2011 Annual Report Taishin International Bank Co., Ltd

Stock Code : L5848 Publication date : June 2012 Company website : http://www.taishinbank.com.tw Market Observation Post System website : http://newmops.tse.com.tw 2011 Annual Report Taishin International Bank Co., Ltd. 2011Annual Report Ⅰ . Names, titles, phone numbers, and e-mail addresses of spokesman and acting spokesman Spokesman: Spike Wu Title: Chief Executive Officer, Retail Banking Group Tel.: 886-2-5576-3701 E-mail address: [email protected] Acting Spokesman: Wilson Chou Title: Senior Vice President Tel.: 886-2-5576-2568 E-mail address: [email protected] Ⅱ . Addresses and phone number of headquarter and branches Headquarter: 1st fl., and 1st basement, No. 44, Zhongshan N. Rd., Sec. 2, Zhongshan District, Taipei City Tel.: 886-2-2568-3988 Addresses and telephones of branches: see the “domestic and overseas business points” section of the annual report. Ⅲ . Name, address, website, and phone number of the institution for handling stock register Name: Stock Affairs Agency Department of Taishin International Commercial Bank Address: B1,No.96,Sec1,Jianguo N. Rd.,Zhonghsan Dist.,Taipei city. Website: http://www.taishinbank.com.tw Tel.: 886-2-2504-8125 Ⅳ . Names, addresses, and phone numbers of credit rating institutions Name: Fitch Ratings Address: Room1306, 13th fl.,No.205, Dunhua N. Rd., Songshan Dist., Taipei City Tel.: 886-2-8175-7600 Name: Taiwan Ratings Address: 49th fl. Taipei 101 Tower, No. 7, Xinyi Rd., Sec. 5, Taipei City Tel: 886-2-8722-5800 Ⅴ . Name, address, website, and phone number of certified public accountant and accounting firm for the financial statement in the recent year CPAs: Yang Qinzhen , Peter Tsai Name of accounting firm: Deloitte & Touche Tax Consulting Co., Ltd. Address: 12th fl., No. 156, Minsheng E. Rd., Sec. 3, Taipei City Website: http://www.deloitte.com.tw Tel.: 886-2-2545-9988 Ⅵ . Name of exchange for trading in overseas listed securities and information inquiry for the securities: Nil Ⅶ . Company website: http: //www.taishinbank.com.tw 2011 Annual Report Date I. Message to Shareholders 2 Rating of latest Ratings results Agency rating II. Brief Introduction to The Bank 5 Issuer L-Term BBB+ III. Corporate Governance Report 7 Issuer S-Term F2 Fitch Outlook Stable IV. Fund Raising Activities 58 Ratings 2011/12/09 Individual C Support 3 National L-Term AA- (twn) V. Business Status 70 National S-Term F1+ (twn) VI. Financial Status 91 Issuer L-Term BBB Taiwan Issuer S-Term A-2 VII. Review and Analysis of Financial Status Ratings 2011/12/08 Outlook Stable National L-Term twA+ and Business Performance and National S-Term twA-1 Risk-Management Evaluation 98 VIII. Special Notes 113 IX. Directory of Head Office & Branches 123 X. Notes to Financial Statements 129 1 I. Message to Shareholders After experiencing a brief robust rebound in the wake of the global financial tsunami, the global economic growth rate slackened to 3.7% in 2011. Major reasons include downturn of the global economy, Japan’s strong earthquake, and the Thai flood, which impacted the operation of the global industrial chain. The U.S. sovereign credit rating was downgraded and the European-debt crisis spread, weakening demand in the U.S. and European markets which dampened export growth of Asian countries. In addition, to counter inflation, mainland China embraced tightening policy, putting a damper on business expansion. Due to these factors, most stock markets dropped by 10-25% in 2011, except Dow Jones Industrial Average which rose 5%. Taiwan’s economy had a relatively stable performance. It scored over 5% in the first half but slid in the second half, due to global economic downturn, racking up 3.45% in the third quarter and 1.89% in the fourth quarter. The growth rate for the whole year is estimated at 4.04%. Foreign trade advanced 12.2% to US$589.9 billion, a record high, but the expansion began to slacken, along with global economic downturn. The Cabinet-level Council for Economic Planning and Development flashed a blue light, signifying sluggish economy, for four consecutive months from November 2011 to February 2012 for Taiwan’s economy. The Directorate General of Budget, Accounting, and Statistics (DGBAS) predicted that the economy would bottom out in the first quarter of 2012. Due to the effect, Taiex index dropped to 7,072 as of the end of 2011, down 21% from a year earlier. Under global economic slowdown and financial turmoil triggered by European-debt crisis, it is a good timing for Taiwan’s financial industry to carry out financial reform, should it be able to take advantage of related niches. As of the end of 2011, the domestic banks racked up non-performing loan rate of 0.43%, bad-debt coverage rate of 252%, and BIS (Bank of International Settlement) ratio 12.08%, underscoring a financial strength which is the best in the past 10 years. The quality status constitutes a strong backup for domestic banks to expand their business, enabling them to tap overseas markets. In addition, Taiwan has signed cross-Taiwan Strait Economic Cooperation Framework Agreement, paving the way for domestic financial institutions to foray into mainland Chinese and emerging markets. For mainland the mainland Chinese market, the government opened up various business items in 2011, including the establishment of finance leading firms and venture capital firms by companies with risk-management mechanism; undertaking of renminbi-related businesses by overseas branches and offshore banking units (OBU), which are conducive for domestic banks to tap renminbi-related business opportunities. In addition, the government is pushing financial businesses with cross-Strait characteristics, including cross-Strait currency clearance mechanism, renminbi wealth-management business, and online payment platform, which will further boost the flexibility for the development of financial business and expand the scope of customer service. In business performance, the bank raked in after-tax profit of NT$7.739 billion in 2011, equivalent to NT$1.61 of earnings per share (EPS). BIS ratio reached 12.76% and first-category capital ratio 8.8%, underscoring excellent performance in both profits and capital structure. In their credit-rating report in December 2011, Fitch Rating and Taiwan Rating both maintained the credit rating of Taishin Bank unchanged. Performances of the bank’s two major business units, retail banking group and wholesale banking group, follow: 2 Wholesale Banking Group Following the launch of renminbi business by the Hong Kong branch in 2010, offshore banking unit (OBU) also rolled out renminbi business in November 2011, not only providing offshore enterprises individuals deposit/loan service but also enabling them to engage in flexible renminbi-fund maneuvering and fund-flow management, which cuts cost and risk for trade-related remittances. In addition, thanks to relaxation of regulations by the regulator, overseas branches and OBU are able to invest in securities in mainland China, boosting the business niches of the bank. Under the simultaneous care of risk management and business development, the bank extended NT$190.7 billion of outstanding corporate loans, up 20% than a year earlier. In addition, in line with the government’s policy of financing small and medium enterprises, the bank extended NT$54.6 billion of outstanding loans to small and medium enterprises as of the end of 2011, up 19% over a year earlier, compared with 11% growth of other domestic banks. The bank undertook NT$297.1 billion of factoring business in 2011, ranking third place in the market, and outstanding amount of US$34.6 billion for derivative contracts, ranking fourth place. It undertook stock-affair service for 182 listed firms, ranking fourth place. For corporate information service, Taishin Bank obtained 2011 IDC corporate innovation award with its unified facility and risk management system (UFRMS), following its winning of the award with its image process management in 2010. UFRMS aims to achieve “automated risk management for credit-extension risk,” “upgraded credit-extension operating flow,” and “integrated management of customer information.” The purpose is to automate various corporate-banking businesses, including reception of loan applications, quota management, and risk warning. In addition to rapid duplication of quota-control operating flow, it can instantly and effectively control various product risks, so as to enhance overall service standard of the bank and its market competitiveness. Retail Banking Group As of the end of 2011, outstanding amount of retail housing procures (including book-value loans) reached NT$266.1 billion, for market share of 4.6%; outstanding auto loans amounting to NT$15.7 billion, for market share of 22.4%, ranking first place in the market. The number of credit cards in circulation reached 2.96 million cards, for market share of 9%, ranking third place, and annual credit-card spending value reached 147.6 billion, for market share of 8.8%, ranking fourth place. The number of merchants hit 46,000 stores, for market share of 16.8%, ranking third place. In November 2011, Taishin Bank and Ever Rich Duty Free Shop jointly issue co-branded credit card, which offers the benefits of free parking at international airport and free usage of VIP rooms at international airports in Greater China. Services for infinite cards are further upgraded, such as cooperation with China Airlines for unlimited upgrading of flight seats for card holders. In 2011, the bank rolled out “business-class ticket upgrading for high- speed” rail for holders of Taishin’s infinite cards. 3 In 2011, Taishin Bank launched “oral instruction” service, which is available for deposits, fund withdrawal, and fund transfer at counters. According to the oral instructions of customers, banking staffers would produce trading certificates for confirmation by customers to complete the transactions. In 2011, Taishin Bank received the awards of “Taiwan’s best retail bank” and the “best direct marketing in Asia,” granted by Asian Banking & Finance, as well as the 2011 “excellent service award,” granted by Global View Monthly.

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