To our Sharechlders
Market Analysis
Our Goals for 2002
Organization Chart
DepositsWLoansWIncome AnalysisWForeign Exchange
Money MarketWTrustWCredit Cards
Affected by the dramatic slump at home and abroad, Taiwan's economy recorded an unprecedented negative growth rate in 2001. The difficulties that had begun to permeate the financial environment in the fourth quarter of 2000 continued to worsen. Financial institutions across the board found their overdue loans reaching record highs. Faced with the increasingly difficult external environment, we proceeded with our main strategy of building up a system of regional centers, and unveiled our core operational objectives of providing internationalized business banking, community-centered retail banking, and general banking that is oriented toward financial management. We employed the model of regionally dividing and concentrating the management of business finance and consumer finance services, in conjunction with the establishment of specialized real-estate assessment and valuation units in appraisal centers, with the aim of enhancing both customer service and credit quality. To match our customers' financial management needs, general service branches were transformed into outlets for marketing financial management services. And operations centers were set up to serve the entire bank network and improve the logistical efficiency of our whole business system. The addition of a new bank branch at Huko augmented the comprehensive coverage provided by our nationwide network of 85 branches. Adding on our Business, Trust and International Banking Departments, our offshore banking branch, and our overseas branches in Macau and Hong Kong, our business locations at home and abroad numered 91 in all. At the same time, through the installation of automated service facilities in convenience stores and large retail outlets, we put into practice the concept of community banking to serve our existing customers and tap a large pool of potential new customers.
On the product and service functions front, our bank continued to strengthen the development of electronic financial products, actively planning e-services in the trust and financial management areas of business. At the same time, we vigorously pursued cross-industry operations and strategic alliances. In July 2001, we invested in the establishment of the Taipei Personal Insurance Agency and the Taipei Property Insurance Agency, cooperating with several different life insurance and property insurance companies to market insurance services. We also formed a strategic alliance with the Dutch company "AEGON Group", to introduce their life insurance products and specialized marketing know-how and cultivate marketing talent within the bank. By supplementing the marketing knowledge of bank staff and rounding out their financial management planning skills, we hope to speed up the translation of organizational restructuring into branch value. In addition, our bank formed a strategic alliance with Grand Cathay Securities, to promote Internet securities dealing and jointly launch our comprehensive, integrated, and multi-functional all-in-one investment and money management accounts, to provide our customers with a complete range of simple and convenient financial management services.
In 2001, our total deposits reached NT$274.1 billion, up NT$5.7 billion, or 2.14%, from 2000. Spurred by the bank's active promotion of custodian banking, special securities settlement accounts, and all-in-one accounts, and by the return of buoyancy to the stock market in the fourth quarter, demand deposits rose above the NT$80 billion mark, reaching NT$81.6 billion at the year's end, up NT$5.8 billion from a year earlier. Time deposits amounted to NT$192.2 billion, down NT$100 million from 2000; and interbank deposits totaled NT$100 million, up NT$27.79 million. As to funds composition, demand deposits made up 29.80% of total deposits, time deposits 70.14%, and interbank deposits 0.06%.
On the financial products side, in response to the trend of one-stop shopping in financial services, our bank's product R&D strategy was oriented in the direction of developing a full range of commodities for marketing together. In mid-October 2001, we formally launched our all-in-one investment and money management account, integrating deposits, securities, insurance, utility-bills agency payment, credit cards, funds, and cash-card credit in a single multi-functional account. As of the end of December, newly opened accounts had already reached 6,746, spurring an increase of NT$427 million in demand deposits.
In addition, because of the central focus on e-finance in our bank's product development, and with a view to providing our customers with diversified capital deployment channels to accommodate their investment and financial management needs, in February 2001 we launched the SSL Internet banking fund transfer service. As of the end of December, we already had more than 5,000 customers using our Internet banking. In the future, we will gradually strengthen our Internet, mobile phone and ATM electronic financial management services.
To match our management strategy of operating regional corporate and consumer banking centers, on the consumer banking side we replanned our regional lending business. In the greater Taipei area, we set up eleven regional consumer banking centers, established a consumer finance specialist staff system, and pursued business expansion through the deep cultivation of communities, schools, companies, organizations, and so on, in order to strengthen our consumer services to the general public. Looking at products, with traditional real estate mortgage-backed lending tending toward conservatism, in home-purchase and housing-investment loan operations, our bank launched various consumer finance products differentiated according to particular customer needs. At year-end 2001, our general consumer loans amounted to NT$4.4 billion, in addition to government-policy special housing loans amounting to NT$65.6 billion.
In the sphere of business finance, the prevailing global economic slump and weakness of the domestic economy dampened corporate funding needs. In response to the adverse impact of this situation, we remodeled our organization toward a strengthened focus of operations and specialized division of labor. In the greater Taipei area, we established ten regional corporate banking centers, and fully implemented an account operator (AO) system, to strengthen our business finance operations. Our loans extended under guarantee of the Small and Medium Business Credit Guarantee Fund grew from a one-month total of just under NT$600 million in January 2001, ranking 8th among all domestic banks, to nearly NT$800 million in December, ranking 6th. The total guaranteed credit extended in the whole year reached NT$7.943 billion. Our total business-loan outstandings increased from NT$113.5 billion at year-end 2000 to NT$120.2 billion at year-end 2001, a growth of 5.57%.
At year-end 2001, our aggregate loan outstandings stood at NT$206.5 billion, down NT$800 million, or 0.40%, from 2000. Within that total were local currency loans of NT$191.5 billion, and foreign currency loans of NT$15 billion. To maintain credit quality, and minimize adverse impact from the slumping economy, we placed special emphasis on strengthening post-credit management. At the end of the year, overdue loans amounted to NT$10.5 billion, an overdue loan ratio of 4.83%.
For the year, our pre-tax profit was NT$2.56 billion. Operating revenue was NT$19.519 billion, a fall of NT$228.15 million from the previous year. Within that total, interest revenue was NT$14.915 billion, making up 76.41% of total revenue, down NT$1.277 billion year-on-year. Other components of revenue were commission revenue of NT$633 million, or 3.24% ; net gains on money market dealings of NT$3.728 billion, or 18.96%; net earnings from long-term equity investment of NT$24.93 million, or 0.13%; net gains from foreign-exchange dealings of NT$223.65 million, or 1.15%; and non-operating revenue of NT$259.77 million, or 1.33%.
Operating expenditure was NT$17.198 billion, a reduction of NT$408 million from the preceding year. Within that total, interest expenses were down NT$1.499 billion year-on-year, to NT$10.521 billion, 53.90% of total revenue. Other operating expenses amounted to NT$3.743 billion, 19.18% of total revenue. After expenditures, pretax net income was NT$2.56 billion, 13.13% of full-year revenue.
Impacted by the weak international economic conditions, Taiwan's imports and exports both showed double-digit contractions in 2001, which affected our import and export business volume. But with the continued heating-up of cross-strait business, our foreign-exchange dealing turned in a good performance. In the whole year, our foreign exchange transaction volume reached NT$11.546 billion, up NT$1.091 billion, or 10.43%, from the year before.
In response to the outflow of business capital from Taiwan to mainland China attracted by the flourishing rise of three-way cross-strait trade, and to facilitate manufacturers' capital utilization, the government modified its cross-strait policy to "active opening, effective management". It also began the gradual easing of restrictions on direct movement of funds between OBUs and overseas bank branches on one side and Chinese and foreign banks in the mainland on the other. To provide our business customers with faster and more convenient channels for cross-strait money transfers, our bank has already established a speedy remittance service in cooperation with mainland Chinese banks. In the future, to meet business needs in international trade, we will extend our import and export services, and build upon the established service network of our Hong Kong and Macau branches to provide greater choices and more complete service to Taiwan businesses operating across the Taiwan Straits.
Also, in response to the financial industry development trend of specialized division of labor and centralization of business functions, we established a foreign exchange center in the bank in 2001. By bringing together the handling of all foreign exchange business in this new center, we have been able to reduce our costs while raising the quality of our branch service. In our continued efforts to upgrade our foreign exchange system, we hope that, through process automation and computerization, we will be able to provide customers with even better service quality and efficiency.
To expand the scale of our foreign exchange operations, and to strengthen our service to businesses and the general public, we increased by four the number of our branches designated to conduct foreign exchange transactions. That brought our foreign exchange transacting branches up to 26 in all, and we will go on striving to raise that number further in the future. Meanwhile, to enhance the convenience of our customers' inward and outward foreign remittances, we also actively expanded our global correspondent network, which now includes more than 1,400 banks.
Following the introduction of our bond self-trading in June 2000, we obtained a bond trader's license in July 2001. Thanks to the hard work and professionalism of our staff, our trade volume in bonds reached a new high of NT$1.6964 trillion in 2001, a growth of almost threefold year-on-year. Our short-term securities business, affected by the economic downturn and market shrinkage as well as by our partial shift of repurchase agreements from bills to bonds, saw transaction volume for the year fall to NT$864.4 billion.
To enhance the "combat effectiveness" of our finance departments, in March 2001 the bank established a financial marketing department to promote our products through a specialized team marketing strategy. Also, to maintain effective controls in an era when financial commodities are changing rapidly and when banks face increasingly complex and hard-to-manage risks, in April 2001 we set up a risk management group to move step by step toward putting effective control mechanisms into place. Among these, we have already established new or modified risk-control standards for limiting exposure and stanching losses in all kinds of financial operations. We have also adopted the use of Bloomberg's Trading System risk mechanism to assess our bank's risks and reduce the potential for loss.
Under the trends of liberalization and internationalization, our bank will continue to be active participants in the money and capital markets. We will make our utmost headway in the development and timely introduction of new financial products, and expect to be able to offer our customers ever more diverse professional financial services.
In response to developments in financial management, since the passage of the Trust Law our bank has been actively developing trust business. In 2001, we applied to operate foreign-exchange trusts, insurance trusts and retirement trusts. In conjunction with the upgrading of our systems and establishment of a financial management website, we will continue to plan new trust products in order to provide our customers with rich and diverse financial management services.
In our mutual fund business, we raised our total assets entrusted in overseas funds to NT$1.996 billion at year-end 2001, an increase of NT$944 million, or 89.66%, in the year. In custodian banking, with the addition of six new funds, we raised our number of custodian funds to 20 and our total assets in custody to NT$133.7 billion, a growth of 90.79%.
To expand the scale of our credit card issuance, besides issuing the U Card, VISA, MasterCard and JCB Card, we also kept pace with our cardholders' on-line purchasing needs by issuing the MasterCard "Virtual Card" to assure our customers a convenient and secure method of making purchases on the Web. In addition, we issued several new co-branded crds, including those in conjunction with the Taoyuan Teachers Association, Asia Broadcasting Networks and Grand Cathay Group, and continued to promote the growth of our co-branded card business to increase the total number of our cards in circulation.
To increase the volume of business transacted with our credit cards, we launched a series of special promotions to encourage our customers to use our cards in making consumer purchases. We also continued to carry out our bonus-point program, rewarding our customers with double cash bonuses for credit-card spending overseas. At the same time, to build up closer bonds with our cardholders, we linked up with various businesses, including major department stores and shopping malls, hot-spring and other resorts, magazine publishers, and so on, to offer special privileges and benefits to our cardholders, thereby greatly increasing the added value of our credit cards.
Altogether, we increased the total of our credit cards issued by 35,885 cards, to 411,018 at year-end. And we increased by 264 the number of business locations contracted to accept our cards, reaching a total of 4,857 at the end of the year.