Taiwan Cooperative Bank
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If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail. WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 Contents 2 Message to Shareholders 3 Major Achievements in 2017 5 Operating Performance in 2017 5 Operating Strategies for 2018 8 Business Targets for 2018 8 Credit Ratings 9 Bank Profile 9 Date of Establishment 9 History 11 Corporate Governance Report 11 Organization Chart 12 Bank’s Subsidiaries Chart 12 Major Corporate Functions 14 Directors, Supervisors and Executive Officers 15 Major Shareholder 15 Corporate Governance Execution Status and Deviations 17 Implementation of Corporate Social Responsibility 20 Operational Highlights 20 Annual Business Plans for 2018 22 Market Analysis 24 Human Resources 25 Financial Information 25 Condensed Consolidated Balance Sheets 26 Condensed Consolidated Statements of Comprehensive Income 26 Financial Analysis 27 Supervisors’ Report 28 Consolidated Financial Statements 105 Stand Alone Financial Statements 112 Risk Management 112 Credit Risk Management System 113 Operational Risk Management System 115 Market Risk Management System 117 Head Office and Branches 117 Head Office 118 Domestic Branches 129 Overseas Units WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 1. Message to Shareholders As the global economy grew steadily in 2017, the overall economic situation and the employment market recovered moderately. Domestic economy benefited from the continuous increase in global trade, therefore driving a higher momentum for exportation. The banking industry has also experienced rapid development of financial technology (Fin-Tech), thereby expanding the scope of services and boosting operating performance. However, the growth of deposits was still stronger than the growth of lending, while the pressure on allocation of funds still remained. Looking forward to 2018, the global economy is expected to grow continuously. With improvements in the domestic employment market, consumers' willingness to purchase is also expected to improve. However, due to factors such as the rise of trade protectionism, aging population, declining fertility rate and geopolitical tensions, the Directorate-General of Budget, Accounting and Statistics (DGBAS) Executive Yuan estimates the economic growth rate for 2018 to be 2.42%. In terms of financial conditions, the government continues to open up new opportunities in the Fin-Tech industry, and encourages the financing of Innovative Industries at the same time. Rising expectations for interest rate hike, which continues to improve the low interest rate environment, will also help enhance the profitability of domestic banks. Following the principles of stable operations and equally balancing quality and quantity, we will continue to expand high-quality loan assets, consolidate our core business niche, keep abreast of FinTech trends, advance digital financial services, access the effectiveness of integrated marketing, provide customers with high-quality financial services and introduce innovative capabilities in order to achieve our performance targets. At the same time, we will extend our care for the society over the long term, promote the spirit and importance of sports. hold various sports activities and sports camps. Realize the vision of "having taken from the society, now we strive to give back" and fulfill our corporate social responsibility. Our major achievements in 2017 and operating strategies for 2018 are described briefly below: Chairman Chung-Dar Lei 2 Annual Report 2017 WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 Taiwan Cooperative Bank 1.1 Major Achievements in 2017 A. Capital Adequacy In 2017, we underwent a cash capital increase of NT$5 billion and issued subordinated debentures of NT$2 billion, which effectively improved our capital adequacy and strengthened our capital structure. At the end of 2017, our capital adequacy ratio, Tier 1 capital ratio, and common equity ratio were 13.44%, 10.32%, and 10.32% respectively, have achieved annual target successfully. B. Deposits At the end of 2017, our deposit balance was NT$2,623.8 billion, ranking Second in Taiwan. The amount of demand deposit stood at NT$1,231.1 billion (excluding government deposits), an increase of NT$43.4 billion from the same period in 2016, placed us in the First Place throughout Taiwan. We effectively improved our deposit structure and lowered funding costs. C. Loans (1) At the end of 2017, our loan balance was NT$2,012.5 billion, ranking Second in Taiwan, in which the small-and-medium enterprises (SME) loans stood at NT$604 billion, ranking Second in Taiwan. Our loan to private enterprise loans (excluding government institutions and public enterprises) was NT$830.1 billion, ranking in the First Place throughout Taiwan. (2) In year 2017, we arranged/coordinated 77 syndication loans, for a total amount of NT$362 billion, and our participation amount reached NT$56.9 billion. According to Thomson Reuters Basis Point, our bookrunner market share ranked Second in Taiwan. (3) In November 2015, we launched a “Bagful of Happiness Loan,” Taiwan’s first-ever commercial reverse mortgage product, which received great feedback. As of December 2017, the cumulative number of mortgages reached 924 with approved credit of NT$5.32 billion, ranking in the First Place throughout Taiwan. (4) Due to our significant contributions to SMEs and our active cooperation with the government to promote industrial policies, we were granted the “Outstanding Financial Institution for Provision of Loans to SMEs - Grade A Bank Award’’ and the “Outstanding Financial Institution for Provision of Loans to Key Innovative Industries - Grade A Bank Award’’ by the Financial Supervisory Commission (FSC). D. Overseas Business (1) In year 2017, our overseas pre-tax income (including OBU and overseas units) was NT$5.927 billion, accounting for 39.53% of total income. President MesssageBor-Chang to Shareholders Hwang 3 WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 (2) Our overseas units and services have expanded to Europe, the U.S., Australia, and throughout Asia. Our Changsha, China branch was opened on April 27, 2017, Melbourne, Australia branch was opened on July 26, 2017, and our City Center sub-branch under Phnom Penh branch in Cambodia was opened on October 27, 2017. We already have 20 overseas units. E. Wealth Management Business (1) The net service fee income from trust, financial planning, insurance (excluding mortgage life insurance), and gold bankbook reached NT$2.985 billion, making up 50.38% of the total net fee income. We added new products to our lineup in 2017, including domestic and offshore funds, bonds as well as structured investments, for a total of 146 products. (2) Through our efforts to promote and enhance the scale of our custody services, as of the end of 2017, the average balance of our custodial funds was NT$97.839 billion, an increase of NT$26.86 billion from the same period in 2016. F. E-banking With our efforts to actively promote Taiwan Pay and automated clearing house (ACH) services, we were granted the “Electronic Payment Services Best Service Innovation Award” at the 2017 Annual Financial Information Systems Meeting organized by the Financial Information Service Co., Ltd. We also won Second Place in the State-owned Bank category and Third Place in the All Banks category for the ACH Collections Contest Excellence Award during the 2017 Financial Institution ACH Promotion Competition organized by Taiwan Clearing House. G. Credit Card Business In 2017, we actively promoted our core products including the Lugang Mazu Card, Hi Lai Card, Worldwide Card, and i-Cash Card, resulting in overall transaction amount of NT$33.996 billion, equivalent to an annual growth of 10.99%; the transaction amount of the government’s online purchasing card reached NT$966 million in 2017, ranking in the First Place throughout Taiwan with a market share of 37.62%. H. Corporate Social Responsibility