us to apply for this bailout package, and we would detect the demand that they would need some secured lending. It will also help us to explore the new opportunities via this very fresh bailout customer base for us.

So for next year, our main focus will be, apart from our SME book and also the retail customers from this newly acquired database, will be another target that will help us to further penetrate into their secure lending or bundled with mortgage lending. So we would see for next year our focal point still placed in domestic market and along with some recovery in the overseas lending that we will manage to grow moderate growth, around 6% to 7% in the FX lending. So this will be our strategy for next year loan book expansion.

And in terms of the NIM strategy, we would see for the first half of next year, there's no big chance that we can hike our loan yield due to we're still in the mood to attract new customers and also competition from the peers. So the NIM projection would see more moderate or even slightly lower than this year's level. So this will be our major market strategy for next year.

And I also would like to highlight that based on these new customers that we acquired from the bailout plan that we can also help them to manage their wealth. We understand that for this year, actually, a lot of young generation, they would like to start their investment into the stock market. So this is somewhere that we can also penetrate to help them open their equity or stock market account and help them manage their not very huge portfolio and to deliver good products for these new customers to expand our wealth management and new customer sectors. So all of this will be our major strategy for next year.

[K. C. Lee, executive]

Okay. Can Annie talk about the new customer base? You are talking about the new bailout labor project.

[Annie Lee, executive]

Yes.

[K. C. Lee, executive]

How many cases that First Bank has been stand out for the new customer base? Just give us some picture, some color of...

[Annie Lee, executive]

Okay. Well, okay, last year, for the individual, I mean for the retail bailout program, we acquired around nearly 100 -- 100 -- around 110,000.

[K. C. Lee, executive]

110,000.

[Annie Lee, executive]

110,000 yes. Around 11,000, 11 -- sorry, around 111 -- not 11, 110,000, 110,000 new accounts.

[K. C. Lee, executive]

110,000.

[Annie Lee, executive]

But we actually approved just 80 -- around 80,000. So it implies that these customers will...

[K. C. Lee, executive]

Continue to grow...

[Annie Lee, executive]

Yes, will become our new -- yes, yes, our new customers.

[K. C. Lee, executive]

Because this part is not usually what we have had.

[Annie Lee, executive]

Yes. Yes, not in our customer profile.

[K. C. Lee, executive]

Profile, of course. So you said that this customer base can bring out more on secure loan opportunity percent.

[Annie Lee, executive]

Yes.

[K. C. Lee, executive]

And we have another follow-up question. It's about our bank at 72.2, the mix. And can Annie tell us how -- what the First Bank's 72.2 figures until the third quarter or until the end of October?

[Annie Lee, executive]

The most updated figure was end of October, we have reached 28.1%.

[K. C. Lee, executive]

28.1% something.

[Annie Lee, executive]

Yes. End of...

[K. C. Lee, executive]

End of September.

[Annie Lee, executive]

September, October, yes. So we're pretty much close to the ceiling.

[K. C. Lee, executive]

Okay, pretty much. Okay.

[Annie Lee, executive]

So you can see that our deposit growth is very strong.

[K. C. Lee, executive]

So how much can First Bank do basically on the 72.2?

[Annie Lee, executive]

30% is billing. 30%.

[K. C. Lee, executive]

Okay. 30% is the billing...

[Annie Lee, executive]

But we are now up to...

[K. C. Lee, executive]

Around 66 -- TWD 46 billion.

[Annie Lee, executive]

Yes, yes, yes.

[K. C. Lee, executive]

Okay. Another question from Gina Chen, hopes to confirm that -- Annie just talked about the mortgage -- the total loan book has already grew by 9% until October. So can Annie give us some update for the total loan book growth for the full year of 2020.

[Annie Lee, executive]

I suppose that will be similar to the third quarter. Listen up, because up to October, it's quite similar to September.

[K. C. Lee, executive]

9%.

[Annie Lee, executive]

Yes, 9%. Yes, Mortgage...

[K. C. Lee, executive]

The total loan book.

[Annie Lee, executive]

Yes. I mean, yes, up to October, the total loan book expanded by 9%. And among which the SME, yes, nearly 11%; and mortgage, 5.9%. The overseas market is still contracted. So mainly...

[K. C. Lee, executive]

Do you think that the 9% growth will be sustained until the end of December?

[Annie Lee, executive]

Yes. Yes, it should be. Yes, yes, yes.

[K. C. Lee, executive]

All right.

[Annie Lee, executive]

Yes. So after we posted a strong loan growth, next year, we will continue to grow by another 6% to 7%. Yes, that's for sure.

[K. C. Lee, executive]

Okay. And another follow-up question from Jemmy Huang from JPMorgan is that after we adopt the new LTV, revised LTV method from next year, will First Group consider to increase your cash payout ratio?

[Annie Lee, executive]

That's a good question, Jemmy. But we were looking into our dividend policy as a whole, not just for one factor, because actually, this year, our bottom line, actually, for nearly 16%. So we would see how much we can deliver to the investors. After all the factors being considered, we will still manage to deliver up to 60% to 70% dividend payout. That's our policy.

[K. C. Lee, executive]

Okay. I think I hope Annie's question can answer -- Annie answered your question.

Okay. Annie, here is another question. It's about our lending rate at the end of this year, from [ Michael Lam ] of [ Calpay ]. And Michael hopes to know, after the end of 25 bps actual mortgage rate cut for these credit line for these borrowers, what will it look like for the overall lending rate? By how many bps will -- after the end of the payout program?

[Annie Lee, executive]

I cannot project the actual lending yield, but the impact revenue from the subsidized mortgage lending figure was around TWD 300 million, right?

[K. C. Lee, executive]

Right. Total revenue...

[Annie Lee, executive]

Around TWD 300 million. The total figure was around TWD 300 million.

[K. C. Lee, executive]

Yes, TWD 300 million.

[Annie Lee, executive]

Yes. So I suppose the translation from these figures into the spread should be minimal. Yes, not much. This TWD 300 million is quite minimal.

[K. C. Lee, executive]

Okay. And we have the last question. And the last question is about our bank insurance subsidiary. After we have seen that life insurance subsidiary has turned positive starting from last year, and how would First Group take a look this life insurance subsidiary? Is there any recap plan for it for the coming years?

[Annie Lee, executive]

Yes, we would manage to grow our life insurance unit as our second profit driver among -- apart from the bank units. We will need to recap the company, but not very huge. The extra capital injection should be less than TWD 1 billion. So it's quite affordable for us. So we would manage to expand its asset under management, first to stand up to TWD 50 billion and further grow beyond. But the recap plan will be in the pipeline next year or going forward. But nothing much would be required for the IFRS 17 implementation, mainly for the expansion plan.

[K. C. Lee, executive]

Okay. Thank you, Annie, and thank you for everyone who participated in today's website -- web conference. And this is the last web conference that we have held for this year. And we'll see you next year, 2021. Bye-bye. Have a good day.

[Annie Lee, executive]

K. C., I'll interrupt one thing. I have seen that Jemmy raised question about our NPL ratio for overseas, right?

[K. C. Lee, executive]

Oh, right.

[Annie Lee, executive]

Jemmy, last answer for you. The NPL ratio of our overseas branches dropped to 0.13% after we charged most of the exposure and losses. So it was down from 0.35% to 0.13%, just 1/3 of the level. So not to worry, we have charged most of these losses, okay?

[K. C. Lee, executive]

Okay. Thank you, Annie.

[Annie Lee, executive]

Okay. Thank you.

[K. C. Lee, executive]

Those are all of the questions today. See you in 2021. Bye.

[Annie Lee, executive]

Bye-bye.