Chailease Holding Company Ltd
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Chailease Holding Company Ltd
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Welcome to the Chailease First Quarter 2022 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, and for your information, the webcast replay will be available within an hour after the conference is finished.
And now I would like to turn the call over to Kimberly Lian, the Project Manager of Investor Relations. Ms. Lian, please go ahead.
Thank you. Good afternoon, everyone. I would like to welcome everyone to Chailease Holding First Quarter 2022 Earnings Conference Call. With me this evening is Mrs. Sharon Fan, Head of IR, and she will open to your questions in Q&A section.
This quarter's earning presentation is available for download on our corporate website under the Investor Relations section. As a reminder, please refer to the disclaimer regarding forward-looking statements on page 2 of the presentation.
The agenda we're going to cover for today includes management highlights for our first quarter 2022, and we will go through consolidated performance review, followed by the segment review for our Taiwan, China and ASEAN operations.
Without further delay, I would like to start the presentation from Slide 4. Highlights for our first quarter 2022 operating results. First set on my table here shows a loan portfolio for the first quarter on a year-over-year basis. Taiwan, China and ASEAN loan portfolio grew 23%, 18%, and 21% respectively. On the consolidated level, we achieved 21% year-over-year loan portfolio increase. As for sequential portfolio growth, Taiwan increased 7%, China up by 5%, and ASEAN increased 10%, and the growth on the consolidated basis increased 6% year-to-date.
The first quarter's portfolio growth was pretty much in line with our yearly plan. Second, asset quality remained stable and healthy in all of our main operating regions.
And third highlight point is that Chailease Holding's Board of Directors approved the proposal of cash dividends of TWD 6 per share and stock dividend of TWD 0.50 per share. The dividend proposal will be submitted for approval by the AGM which will be held next week on May 20.
Let's move to the next section, first quarter of 2022 performance review. Moving on to Slide 6. Consolidated loan portfolio reached TWD 592 billion at first quarter end, with 21% year-over-year growth and 6% quarter-over-quarter increase, as business momentum is strong for both Taiwan and ASEAN in the first quarter. Compared to last year, China also shows some recovery for the first quarter this year.
Next slide, Slide 7, shows you the trend of consolidated and loan yield and cost of funds for the past 3 years. As you can see, we maintain a relatively stable interest rate in a narrow range in a rising interest rate environment, which will pass the interest [indiscernible] to clients and maintain stable interest spread.
Slide 8. On the left-hand side, the consolidated revenue for the first 3 months reached TWD 19.9 billion, representing 19% growth compared to the same period of last year. On the right-hand side, first quarter consolidated revenue increased 3% from previous quarter as strong growth coming from Taiwan and ASEAN.
Moving on to Slide 9 on the left-hand side. The consolidated net profit for the first 3 months totaled TWD 7.2 billion, and the earning per share was TWD 4.94. On the right-hand side, first quarter consolidated net profit was up 28% quarter-over-quarter, and the higher net profit growth was mainly driven by more tax refund for China operations and the effective income tax rate back to a normal level at around 28% compared to last year.
Moving to Slide 10. This slide shows you the loan portfolio mix and profit contribution in terms of operating regions. On the left-hand side we can see Taiwan business still accounts for 50% of total loan portfolio. China is about 35%, and ASEAN remained 14% at first quarter end. On the right-hand side, Taiwan net profit contribution account for 45% and China increased to 49%, as more tax will be recognized in the first quarter of this year. ASEAN contributed more, also increased from 5% to 6%, as [indiscernible] for profit in the first quarter this year.
Moving on to Slide 11, the chart on the left-hand side. Cost to income ratio improved to 25% for the first 3 months of this year due to well-controlled operating expenses. The chart on the right-hand side, asset-to-equity was 6x at the end of first quarter.
Slide 12. The consolidated ROA was 4.1% for the first quarter, increased by 3.5%, reflecting a strong growth of profit than last year. The consolidated ROE on the right hand side was 28% for the -- for this quarter. The total calculation for ROE was excluding preferred shares.
Next slide, Slide 13. The consolidated delinquency ratio on the left-hand side, at first quarter end, was maintained at 2.2%. Later in the presentation, I will talk about each region in more detail. Moving to the right-hand side. Allowance to loan portfolio remained stable at 2.2%. Allowance to loan portfolio remained sufficient.
Moving on to the segment review. Let's look at operating performance region by region. On Slide 15, Taiwan's loan portfolio reached TWD 295.8 billion at first quarter end, representing 23% year-over-year increase, and quarter-over-quarter was up 7%. Thailand continued its business momentum this quarter.
Slide 16. This slide shows the change of Taiwan solar assets. Taiwan solar net asset reached TWD 40.9 billion at first quarter end, representing 27% year-over-year increase and quarter-over-quarter increase was up 13%, the solar asset around 9% of Taiwan's total assets.
Slide 17. This page presents trend of our Taiwan loan yield and funding costs. We maintained steady interest rate in a narrow range for the past 3 years. In a rising interest rate environment, we proposed to increase funding cost to clients and maintained a stable interest spread.
Moving on to Slide 18. Revenue for our Taiwan operation for the first 3 months reached TWD 10.3 billion, representing 25% year-over-year growth. The solar revenue accounts 11.5% of Taiwan revenue for the first quarter. For the quarter-over-quarter comparison on the right-hand side, first quarter revenue grew by 4% quarter-over-quarter, mainly driven by the solar business, microfinancing, cloud financing and the construction machinery financing.
Turning to next slide, Slide 19. Taiwan's profit for the first 3 months of this year grew by 30% compared with the same period of last year, higher bottom line growth reflecting slightly improved cost-to-income ratio for the quarter. The first quarter Taiwan net profit grew by 7% quarter-over-quarter.
On Slide 20, on the left-hand side, Taiwan's delinquency ratio at first quarter was remained at 2% for the first quarter. On the right-hand side, recovery from delinquency and write-off was less for the first quarter.
Slide 21. The allowance to loan portfolio in Taiwan slightly decreased to 1.8% in this quarter, with increased absolute amount compared to prior quarter. The allowance amount remains sufficient.
Let's start China operation on Slide 22. China's total loan and receivable reached TWD 207.2 billion at first quarter end, which grew by 18% year-over-year and 5% increase quarter-over-quarter. The growth rate was 14% year-over-year and 1% quarter-over-quarter, if using RMB currency to calculate the growth. The first quarter is usually relatively low season. However, this year's business momentum is better if compared to the same period of last year. We will remain our China loan portfolio growth yearly guidance of around 15% unchanged.
Turning to Slide 23. This page shows the loan yield and cost of funds trend for our China operations. We continued to maintain stable spread over the quarters.
Slide 24. China's revenue for the first 3 months of this year totaled TWD 7.2 billion, increasing 10%. The sequential decrease of 1% of top line growth on the right hand side was due to less loan disbursement compared to the fourth quarter of last year.
Moving on to Slide 25. China for the first 3 months of this year's net profit reached TWD 3.8 billion, increasing by 26% year-over-year. The higher growth compared to the top line was driven by nice business momentum, less impairment loan book, and more tax rebate booked this quarter. For tax rebate, RMB 118 million of tax rebate was recognized for the first quarter of this year compared to RMB 90 million in the same period of last year. China's first quarter of this year's net profit was up 23% sequentially as more tax rebate was recognized for the first quarter compared to the same period of -- compared to the previous year's fourth quarter.
Turning to next slide, Slide 26. On the left-hand side, China's delinquency ratio at first quarter slightly increased to 2% compared to the prior quarter, with slightly increase of new delinquent amount for the quarter, but still within reasonable range. On the right hand side, write-off amount and recovery for delinquency slightly increased for the quarter compared to the prior quarters.
Next slide, Slide 27. China's allowance to portfolio ratio for the first quarter of 2022 was lower to 2.3%. This level remains sufficient based on the IFRS assessment standards.
Moving to Asia on Slide 28. The total loan and receivable at first quarter end this year reached TWD 84.3 billion, up 21% year-over-year and 10% sequentially. Thailand and Malaysia is the main growth driver for ASEAN.
Let's turn to Slide 29. The left hand side, ASEAN's revenue for the first quarter of this year totaled TWD 2.28 billion, grew 24% compared to the same period last year. On the right hand side, ASEAN's first quarter revenue was up 7% sequentially due to better business volume for the quarter.
Slide 30. ASEAN's first 3 months of this year net profit reached TWD 691 million, increased by 35% due to better growth of Thailand and Malaysia. On the right hand side, ASEAN's first quarter of this year's net profit was up 6% sequentially.
The last slide, Slide 31. On the left hand side, ASEAN's delinquency ratio at first quarter slightly decreased 0.1 percent point to 3.4% compared to 3.5% in the fourth quarter of last year. On the right hand side, ASEAN's allowance to portfolio ratio for the first quarter of this year was 3.2%, remained the same from previous quarter.
And this also bring us to the end of my presentation for today. Thank you for your time and listening.
Now I would like to turn the call to Jason to open the line to questions. Jason?
[Operator Instructions] Our first question is coming from Jemmy Huang of JPMorgan.
Just one question from me. Could you share with us what is the range of your monthly repayment rates for the China operation in the first quarter and also April, if the data is available? And then also, if we calculate the new delinquent formation in China, it went up to somewhere around 2.6% in the first quarter. I think your guidance is trying to maintain critical flattish year-on-year this year. But if we see the new delinquent formation continue to stay above 2%, let's say, somewhere around 2% to 3% for the entire year, would you still be able to maintain critical flat year-on-year?
Regarding -- we continuously -- to monitor our monthly account receivable collection rate as an early indication about how our asset quality evolve. And so far, I think, at the end of the third quarter, the March number is about 90 -- 96 point-something. So this number actually is still at a good range. If you remember, last time, I think the trial is like 94 point-something. So we need to continue to closely monitor our monthly collection situation, especially when China still has some lockdown break for some cities. But I think the number is not that -- the major lockdown city probably is like Shanghai or Beijing. But actually, our Beijing business percentage is not that high. So to our -- the impact so far as of now because of this lockdown actually is manageable.
And regarding the new delinquency formation, yes, this quarter, we have higher new delinquency formation in terms of absolute amount. Usually, it's -- for the previous couple of quarters, it's ranging from like TWD 1.3 billion to TWD 1.7 billion. And this quarter it's like TWD 2 billion point-something. But this number actually is in TWD. It's our reporting currency. But if we are looking at the local currency like renminbi, actually, the increase scale is not that high because recently, there is a depreciation of TWD. So -- but if you remember this -- for example, this month's delinquency number is roughly TWD 2.2 billion. Actually it's roughly the same size as the first quarter of 2020. So it's still within the normal range.
And I think we will continue to monitor how will -- our asset quality, delinquency ratio, monthly receivable, collection rate, been evolving, and we will try to like adjust this provision level. But actually, so far, as our CFO -- like his statement in our mentoring session of this result call-- so far, with all the indicators that we are monitoring the -- either it's the leading or a lagging indicator.
Actually, so far, we still maintain our view and probably we can still maintain the same provision rate, which is around 1.2%, 1.3% of the new disburse amount. We still can maintain a very sufficient provision level. Yes. That's our current view.
Could I -- I mean, is the monthly collection rate in April available? You can share with us over the trend...
Yes. We calculate this rate -- we cut-off -- the cut-off date is like every month 15th of each month. So there's still a few days to go. But so far, as of now this rate is similar to March number for April, but we haven't finished yet.
Next question is coming from Gurpreet Sahi of Goldman Sachs, Hong Kong.
A bit high-level question on the China lockdown. So either in Shanghai or Beijing, can you talk about what percentage of your clients are actively running their facilities like office or factory, like they're open for business during the last 1 month? And then in general, talk about the effect that this lockdown had on their business, and give us some sense on how we should think about provisioning in the second quarter for China.
Regarding this lockdown in our China market, actually, although from time to time, you see some cities implement this lockdown policy. But actually, in the earliest of lockdown probably will be in like [indiscernible] or Guangzhou in the early March. But actually, some of the lockdown city already released. And right now, as of now there are only 3 cities which we have operations still remain lockdown, which are Shanghai, Beijing and Suzhou. So for those 3 cities, our colleagues need to work from home. So actually, I think the impact is still limited. And this is about the lockdown situation.
And so actually, if you look at our business activity, we do for the first 3 quarter months, we still achieved like 90% -- more than 90% of our business plan in terms of the new business volume. And probably in April it's a little bit -- slight down a little bit. But I think, yes, the impact scale is still small. And that's the reason why management, they want to maintain our annual target of the growth target for China, which is around 15%. And because this lockdown, it's ongoing basis, and we need to continue to monitor, but so far, as of now our management will still maintain that probably, because our collection rate is still reasonable and the delinquency ratio is still maintained at quite healthy level. So I think as of today, management still think there's a chance that we can maintain similar provision rate, provisioning level ratio, so-called the GPE ratio for the next quarter or so, yes.
Okay. And then, for overall allowance in China, around 2.3%, and falling over the last few quarters, I know that we try to look at allowance on total coverage basis. In other words, how much of these delinquencies will then go into actual loss? So can you please talk about in the recent few quarters, what has been the recovery rate?
In China, the recovery rate is still around 40 -- around 50%. So this recovery rate is still quite stable. Yes. And how do we got this kind of provision level, it's sufficient or not, actually, we go through this -- we comply with the FIS standard, and we need to go to our risk model to do some test, and this is verified by our auditor. So yes, so far, we still remain the same provision policy, and we will set aside adequate provision based on our provision policy.
Okay. So overall, say -- let's say, delinquency in China is around 2% -- between 2% to 2 point -- just early 2%, right? And so if half of it is going into loss, then with 2.3% allowance, we are just above 2x covered. Is that sufficient covered?
Yes. That still will remain the same. We always want to keep roughly 2x of the estimated loss.
Next question is coming from Edwin Liu of CLSA.
I have 2 questions. Firstly on the loan yield. I have noted a slight decline in the loan yield for Taiwan and China. I mean, the magnitude is small, but can you share a little bit more regarding your loan? Is there an increase in the risk taking or whether that would have anything to do with the slightly lower loan yield? That would be my first question. Secondly is on your long-term financing. I think you will discuss that in the upcoming Board meeting. Can you share with us some considerations in terms of whether you would choose to raise equity via common equity or preferred equity? And if you choose preferred equity, is there any limit in terms of how much you can raise or -- in your capital structure? Yes. That will be my 2 questions.
About the yield and our split, actually, we have been consistently –- like want to communicate to investors, we always put the stable spread as a priority of our goal. So actually, if we have some funding cost valuation, actually, we will adjust our pricing. So far, because for the past couple of years, we continue to improve our funding cost both in Taiwan or China -- So actually, we -- if you look at like longer term for 3, 5 years, this funding cost also decreased and -- but we remain very stable spread in -- both in Taiwan and in China. Like in Taiwan, our target is 10% of the spread and -- in China, it's 10% of the spread. In Taiwan, it's 8% of spread. And we have been continuing to deliver the results.
And I think the slight -- small variation of this yield number or funding number is more because of the calculation method, because we want to present this trend, and we want to make -- this number is able to be verified by you guys, from our financial statements, financial accounting reports, so that we are using the financial numbers, the interest expense portion and the interest revenue portion, and try to do some simple calculation. So there's some small variation. But overall, we still maintain the same pricing level for every market.
And as we continue to emphasize -- actually, in our business model and our experience, we are quite able to pass through the increased funding cost if there's interest rising environment. So we are still quite confident that we can maintain this very stable spread. And I believe our -- the 2 yields -- because we didn't change our pricing. We didn't change our risk appetite or any pricing strategy. So this is only some calculation like variance.
And for the long-term financing plan, including the equity rate, equity fundraising plan, I think we've been continuously deliver a very regular like fundraising behavior. Like if our leverage ratio reached to some point, the management team think we need to raise some equity fund to lower the leverage to support our following year's growth, then we will start to do the plan. So from the historical -- you can see from the history, usually, it's like every 3 to 5 years we need to do this kind of exercise.
And it's about the time. But actually, everybody knows that right now the macro economy is not that stable and the visibility is low. So management team will still keep this option open, but I think we will continue to monitor whether this is a good timing to do, which is the good timing in this year or next year, in the second half or like first half. So yes, we will continue to –- like, to follow this kind of guidance Yes.
And regarding whether it will be like preferred share or GDR or like local share offering, I think we still keep it open. And preferred share, we have been doing once with a small scale in 2020, right? And so we are able to do that. But it's more -- I think everything comes back to what the market demands, and good timing for the market. Then I think we still need to do because we still believe we have quite good growth potential there in the next few years. So yes, but everything still keeps flexible now.
Can I just follow up on a very small technical question? So for example, in China, if there are delinquent loans, meaning that there are some customers that are late for their interest payment, under that circumstances, would you still recognize their overdue payment to interest income? Or you will stop recognizing such interest income whenever they become overdue?
Because we still are -- strictly follow our definition of the delinquency definition. So in China, many SME equipment leasing, if the monthly payment overdue by 30 days, it will be put into the delinquency pool. And for some clients, probably, they still can maintain some portion of the interest payment. I think for that part, we still recognize as we're still booking the interest revenue.
Next question is coming from Chung of Credit Suisse.
I just want to follow up on the provision of China. If my number is correct, I think your new NPL influx in China has been rising for 3 consecutive quarters. And you mentioned earlier that the loss of China has been pretty stable, around 50%, if I remember correct. So just trying to understand management's rationale on guiding that provision would maintain steady. And then you have a rising NPL influx and with a stable loss ratio.
Are you expecting this influx to come down in the next few quarters? The reason I'm asking is, if, say, for the next few quarters, we see this rise influx at the current level, your allowance to loan ratio will be below 2%, right? So should we expect that if this influx doesn't come down in the next couple of quarters, there is a possibility that you will increase your provision, hence credit costs in China?
No. This is -- we should look at the new delinquency formation. It's the incremental part. And the provision is the absolute level because we are using this provision balance as a denominator and the portfolio balance as a numerator, right?
So actually, yes, it's a good point that we still -- because this provision level, whether it's adequate enough, we need to really come back to see our asset quality, how our asset quality development -- it's not just depending on 1 quarter or 2 quarters delinquency amount. Because if you look at the absolute amount of -- the new delinquency amount, actually, either it's TWD 2.1 billion or it's TWD 1.3 billion. It's still within a normal range if you look back at longer term, our historical data. And so the put itself -- when we look at the April new delinquency, if we look at the monthly new delinquency amount, I think it's quite -- the level is quite similar to March, March level, which means there's -- probably it didn't get worse. And so at this point of time, we still maintain the view that we need to like increase the general provision ratio.
And also for our provision part, there are 2 portions. 1 is to cover the delinquency amount and estimate loss -- the estimated loss from the delinquency amount, delinquency pool. The other portion, it's roughly a 50-50 speed. The other half of the provision is based on the general provision ratio. We are satisfied for those loans, like portfolio loan. And so as long as our delinquency ratio still maintained at a quite stable level and our monthly collection rate didn't show any early signs of deterioration of our assets, I think it's very possible that we still can maintain the same general provision ratio, because it's still quite enough. It's not just only look at this like allowance to portfolio. It's -- you cannot just simply look at this 2.3% or 2.5%, because the portfolio balance is getting bigger and bigger.
Yes. That's like one other point. I – really going to ask this question. How sustainable is it that you maintain the provision level -- general provision level against a -- if this new NPL influx – They --
Yes.
In the first quarter level. So if you...
The new formation of the delinquency monthly amount continue trending up out of the range, out of the normal range, as we can see for the past like 1 year or 2 years. Then probably that's about the timing of the management team to think about set aside more provision, general provision. And I believe at that time, because there's a higher new delinquency formation, that it will reflect in the delinquency ratio. And then we also need to set us a more special individual position.
[Operator Instructions] Next question is coming from Yafei Tian of Citi.
I have 2 questions as well. As you can see, there's quite a lot of uncertainties around asset quality that we are trying to get our heads around. So if you can tip the question, just wanted to understand from your customer perspective, how are they impacted by the COVID lockdown, right? So I know you're trying to give us assurance that collection rate, everything is still looking okay. But has their operation been impacted, which could sometimes down the line lead to bigger delinquencies? Whatever you can observe from your customer behavior, that would be appreciated.
And secondly is that we are in this COVID situation for a number of years. Just wanted to see how Chinese business model in China has evolved. So if I remember correctly in the past, is we like quite a lot of face-to-face as well as visiting customers to generate new lending. I wonder if that has any change over the years? So if a branch is under lockdown, would there be a possibility of generating new loans at all? So along with that is that -- so just wanted to check with you what percentage of the customers are we growing customers, right? So if you fund all this loan, so when the old loans mature, how many of the those stay out of Chailease book?
Yes. I think, because we all know that in China, there are still – has this zero teams and so the zero cases policy, right, for this COVID. And so there's still -- from time to time, you will see they will announce some lockdown for some city. And along with this slowdown of the macro economy -- so if I say there's no impact to our SME clients, it will be not real. But actually, from our local, like underground understanding from our customer in our 56 branch offices like in China, in like 20-plus provinces, I think probably we will have some SME clients, they come to us as for some of the restructuring or some of the grace period, but this still -- that part still in the random kind of situation. It's not like in year 2020 across the board, we set a company-wide policy to grant this kind of help to our clients.
So far management still believe the impact is much, much smaller if we want to compare to last time in year 2020, the massive city lockdown. And yes, so far we're still hoping that it will -- like this COVID lockdown situation will like finish as early as possible so that we can gradually catch up some of our lost business opportunity in the next following quarters and still meet our target for China business -- our business plan for China.
And the second question is like -- the business model -- as you know that in year 2020 when we experienced this main city lockdown in China, we gradually tried to develop some of the online DD, like either the technical establishment or some of the scale, and our sales team, credit team, they tried to develop some of the skills or techniques so that we can still execute our required DD process or business development activity. So we've learned some of the experience, that we can use it this time for those branches, those cities still being locked down like Shanghai, Beijing or Suzhou, as I mentioned earlier.
But I think if we talk about the fundamental business model, I think we didn't change our business model fundamentally. This is just for some temporary solution, we can leverage some of the new technology to help us to like have some alternative solutions, try to maintain the business operations. And -- but I think in the long run, still we didn't change this on-site visits due diligence as our very core process. So -- but we still need to see how this lockdown will continue. And hopefully, it's temporary and that's our—but if it's really getting longer and longer, I think we need to think about some of the other solutions. But so far, we haven't reached to that point.
Yes. And about the part of what percentage of customers' loans will be recurring? And what percentage should be actually new customers?
For China?
Yes.
I think for China, because we already have 10-plus years operation year there, so I think the recurring customer base will already reach to 50% to 60% already now. Yes.
It was much lower previously, right?
Yes. But I think this number is just gradually increase with longer and longer operating history. I think it will -- this number will continue to increase. Like in Taiwan, this is even higher, like 70% or more.
[Operator Instructions] And next question is coming from Anupam Mathur of Goldman Sachs.
I just had few questions. Firstly, on this China delinquency increase, so I just wanted to get some more details. Like is it only driven by this lockdown situation? Like only the areas which are in lockdown are contributing or even outside lockdown we are seeing? And any details around what sort of customers or any specific sectors are getting impacted? Or is it more broad-based? So firstly around -- details around this delinquency, this quarter.
Actually, our China delinquency ratio like -- current is like 2%. Previous quarter is 1.9%. Those numbers actually consider very, very good number. If you look at our -- in the past, China delinquency ratio, I mean we take out the COVID year, like in year 2020. Actually, before that, it's roughly 3%, 4%. And of course, we continue to enhance our credit screening, like skills with more and more data points, and more and more experienced employees. And this should be continuous to be improved. But it's already improved to this level, 1.9%, 2%.
I think to the management team, these numbers still consider very healthy now. And, yes, I think -- and where does those new delinquency comes from? It is random. Because you know our -- our customer exposure is very diversified in terms of customer, industry segment, everything. So there's no concentration for those new delinquency in -- which city, which branch or industry. So just normally random.
But is it not primarily driven by lockdowns? Or is it we are seeing even in non-lockdown areas driving delinquency? So I'm just trying to --
Yes. Because the lockdown city only for 3 cities, I think less than 10 branch. And actually, our collection is through the bank transfer, bank wiring. So we need to not to do the collection -- payment of collection. So basically, yes, the lockdown -- it's only our clients, their operation issue or their cash flow problems will cause default of their monthly payment. It's not the lockdown.
Okay. So -- but like any -- like what are we seeing on the ground? Like the previous question had asked like the customer situation. So this kind of temporary -- this cash flow issue, is it temporary? Or are we seeing some permanency in this? Like have we done -- or what is our understanding on the ground?
Yes, I think so far it's okay. Yes, because -- so there's a reason why we need to monitor the monthly collection rate. If our customers still can maintain their monthly regular payment, it shows a sign that their cash flow status still remain at a reasonable level, unless they like fail to pay the monthly payment. That shows a sign. So with the very reasonable monthly collection rate, 98%, 97%, we believe our customers still has -- is still doing okay.
Okay. But I thought you mentioned like end of March, it is 96 point something percentage.
Yes. 96% -- we haven't -- because this is the April number, but the cut-off that reported internally, our internal reporting cut-off for this [ KPI ] is cut-off at 15. So we'll continue to increase where we still go into the collection activity. This number will increase.
Sorry, I'm a little confused here. So our monthly collection rate is 96% as of March, or 98%?
For March?
As of March. Yes.
End of March?
Yes.
End of March it's around 97% -- 96% point-something, so 97%.
Right. So if I recall previously, our normal collection used to be around 98%, 99%.
99%. Okay. Yes. I should explain more -- in more detail. This is for the 30 days number. And we will continue to monitor like 90 days number. Then although for this month, our 30 days monthly collection rate is 97%, but till it reached to 90 days, it can reach to 99%. We will continue to do the collection effort.
No, I understand that, but my question is like, what is this -- if I look at 96% something, what is it versus history? Like, say, at the end of December or at the end of September, what was this number? And what was it during -- when COVID was peak in 2020? Like can you give a reference?
Okay. I have this number -- because this is really an internal number. It just is on a rolling basis. So we just use it as a management reviewing numbers. I have this number. Just -- I think before March, this number continue to like around 99% or 98 point-something. But in March, there is a more clear dip. But what makes us more comfortable is that the April number actually is quite similar to March number. So it -- to us -- it means to us that the asset quality didn't continue to deteriorate. This is the very early indicator.
But versus 1Q, do we expect 2Q delinquency to continue to inch up? Like what is our expectation for 2Q now?
For 2Q delinquency ratio?
Yes. I think because end of March, is worse than the previous quarter, and we are doing a rolling basis. So incrementally, 2Q is definitely looking worse than 1Q.
No. I cannot predict in many quarters delinquency ratio actually. And also, this delinquency ratio is pretty much a lacking indicator. So that's the reason why we try to communicate to you some of the leading indicators like this monthly collection rate also. And the delinquency ratio, you also need to consider in our recovery amount and write-off amount. And this also had some quarter-by-quarter fluctuation. But overall, on the annual basis, it's stable, but actually some will fall a little bit earlier than in the previous quarter or in the second quarter. So this delinquency ratio, we cannot do that. Like I cannot predict, yes.
Sure. I totally understand. And just one other question I had was like, on the NIM or the impact of, say -- any sensitivity around like how much 25 bps impacts our earnings? Like any sensitivity you can provide?
In the spread for 14 years, or -- can you repeat your question?
Your rates are rising, right? So any sensitivity around 25 bps increase in funding cost? How much...
Yes –- we did -- you mean the sensitivity of the interest rate?
Yes.
Okay. We disclosed this number in our financial statements. And based on the sensitivity analysis, roughly if there's 0.25% increase of the interest, probably it will have less than 1% of the bottom-line impact to us, because you know our pricing is fixed for the existing contracts. But actually, our contracts, usually no look -- is last 3 years and need a monthly repayment. So every year, we will -- retire very soon. Every year, roughly like 1/3 of our loan book will be like retired. So we have this impact from the fixed rate for the existing contracts. But for every new disbursement, actually, we can reflect our increased funding cost immediately.
[Operator Instructions] Next question, Gurpreet Sahi of Goldman Sachs, Hong Kong.
A quick follow-up from the other question that was asked. I always understood with regards to repricing that if the funding cost rises, then in 2 quarters, roughly 6 months, Chinese can pass it on to the borrower. Is that still true? Because sharing your recent comment, it seems 1/3 of the book is repriced every year. So it might take some time to reprice.
Yes -- No. There's 1/3 of the book will be retired, not re-priced. We cannot re-price the existing contract. It's fixed price.
Yes. So existing contract is fixed price. It is -- let's say, we signed it today, it is for 3 years, right?
Yes.
So then there is no repricing between these 3 years as funding costs can go up?
No repricing. It's only for the new business deals. We can lose higher -- we charge higher price because of our funding cost increase. So every -- actually, every month, internally, we calculate our funding cost level, and we are using this as like required -- and the top and the markup -- with required markup that, ask our sales team to implement this pricing.
Understood. So with the Central Bank in Taiwan already having hiked with the 25 basis points, so has the repricing for these new contracts started in the month of April?
No. Actually, in Taiwan, because you know our Taiwan banking-source is very diversified. Only like probably less than 50% is relied on the bank borrowing, and it's not reflect at the same time because some with like quarterly adjustments. And so -- and also the -- it won't 100% reflect in our borrowing cost from those banks. So the elasticity is not 100%.
Understood. So it's not a full 25 basis point impact coming to the funding cost for Taiwan from that March interest rate hike from the Central Bank. But for the Taiwan-based borrower, when does Chailease actually start to reprice the contract higher, which month this year?
So far -- right now also in Taiwan, our business portfolio also become more and more diversified with like traditional SME equipment leasing, with big corporate financing and consumer use power financing, et cetera. So with customer-related or micro business financing, the spread actually already higher than the traditional equipment leasing. So far, I think this enforcement of the pricing strategy is the daily work we need to do. But policy-wise, I didn't see the company one – every -- across the board, every business unit needs to increase the pricing, that's still not -- we haven't did that. We didn't do that now.
Next question is from Yafei Tian of Citi.
I have 2 follow-up questions. The first one is on the interest rate sensitivity. On the Chinese call, remember the CFO caught out every 25 bps of increase reduced the revenue by about TWD 2 billion. So if I were to take that, divide it by consensus for year 2020.
No, TWD 200 million, it's not TWD 2 billion.
So I misheard then. I hope to -- okay, TWD 2 million.
Yes. TWD 200 million.
TWD 200 million. And then the second question is on the -- your income statement, right? The other operating expenses line, they seems to be a bit of unusual spike in this quarter, to about TWD 4 billion -- TWD 4.2 billion from the historic quarter –- Yes. So just -- I just wanted to check what is that related to.
Non-op -- you mean the non-op items?
Yes. Page 36. Yes.
It should be China tax rebate.
Okay. But why is tax rebate booked under other operating expenses line? Because it's...
Expense.
Yes, other operating expense. So if you look at the operating expense, the line above operating expenses for this quarter, [ TWD 4,205,846 ].
I think there must be some reclassification. I think we can get back to you later. This should be some reclassification.
And there are currently no questions at this point, and that would be the end of our conference. And ladies and gentlemen, we thank you very much for your participation in Chailease conference call. You may now disconnect. Goodbye.
Thank you.
Thank you.