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Edited Transcript of 2892.TW earnings conference call or presentation 30-Aug-19 8:30am GMT

Q2 2019 First Financial Holding Co Ltd Earnings Presentation

Taipei Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of First Financial Holding Co Ltd earnings conference call or presentation Friday, August 30, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Annie Lee

First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department

* K. C. Lee

First Financial Holding Co., Ltd. - IR Professional

* Keith Ke

First Financial Holding Co., Ltd. - IR Professional

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Presentation

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [1]

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Thank you for waiting. We'll begin our meeting today. Good afternoon, ladies and gentlemen. Hi, everyone. Welcome to join us for First Financial Holding First Half 2019 Webcast Investor Conference. Now we would like to start with our presentation and including the first half snapshot, financial highlights and operating results. Then we will proceed to Q&A session, which will be hosted by our IR head, Ms. Annie Lee. And for investors, you can raise your questions by typing at the bottom of the webcast window. And today's presentation material, you can download it from our website or from the webcast site. And also, we will provide 1-year replay after today's conference.

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

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Keith Ke, First Financial Holding Co., Ltd. - IR Professional [2]

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Thank you, K. C.

Please turn to Slide 5. Let's start with a quick review of group's performance in first half 2019.

First Financial Holding delivered TWD 9.9 billion profit with 3.2% growth Y-o-Y. Among the subsidiaries, bank unit grew by 5% Y-o-Y. And the insurance unit also had a great result comparing with the same period last year. Both subsidiaries underpinned group's solid performance.

Capital repatriation from Mainland China also changed the bank's loan structure somewhat. We believe more focus would draw on core banking eventually.

FX loan demand dropped due to the rate cut from Fed. Year-on-year growth was down to 5.8% from double-digit growth of first quarter. On the other hand, mortgage loans stayed firmly at 6.5% growth Y-o-Y.

Bank's treasury gains still had 31.4% growth in first half 2019 and played as an important driver to net revenue. Both fixed income and the SWAP transactions bolstered the deposits and softened the volatile capital market.

Annualized net credit cost was only 21 bps, which was in line with our expectation. Selected loan business was one of the reasons to maintain the asset quality.

Okay. Let's move to Slide 7 for the financial highlights. On Slide 7, it shows group's key figures. As we said, net income grew by 3.2% Y-o-Y. Comparing with the result last year, EPS improved from TWD 0.77 to TWD 0.80. However, ROAE and ROAA fell behind a little bit. Please take it as reference for other figures.

Okay. Please flip to next slide. Slide 8 displays the breakdown of gross net income. Please take it as reference.

And Slide 9 shows the net income of major subsidiaries. As we mentioned, bank has a 5% growth Y-o-Y. Insurance also had a huge improvement to this year. Securities didn't perform well in first half and expect it to pick up in second half.

Let's move to next part, operating results. Please turn to Slide 11. This slide tracks the group and the bank's net income and the annualized ROAE. Please take it as reference.

And Slide 12 shows the breakdown of bank's earning structure. Total net revenues grew by 3.9% Y-o-Y in first half 2019. Net interest income still fell behind with 3.3% decrease, which was still affected by interbank lending transferred to SWAP transaction and the rate cut from Fed. Fee income increased to 1.9% Y-o-Y. Bancassurance and loans-related fee income were still the major drivers for the growth. And again, our investment increased to 31% Y-o-Y, which bolstered the net revenue growth.

Please turn to Slide 13. Total loan book increased 5.3% Y-o-Y, reaching TWD 1.72 trillion. Large corp. loan increased 21.3%. FX loan improved 5.8% and mortgage loan was up 6.5%, which we had mentioned. SME loan was still cautiously with only 1.3% growth Y-o-Y.

Slide 14 further shows the Q-o-Q trend. Total loan book stayed pretty the same with only 0.5% growth. FX loan drop 1.2% was the major reason.

Please turn to Slide 15 for bank's LDR, spread and NIM. LDR improved to 78.1%, among which NT dollar LDR improved to 81.1% while FX LDR dropped to 68.9% due to less demand of FX loan. Loan-to-deposit spread was down 1 bp to 1.61%, and NIM also continued to drop to 1.06%. The adjusted NIM was 1.14%.

Please turn to Slide 16. This slide shows the breakdown of NT dollar spread and FX spread. Both spreads declined Q-o-Q. NT dollar spread down 1 bp to 1.39%. FX spread dropped over 5 bps to 2.39%.

Please flip to next slide, deposit structure. Left bar chart show that total deposits increased 3.2% Y-o-Y. NT dollar deposit had a 3.9% growth. FX deposits improved 1.5%, too. CASA rate dropped a little bit to 67.4% comparing to the ratio of the end 2018.

Please turn to Slide 18. This slide shows the major exposures breakdown. Please take it as reference.

Okay. Please move to the next slide. Slide 19 presents the mortgage book. Bottom bar chart shows the monthly new mortgage lending, and the amount was still quite stable. And top right chart shows the mortgage yield and LTV ratio. Mortgage yield kept at 1.78%. And both new mortgage LTV ratio and average mortgage LTV ratio also stayed very similar comparing with last quarter.

Please turn to Slide 20 for the fee income breakdown. As we mentioned, fee income year-on-year growth shrank to only 1.9% in first half. Decreased wealth management fee income was the main reason. On top right box, you can find it shows the percentage of wealth management fee income decreased to 55.5% of total net fee income now. And the loan-related fee revenue picked up with 15.3% growth Y-o-Y.

Please turn to the next slide. This shows the Q-o-Q trend of the net fee income. Please take it as reference.

Please turn to Slide 22. Total operating expense increased to 6.1% Y-o-Y, and cost-to-income ratio also rose up to 43.1% at the end of first half 2019. Overall to say, C/I ratio was still under control.

Okay. Let's move to asset quality. Please turn to Slide 23. This slide shows the coverage ratio, LLR ratio and NPL ratio. Coverage ratio improved to 450%. Our NPL ratio continued to improve to 0.28% as well.

And next slide presents the breakdown of NPL ratios. Among the top graphs, individual NPL slightly up 1 bp to 0.18%. Mortgage NPL ratio stayed at 0.17%. SME NPL ratio also remained at 0.5%, and large corp. NPL ratio dropped to 0.19%. And on the bottom graphs, domestic NPL ratio was down 1 bp to 0.32% and overseas NPL ratio decreased to 0.14%.

Please turn to Slide 25. This slide shows the new NPL influx. Domestic new influx was well controlled at TWD 514 million. Overseas new NPL increased to TWD 336 million. And the combined was TWD 850 million new influx, which was better than last quarter.

Please turn to Slide 26, the overseas profits. The pretax profits of overseas branches over total profits slid to 44.9% but still maintained at a relative high level. OBU occupied 41% of total overseas profits. Hong Kong, North America and ASEAN each occupied over 13%.

Please turn to Slide 27. Gross CAR dropped to 120.8%. Bank's CAR slid to 13.2% and Tier 1 also dipped to 11.2% because of a dividend payout. Please take it as reference.

Okay. That's the presentation today. I'd like to have K. C. to host the Q&A session.

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Questions and Answers

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [1]

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Thank you, Keith. Now I'd like to proceed to Q&A session. And the first question was raised from the [China Life], Ms. [Wong]. Ms. Wong hopes to know that can we talk about capital repatriation that the government is focusing. What's the major profit contribution toward -- of this repatriation capital for the company to -- from 2019 to 2020 in terms of the loan growth? Annie?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [2]

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So the loan demand part, given the strengthened investment, I think, from the so-called China-based Taiwan business, which helped to boost our loan demand for the relocation plan back to Taiwan to expand their operations so as to avoid the tariff impact on their manufacture in China, we actually had accepted and approved nearly -- I mean, up to TWD 25 billion to TWD 26 billion new loan -- I mean, new lending. And this is pretty much for just -- for the first half of this year that can justify the trend of this so-called back home capital will further strengthen our new lending in the future. So we welcome the relocation of China-based Taiwan corporates would continue, and the momentum should further help to boost our loan demand for this year and next year. But the actual numbers, we'll have to wait for more confirmation, and the plan that this so-called back-home capital or CapEx decisions will also have to comply with the -- some anti-money laundering and common reporting standard regulations that help them to open their new accounts and put their money into their investment project. So we're quite optimistic about the future investment plan that -- to accommodate some more repatriated investment plan for the -- these Taiwan corporates. So this for the lending side.

And in other parts of the -- I mean wealth management opportunities, yes, as the government has already announced, the tax -- what we call the tax exemption plan that would also help banks to accommodate more back-home fund to help them manage their wealth while they're trying to improve their yield, a company with a investment plan in Taiwan. We actually had to set up some task force to screen from our database to attract those clients who actually want to put more money back in Taiwan to invest. And we also plan to set up some product mix proposal to help them select whatever is appropriate for them to park their money at our account, the so-called the designated FX account that can help them to lower their tax base while they place their money back at home. So we would be quite keen to help this back-home Taiwan business not only to support the expansion for their operation in Taiwan to set up the new CapEx plan and also to help them to propose more wealth management products to help them safeguard their back-home money that can help them get more stable and long-term return for the rest part of their money. So this would be just the beginning of a long-term trend in our group.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [3]

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Oh, thank you, Annie. And can you talk about the wealth management business in the first half? Because we saw that the mutual fund sales and the bancassurance Y-o-Y actually declined. So what's the major factors that are making mutual fund sales and bancassurance?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [4]

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So for the first half, performance of wealth management pretty much impacted by the volatility in the capital markets due to the very unstable trade friction. So we actually tried to help our client divert their excess money to a more stable or principal capacity type of product. That will be to part of the savings product for bancassurance. In terms of more volatile mutual fund markets, we are not that aggressive to push our clients to place their fund into this type of product. So in the second half, we will be more keen to persuade our clients to place their money into the type of products like targeted investment programs for the insurance products that will help them lock in the more long-term return and less volatility to gain more long-term, stable return that will help them to mitigate the risk of volatility in the capital markets.

So in the first half, the growth rate was not that good. But as we enter into the second half of this year, a company with this back-home wealth from China of this Taiwan business and Taiwan finance customers will help us to sustain our wealth management momentum. So we should see our fee income would at least stabilize at -- with a growing rate of about 2% to 3% marginal growth for the second half of this year.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [5]

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Okay. And we have another question, which was raised by several investors, including [Linda] and [China Life], which is what's the impact that the Fed just cut rate for one yard in July? And what's the impact to our NIM for the coming quarters and next year? Annie?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [6]

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When the monetary authority cap rate, it will further translate to a NIM contraction in the coming years. So we must admit that the future projection of our NIM would not be that optimistic. So you can also tackle some -- our -- shrinking of our NIM. In the first half of this year, it actually dropped quite a bit. But we welcome that. The rate cut is just the beginning, so we must be quite conservative about the NIM projection in the coming quarters. But fortunately, we still try to maintain a more stable NIM for us, and we divert today excess money to other treasury activities like SWAP and other high-yield fixed income investment. That will help us to offset the gap left or impacted by the NIM impact. So I must say that as we're facing pressure of the NIM compression due to the rate cut prospect, that the pressure on the NIM in the second half of the -- or going into the first half of next year definitely will be quite challenging for us.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [7]

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Okay. And we have another related question about NIM. What's the adjusted NIM if we [revert] the SWAP gains into the NII and -- or the Q-o-Q change for the NIM or Y-o-Y change for the NIM? Annie?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [8]

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In our slides, we had a nominal NIM at 1.06%. That's why we adjusted the SWAP impact into our NIM. It will add up to 1.14%. But if we compare with the same period last year, it actually still decreased by more than 7 bps. So we must say that due to the narrowing gap between the interest rate in Taiwan and U.S., it actually also cast some shadow on the overall performance of our NIM. So the NIM will see some contraction pressure.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [9]

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Okay. And let's talk about the exposure for some defaulted companies. The first one is Powertech. What's the exposure of First Bank to Powertech Energy? And how much will First Bank set aside a provision for this company?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [10]

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Well, this solar energy company, we had a total lending up to TWD 1.52 billion.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [11]

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$1.52 billion.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [12]

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In terms of its insolvent problem, actually they're trying to push some fresh capital being injected into the company. So up to now, the provision is still not in place. It will start to be migrate from the second tier of the so-called surveillance loan. So we have to see whether this problem borrower gets some fresh capital from the -- their shareholders because we actually set aside significant provision against this exposure. But based on our past record for this type of syndication lendings, as it is -- it has been defined as secure lending. So we had some collateral tender. And normally, we would charge of up to 50% of this type of exposure. So that will -- they amounted to about $800 million. In case it actually go insolvent, that still wait for more time to become really -- become a delinquent lending anyway. So $800 million will be...

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [13]

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Oh, $800 million for the provision? Okay.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [14]

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$1.5 billion exposure...

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [15]

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$1.52 billion for the total exposure of Powertech, okay. And the second one is about a SME called New Site Industries. It's Chinese name is [Ringing]. And what's the exposure of Ringing that First Bank now owns?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [16]

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We had exposure up to TWD 400 million. And out of this lending, more than 75% are secured by collateral. So the -- that exposure, I mean, the potential losses will be minimal. So we would set aside up to about $100 million for this exposure due to its highly collateralized nature.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [17]

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Okay.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [18]

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And $400 million...

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [19]

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$400 for the provision expense for the [Ringing] and...

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [20]

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$100 million for provision.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [21]

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$400 million? Oh, $400 million for the exposure to [Ringing] and...

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [22]

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$100 million.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [23]

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$100 million for the provision expense?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [24]

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Yes.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [25]

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Thank you, Annie. And can Annie talk about the trading gains in the first half, which was -- grew by 31% Y-o-Y? And how do you see the growing momentum for the coming quarters in 2020?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [26]

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So for the treasury or investment activities since last year, this can be viewed as a new territory that the bank would have to put assets at. We started from the SWAP transaction, which performed quite well and gained much, which never happened before. And this year, this type of transaction will sustain, and we also add up new investment like for high-yield fixed income investment portfolio, which not only help to digest the excess liquidity and also help to enhance the return other than our lending business. So you can see for the first half, the treasury gains has already make up, up to quite a substantial part. And we welcome for the whole year including our long-term investment dividend income. We will be able to, let's say, achieve actually $10 billion gain from treasury activities. So this can be viewed as a new trend apart from our traditional core lending and fee revenue business. So this can be -- we should put just -- more than 20% growth for our treasury....

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [27]

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Gain more than 20%?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [28]

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Yes. Yes, actually we had posted a quite substantial or 30% last year, it's still growing quite rapidly.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [29]

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Okay.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [30]

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Yes. 20% growth for treasury again this year.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [31]

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Okay. And talking about the capital, is there any plan for First Financial to raise capital for this year?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [32]

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No. Not at all.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [33]

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Okay. And another question is from SinoPac, Ms. [Leih]. Ms. Leih hopes to know that in Slide 14, there's a mix of loan book. And can you, Annie, talk about that -- how much you loaned to your government and SOE loan in the others item? Annie?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [34]

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Yes. Very, very low. $3 billion only. Yes, relatively low. Very, very minimal.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [35]

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$3 billion? Okay.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [36]

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$3 billion only.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [37]

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$3 Billion only? Okay. (inaudible) $3 billion.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [38]

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Because government lending is not that profitable. It's very low yield. But it's risk-free. So we do not put much efforts on doing this type of lending.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [39]

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Oh, okay. Thank you, Annie. And there's another follow-up question from [China Life], Ms. [Wong]. Ms. Wong hopes to know that can Annie talk about the fee revenues plan in terms of the peers are talking about how to push the wealth management business in terms of the repatriated capital. Now how does First Bank will do -- how does First Bank do to [reshake] the -- your strategy with other peers?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [40]

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Actually, we had to target some of our clients that we spring from the database, and we believe this type of risk to attract the clients and to have them come back to our account, this will be the first stage. And then secondly, due to this repatriated funds, they have to select just one single account for each of them to place their money with us. So also, we have some plan in place to have some so-called encourage program that we will hike the interest rate for FX deposit account that will attract the clients to place their money with us. And we'll also raise some of the fee rate -- the fee for them that they can have no incentive to be with us.

And secondly, for the product plan, we would propose the type of products that will secure their long-term investment return like some of the fixed income product for the large [logistic] company in The United States that were also a more attractive return for them and -- or other than the mutual fund that will help the client gain -- make stable returns when they put their money into this account for more than 4 to 5 years to secure their yield. Apart from that, we would also structure the type of products that were also higher-dividend and low-volatility products to attract this type of back-home money. And apart from this, we would also like to structure some other insurance products that can help them get some annuity plans. This is also put in a place that the regulators would ask if repatriated funds can be placed at the insurance type of products. And all of this can help to boost the fee revenue for the bank. But this is still in the early stage to attract these type of businesses. So we're still in the process to organize all this plan in order to compete with other peers that can have more chances to retain this type of capital with us, yes. But definitely, most of this back-home capital would first start with the original account or the business that they're dealing with that will help them more easily to retrieve, I mean, retrieve their money back due to the newly imposed anti-money laundering and other regulations. So I suppose this will be our major initiative to accommodate this type of capital.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [41]

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Okay. Thank you, Annie. And we have a follow-up question from [Leo]. Leo hopes to know what's the targeted loan growth and fee income growth for the fiscal 2019 now.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [42]

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Okay. Given the newly announced incentive programs from the government to help the Taiwan corporates operating in China or other areas to relocate their business in Taiwan, we would continue our momentum for our lending activities. So we would maintain the lending target at around 4.5% to 5% after we posted a more than 5% loan growth. And this would be a neutral projection for this year.

In terms of the fee revenue, as we are welcoming this type of new lending, it will help to boost our loan-related fee income after we recorded a 15% growth for our fee revenue from the loan business.

In terms of wealth management business, again it would be not so (inaudible) due to the market volatility. So we should see the wealth management business would be slower than the FX fee revenue business. So I just mentioned that we are targeting fee -- the total fee revenue growth around just 2% to 3%, low single-digit growth.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [43]

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Okay. Thank you, Annie. And we know that First Bank was ranked #6 in the G-SIBs list. What's the potential impact to First Bank capital if First Bank was reallocated to top 5? If? Yes.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [44]

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Yes. We're not in the list of the so-called systematically important bank yet. But as the top 5 may have chances to drop below the original list, so we actually would have some plan to prepare for a potential upgrade to become the important bank. But in terms of the current threshold of the capital requirements, which is highly required by the regulators, we would have to add up, up to more than $20 billion, $25 billion fresh capital to become -- meet the criteria of the so-called G-SIB bank list. But as the current top 5 banks already claim difficulties that they cannot meet this criteria, so I must say that I'm not so sure whether the criteria will be further amended in the future. So we still have to wait and see. But the gap in capital will come, and at the moment, it's somewhere around $25 billion fresh capital for us.

And in terms of the plan that we would have to meet the criteria, the strategy that we will adapt can be to lower the cash dividend payout ratio in the future or to increase the stock dividend ratio. So this is subject to the final, I mean, decision from the regulators whether they're going to do some adjustments to this G-SIB criteria.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [45]

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Okay. In terms of the wealth management business, since FHC is considering using a new (inaudible) basis balance to calculate the commission paid to the franchise instead of the volume basis at bank side, so what's the potential impact to banks about the fee income in the coming year, Annie?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [46]

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This is a very significant change from the traditional pricing for the fee revenue. So I suppose that most of the banks would have to adjust to it. But as it is still, not actually started yet, I must say that for banks also, the channels have to consult with the product manufacturer to see how to safeguard the fee revenue in the future as this is very long-term change from the traditional model. So I must say that the first impact will be how to price -- how to pricing the so-called AUM, to what extent that, that will not impact the revenue of the bank or most bank. And I suppose that banks would see what the other peers have done, and we would act simultaneous to safeguard the fee revenue. But it's still quite early to know what will actually be done because the banks would not collate any big shortfall for the fee revenue like from the traditional transaction-based pricing model. So we still have to wait and see. And this will not impact just one bank but all the banks will get impacted.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [47]

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Okay. Thank you, Annie. And since we are going to wrap up our Q&A session, let's summarize guidance because some investors are kind of raising the question about summarize your guidance for this year, okay?

First of all is the loan growth. Loan growth, we summarized the guidance for the fiscal year about 4% to 5%. And for the fee revenue growth, that we forecast a 2% to 3% growth in the fiscal year. And how about the trading gains?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [48]

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Trading gains, we would target at least a 20% growth.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [49]

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Okay. At least 20%, 20% growth for the trading gains.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [50]

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Yes.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [51]

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And...

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [52]

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How about the credit cost?

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [53]

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Okay. Let's talk about the credit cost.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [54]

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Yes.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [55]

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And in terms of -- if we add up the Powertech and the New...

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [56]

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New Site Industries.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [57]

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New Site Industries, [Ringing], and what will be your total credit cost for the fiscal year?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [58]

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The maximum credit cost there after we incorporate the so-called Powertech or the New Site Industries is still lower than that of last year. The net credit cost for this year can be content at just 20 -- 26 or 25 bps still.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [59]

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The -- 25 to 26 bps is the...

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [60]

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But if the Powertech can be revitalized, it will be even lower. So the credit cost part is not so bad anyway.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [61]

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Okay. Okay. Either we conclude Powertech, okay.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [62]

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So about $800 million after provision.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [63]

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Right, right, right. Okay. Now how about the fee -- how about the cost-to-income ratio? Still the same?

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [64]

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Yes. Yes. Still content at 33% even though we had a cost increase up to 3% to 4% due to the implementation of new pension program and a bonus increase.

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K. C. Lee, First Financial Holding Co., Ltd. - IR Professional [65]

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Okay. Okay. I think that we have concluded a pretty clear guidance for the fiscal 2019. And we thank you for your listening, and we hope you enjoyed today's conference. And we hope you -- see you next quarter. See you. Bye-bye.

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Annie Lee, First Financial Holding Co., Ltd. - IR Head & Head of Strategy Planning Department [66]

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Bye-bye. Have a nice Moon Festival ahead.