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Annual Report 2013

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Annual Report 2013 2013 2013 ANNUAL REPORT Contents Letter to Shareholders ......................................................................................................... 2 Bank Overview Introduction ...................................................................................................................................................................7 Organization ..................................................................................................................................................................9 Information of Directors (and Independent Directors) ..............................................................................................14 Fund Raising Status and Operational Highlights Capital & Dividend ......................................................................................................................................................22 Issuance of Bank Debentures .....................................................................................................................................26 Preferred Shares ..........................................................................................................................................................26 Issuance of Global Depository Receipts ....................................................................................................................26 Employee Stock Option Plan (ESOP) .........................................................................................................................26 Merger with or Acquisition of Other Financial Institutions .......................................................................................27 Scope of Business ........................................................................................................................................................28 Employees ....................................................................................................................................................................35 Corporate Responsibilities and Moral Behavior ........................................................................................................36 Labor - Management Relations ..................................................................................................................................38 Important Contracts ....................................................................................................................................................39 Risk Management ........................................................................................................................................................40 Privately Placed Securities ..........................................................................................................................................49 Audit Committee Report of the 2013 Financial Report .............................................................................................49 Financial Review Independent Auditors’ Report ....................................................................................................................................51 Financial Statements ...................................................................................................................................................53 Note to Financial Statements .....................................................................................................................................57 Contact Details of Head Offices and Branches ............................................................... 177 Letter to Shareholders Letter to Shareholders 2 COSMOS BANK Letter to Shareholders Overall Economy In 2013, the global economy was recovering at a slow pace and the mature nations outperformed most of the emerging markets in terms of economic outcomes. The stock markets were mostly in an uptrend as most countries maintained their investment environments with prolonged period of low interest rates. Under the influence of gradual tapering of US quantitative easing (QE) policy and the economic or political turbulence Letter to Shareholders between regions, the global economy is still facing great uncertainties and challenges on its way to recovery. The local economy did not show clear signs of recovery as the mature markets did. Amid the weak momentum for external trade and sluggish domestic demand, the annual economic growth rate, though not as high as expected, demonstrated improvement as compared with 1.48% in 2012. In view of the global recovery and cooperation with the government policies, there are chances to break through the bleak economic situations. However, QE and a clear slowdown in China’s rapidly growing economy might create uncertainties to the domestic import and export. Therefore, we should be more wary of and careful in evaluating the economic performance throughout 2014.The economic growth for year 2014 is projected to be 2.82%, up by 0.71% as compared with the previous year, according to the forecast released by Directorate General of Budget, Accounting and Statistics of Executive Yuan. Business Performance Throughout 2013, the Bank aimed at becoming “a niche bank with a firm foothold in Taiwan and advancement in Asia Pacific.” We succeeded in achieving the following business performance by offering innovative and differentiated financial services, continuously diversifying and strengthening our core profit structure, constantly fine-tuning our risk management system and assuring our asset quality: 1. Consumer Banking: While we continued to develop high-yield products such as cash card and credit card, our new profit driver- “Personal Loan” grew substantially through various marketing campaigns and cross-selling. Our loan balance as at the 2013 year-end reached NT$14.5 billion and soared by around NT$5.5 billion (+62%) when compared with NT$9 billion in 2012. To increase card use by customers and our credit card market share, we rolled out the Combo EasyCard Credit Card, which combines four major functions including credit card, bank card, EasyCard and mobile payment option, providing customers more hassle-free financial services. We also launched “QR Code Mobile Payment Services” jointly with Chunghwa Telecom on various contracted vendors including shopping, transportation and air tickets. We aim to become the leading mobile payment service provider nationwide. 2. Corporate Banking: Our banking channels include large corporate loan centers, regional corporate loan centers and developing enterprises loan centers. We provide differentiation- and focus-driven corporate banking services in order to effectively increase customer stickiness and market share of our products. We also focus on and make relentless efforts to promote high-yield products such as foreign currency loans. The balance of our foreign currency lending nearly doubled at the end of 2013 to around NT$5.8 billion compared with NT$1.9 billion in 2012. 3. Branch Banking: With equal emphasis on lending business growth and asset quality, our mortgage balance increased by around NT$5.2 billion (+16%) from NT$31 billion in 2012 to NT$36.2 billion at the 2013 year-end. We took advantages of our local branches and worked proactively to attract nearby customers to our money services. As a result, our total deposit grew by around NT$14.5 billion (+11%) against NT$126.5 billion in the previous year to NT$141 billion this year. We also continued to expand our line-up of wealth management products, organize professional training programs and introduce tailor-made products to deliver a full range of wealth management options and asset management services for our clients. Our assets under management (AUM) as of December 31, 2013 reached NT$209.8 billion, up by NT$20.4 billion (+11%) in comparison with NT$189.4 billion in 2012. 4. Financial Institution: We expanded interbank credit facilities and strived for more favorable business deals. In 2013 the business achieved NT$6.8 billion, growing considerably by NT$5 billion (+288%) as compared with the NT$1.8 billion at the end of 2012. 2013 ANNUAL REPORT 3 Letter to Shareholders 5. Treasury: We entered New Taiwan Dollar, U.S. Dollar, bonds and stock transactions under prudent risk management, along with an optimal allocation of assets and active TMU business to improve our profit efficiency. Financial Performance 1. The Bank recorded a NT$3.05 billion after-tax profit, up by NT$0.16 billion in comparison with the NT$2.89 billion in the previous year. Our return on assets (ROA) rose to a high of 1.90% and return on equity (ROE) to 18.05%. 2. With respect to risk control, under our prudent credit administration and effective debt recovery management, the non-performing loan ratio has been improved and reduced by 0.26%, from 0.78% at the end of 2012 to 0.52% at the end of 2013. 3. Our earnings per share recorded in 2013 was NT$2 and the net worth per share at the end in 2013 was NT$12.01, showing significant growth by NT$1.85 as compared with NT$10.16 at the end of 2012. 4. Our capital adequacy ratio as of year-end 2013 was 13.57%, which can provide sufficient funding support for business development in the near future. 5. Compared with other competitors, the Bank has higher core profits, diversified lending positions, sufficient liquidity and an improved capital level. In October 2013, Fitch Ratings, Inc. raised the Bank’s credit rating to BBB+ (twn) and F3 (twn). Besides, we are placed to the positive watch list in February 2014 due
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