A
letter to the shareholders
Ladies and Gentlemen: In retrospect, 2005 was a year defined by a resurgence of global terrorism, high oil prices, US interest rate hikes and natural disasters such as the tsunami in Asia. Economic growth in Taiwan in the first half was at 2.75%, a growth rate which lagged the US and many other nations in Asia. However, there was a market improvement in Taiwan's economy during the third quarter, hence leading to an overall stable performance in the second half of the year. Globally, the increase in oil prices in Europe, America, Japan and other key nations had a negative economic impact. |  | ||||||||||||||||||
In the financial markets, banks reported strong profit growth in past years due to the lucrative returns from the personal banking sector (issuance of credit and cash cards). However, this has led to a higher risk of non-performing loans and erosion of profit margins in recent years. Moreover, all the chapters of the Banking Association have proposed a negotiation mechanism for consumer debt to help debtors repay their debts and reform the consumer finance market. The situation still needs observation. The future economic outlook is affected by uncertainties about high oil prices, increased U.S. interest rates and avian flu. To enhance operational performance and the quality of our assets, we will continue to write off non-performing loans. By June 2005, we sold NT$5.5 billion worth of non-performing loans to AMC, and by the end of the year our non-performing loan ratio was 2.73%. An injection of NT$2.5 billion from our parent Jih Sun Financial Holding increased our operating cash, bolstered our financial structure and raised our capital adequacy ratio. By the end of 2005, our cash deposits totaled NT$227.6 billion, our loans were at NT$191.7 billion and pretax profit was NT$5.6 billion. In 2005, with the effort of our staff, we achieved the following goals: ※ Purchased the Trust Department of Taiwan Land Development and Trust Corp: In conjunction with the government's policy for financial reform, our bank received NT$6 billion from Taiwan Land Development and Trust Corp in exchange for the operation, assets and liabilities of its trust department other than bad debt (including debt that had been written off), non-operating real estate, collateral, and development assets. We also received in the deal the business facilities owned by departments run under own funds (i.e. the Good Bank of Taiwan Land Development). By midyear, the integration of the operation was successfully completed and the Bank's retail location is expected to further increase to 46, which will help improve our competitiveness in the fields of corporate finance, consumer finance and wealth management. ※ Wealth management: Jih Sun Bank has established "Smart Wealth Management Centers" across the country, demonstrating our innovation and resolve to operate a personal asset management business and actively create new products designed to meet the needs of our customers. We have been introducing innovative products such as Smart MIP (Smart Monthly Investment Plans) as well as our Educational Investment Fund, which underscores the capability and initiatives of the Smart Wealth Management Center in product innovation. ※ Risk Management: in preparing for the implementation of New Basel Accord, the Bank has led the industry in the management of market risk and credit risk, and the construction of corporate credit rating system. In light of the Bank's performance, the General Director of Banking Bureau, Gary Tseng praised the Bank's parent company - Jih Sun Holding Company in public that it is a model among the fourteen financial holding companies in Taiwan. ※ Credit ratings: Our bank has received the following
credit ratings from Fitch Ratings and Taiwan Ratings Corp.:
Our outlook for 2006 is to expand into strategic business areas that will generate synergies and complement our existing operations. Our focus is on the five key strategies of "transformation of corporate banking, reviving consumer banking, development of commercial banking, enhancement of TMU and fostering wealth management business growth." We will strengthen critical internal functions such as marketing, sales, operations, credit assessment and customer services at the same time as we continue to emphasize sincere services, professional innovation, focus on enthusiasm, embracing reform and teamwork as our core values to produce the greatest value for our shareholders. | |||||||||||||||||||