TBB — Investor Presentation 2017

Nov 17, 2017

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Taiwan Business Bank Overviews

Nov / 2017

Robert Rueen Fong Chu Chairman Gordon Y. Wang Executive Vice President

Disclaimer

• This presentation is provided by Taiwan Business Bank Co., Ltd. (‘TBB’).The information contained within is not reviewed or reviewed by any accountant or any independent third party. Users should read this material in conjunction with all other public financial and operational information filed to the competent authorities by TBB. While we endeavor to provide accurate, complete and consistent information herein, TBB makes no guarantee or warranties as to the accuracy or correctness of all the material contained. After this presentation is released to the public, we undertake no obligation to update any relevant data to reflect any change hereafter.

• Users should also notice that this presentation may contain forward-looking statements. Statements that are not historical facts, including statements relating to the implementation of strategic initiatives, future business development and economic performance are forward-looking statements. By their nature, forward-looking statements involve uncertainties, risks, assumptions and other factors that could cause actual developments and results to differ materially from our statement in this presentation. These factors include, but not limited to, regulatory developments, competitive conditions, technological developments, general economic conditions and management changes.

• The information, statements or opinions in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. TBB and its affiliates representatives, no matter for their negligence or any other reasons, should not be liable for any loss or damages arising from the use of or interpretation by others of information contained within this presentation or any matter related to this document.

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Agenda

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Corporate History & Overviews

Operation highlights Strategy Outlook Corporate Governance

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Corporate history of Taiwan Business Bank

• The forerunners of the Taiwan Business Bank were two private savings organizations set up in Taipei and Tainan in 1915, following the traditional cooperatives practice.

• Following the revised Banking Law, the company was reorganized, on July 1, 1976, into the Medium Business Bank of Taiwan (later to be known as the Taiwan Business Bank, or TBB), the first SME specialized bank established by the government.

• To cope with the government's privatization policy, the TBB was privatized on Jan.22,1998.

• The Bank's domestic branch network covers the whole island with 125 branches. In addition, there are 8 overseas branches, including Los Angeles, Sydney, Brisbane, Hong Kong ,Shanghai, Wuhan, New York and Tokyo.

• According to ‘The Banker’ magazine, Taiwan Business Bank ranks #305 on Asset size in global banking list, #15 in domestic banking list on July 2017.

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Stable share structure and dividend policy

TBB’s Shareholding Structure

TBB’s Dividend Policy

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1 9.00%
8.08%
Bank of 0.9 8.00%
7.33%
Taiwan, Ministry of 0.8 7.00%
Finance, 0.7 0
17.2% 6.00%
2.2%
0.6 4.38%
Others, Land Bank, 0.5 4.45% 0.1 4.82%5.00%
45.2% 2.4% 4.00%
0.4 0 0
0.73 0.102 3.00%
Mega 0.3
0.5
2.00%
Financial 0.2 0.4 0.4
0.3
Holding 0.1 1.00%
FINI, 12.0% 0 0.00%
21.0% 2012 2013 2014 2015 2016
Stock Dividend (NT) Cash Dividend (NT)
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Stock Dividend (NT) Cash Dividend (NT) Payout Ratio(%)

• The ownership of Ministry of Finance & government-owned financial institutions account for 33.8% .

1 U.S. dollar = 30.18 Taiwan dollars (2017.11.14)

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Focus on the TW corporate clients

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TBB’s Overseas Units
Shanghai
New York
a branch
and a
Los Angeles
WuHan leasing Tokyo
co.
HK Taiwan (125
branches)
Yangon Cambodia Microfinance Institution.
Representative
Office
Brisbane
Sydney
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S&P Ratings upgraded to BBB+

Taiwan Ratings

S&P Global Ratings

	Long-term	Short-term			Long-term	Short-term
2017	twAA-	twA-1+		2017	BBB+	A-2
2016	twA+	twA-1		2016	BBB	A-2

Overview ：

• S&P raised TBB long-term issuer credit rating to ‘BBB+’ on improved capitalization; Outlook ‘stable’.

• Outlook ‘stable’ reflects the view that TBB will maintain adequate capitalization and asset as well as its domestic market share over the next 2 years.

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Agenda

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Corporate History & Overviews Operation highlights

Strategy Outlook Corporate Governance

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SME loan is the key growth driver

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TBB annual loan balance
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Unit: NT$bn
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1,053 1,106
Total ： 1,005 1,014
Consumer
FCY
Gov-linked
SME
Large corp.
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TBB Q3/17 loan breakdown by customer

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Large corp.
10%
Consumer,
24%
FCY,
11%
SME,
Gov-linked,
38%
17%
Highlights
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• 76% corporate loan; 24% consumer loan

• SME loan was up 9.45% , resulted from TBB’s core competency.

• Reducing gov-linked loans and expanding overseas loans to improve yield.

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• OBU, overseas branches and DBU large corporate, SME loans in foreign currency.

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Strong deposit franchise

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TBB annual deposit balance TBB Q3/17 deposit breakdown
Unit: NT$bn
FCY Deposit.
15%
1400 1,290 1,318
1,270
Total:1,191 Demand
1200 177 186 201 FCY deposit Deposit ,44%
163
Time
1000
Deposit,
498 534 41%
800 534 Time deposit
514
600
TBB demand deposit trend
400
55.08%
559 606 583 Demand 53.13%
514
200 deposit
49.16%
48.80%
0
2014 2015 2016 2017Q3
2014 2015 2016 2017Q3
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LDR and Interest spread

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TBB’s LDR trend TBB’s interest spread and NIM
84.62%
83.96%
81.60% 1.37%
1.35%
1.32%
79.89% 1.29%
1.06%
1.04%
0.97% 0.97%
2014 2015 2016 2017Q3 2014 2015 2016 2017Q3
NIM Interest Spread
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• Due to Central Bank of Taiwan cut interest four times from 2015, TBB’s interest spread and NIM declined.

• In order to increase the interest spread, TBB enhanced the business of overseas units.

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Steady net revenue structure

TBB’s net revenue trend

TBB’s Q3/2017 net fee income breakdown

Unit: NT$MN

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15,563 15,545
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11,081 11,369
2,725 2,449
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Net Revenue Net Interest Income Net Fee IncomeNet income Interest income Net Fee Income

2016Q3 2017Q3

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Others
10%
Loan
21%
Wealth
Management
57%
FX
12%
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TBB’s Q3/2017 net revenue breakdown

Highlights

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Net Service Fee Income
15%
Financial
Net interest Instruments Net
income Income, 6%
74%
Other Income
5%
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• Wealth Management made great profit contribution.

• Aim to increase the proportion of financial instrument net income by FX and bond investment.

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• WM fee includes bancassurance fee and trust fee.

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Operating Expense Ratio

TBB’s cost-to-income ratio trend

TBB’s expense ratio trend

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Unit: NT$ million
19,886 20,409 57.58%
18,811
57.28%
15,545
56.95%
11,390 11,622
10,831 56.60%
8,798
2014 2015 2016 2017Q3
2014 2015 2016 2017Q3
Net revenue Operating expense
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 TBB’s cost-to-income ratio declined, due to strong revenue growth and control of operating expense.

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Income Trend

TBB’s income* trend

TBB’s Q3/2017 income breakdown

Unit: NT$ million

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+2.5%YoY
7,000 +12.63%YoY 6,169 6,323 2016Q3 income OBU+overseas
31%
6,000 5,478 was $4,770mn,
5,292
up 10.94% YoY
5,000
4,000
3,000
2,000
Domestic
1,000
69%
0
2014 2015 2016 2017Q3
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• TBB’s income was up 10.94% YoY in 2017Q3, driven by stable NII and decrease of provision expense.

• TBB’s net income: NT$ 5,196 mn in 2016, NT$ 4,460 mn in 2017Q3.

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• Income before tax .

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Solid profitability

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TBB’s Key Profitability Ratios
ROA ROE
9.65%
0.46%
9.46%
0.43% 0.43%
9.13%
0.40% 9.13%
2014 2015 2016 2017Q3 2014 2015 2016 2017Q3
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Unit: NT$

EPSEPS

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1.20 1.03 1.09 1.06
1.00 0.86
0.80
0.60
0.40
0.20
0.00
2014 2015 2016 2017Q3
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• ROA, ROE and EPS after tax data in 2016 were 0.35%, 7.50% and 0.87 NTdollar.

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• ROA, ROE and EPS are pre-tax data

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Improvement of asset quality

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TBB’s NPL ratio TBB’s provision coverage ratio
293.39%
277.63%
0.48%
0.46%
0.43%
236.78%
231.22%
0.37%
2014 2015 2016 2017Q3
2014 2015 2016 2017Q3
TBB’s NPL balance TBB’s loan loss reserved
14,000
Unit: NT$MN 13,500 Unit: NT$MN
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Unit: NT$MN
NPL
4,905
4,618
4,520
4,113
2014 2015 2016 2017Q3
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12,550
12,066
11,342
10,934
2014 2015 2016 2017Q3
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Well-capitalized for Basel III requirements

TBB’s capital adequacy ratio trend

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12.41%
11.91%
11.24%
10.54%
9.59% 9.47%
8.84%
8.20%
7.88% 7.98% 7.91% 7.93%
2014 2015 2016 2017Q3
BIS Tier1 Ratio CET1
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： S&P rating overview

We expect TBB to maintain its improved capitalization at an adequate level following its hybrid capital issuance with . managed risk-asset growth

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Conclusion

• With solid brand recognition as the only SMEs specialized .

• bank, TBB will focus on the SMEs niche market

• Establish global finance network to enhance profitability.

• Based on the improved asset quality and net income growth, if everything keeps in positive trend, TBB might declare higher dividend in 2018.

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Corporate History & Overviews Operation highlights Strategy Outlook

Corporate Governance

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Strategy Outlook for 2018

• Strengthen overseas business.

• Strengthen financial operations and increase the investment income.

• Adjust the structure of corporate loans and aim to increase the revenue from wealth management.

• Strengthen internal controls on risk management, and enhance the investment in information infrastructure.

• Raise capital for business expansion.

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Corporate History & Overviews Operation highlights Strategy Outlook Corporate Governance

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Corporate Governance

• Increase Minority Shareholder Representation - Inclusion of 3 Independent Directors appointed in 2015

Chau-Chen Yang

Huang, Yophy

Cheng Chih-Yu

Former Professor, Department of Finance, National Taiwan University. Finance Ph.D., University of Illinois at Urbana-Champaign.

Professor, Dept. of Public Finance and Taxation Administration, National Taipei University of Business. Ph.D. in Economics, Indiana University, Bloomington, in USA.

Professor, Institute for Labor Research, National Chengchi University. Ph.D., Department of Political Science ,Univ. of Hawaii-Manoa.

 Improved Shareholder Rights – Proxy Voting

Shareholder Voting

• Adoption of electronic voting system to facilitate proxy voting for shareholders was instituted to align with international standards in terms of closer integration with shareholders on corporate governance topics.

• Establishment of Nomination System – Candidates seeking election or re-election to serve as Directors are subject to a robust evaluation and nomination process whereby final approval are granted by stockholders at General Meetings.

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Corporate Governance

Director Diversity policy

TBB seeks candidates from different backgrounds Reflecting on gender equality, TBB includes 2 Law、Economics、Banking、Financial、 female directors. 、 Leadership Accounting and Labor rights and interests.

Functional committee comprises 3 independent directors Audit Committee Remuneration Committee

Legal Compliance & Internal Audit Chief compliance officer is appointed by the Board Chief auditor is appointed by the Board and and reports to the audit committee and the Board on reports directly to the Board a half-yearly basis

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Corporate Governance

• Timely information is disclosed in both Chinese and English on Taiwan Stock Exchange and TBB official website.

Information

Disclosure

• The Board recognises the importance of the Investor Relations function and has designated a qualified team of experts to communicate with shareholders and act as a conduit of information to the Board.

• Announcement of operational and financial performances based on half yearly results and routinely participate with analysts in group meetings and corporate day .

• events to update investors about the general health of the company

Continuously improve various functions of the Board to achieve better levels of efficiency

• Each Board member is required to meet TBB’s training and development goals by participating in Continuous Professional Development activities minimum 6 hours, per year pursuant to the provisions of "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies”

• On January, TBB carries out an internal annual performance review of the Board of Directors and responsibilities undertaken in the last fiscal year.

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Corporate Governance

Number of Directors

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Independent Independent
Non-managing Director Over 70 90-100 Female
Director
Labor Right and Law -Company or
Interest Compliance
(20% ,3) (20% ,3)
Non- MOF 60-70 Male
managing (Including
Director Bank of Accounting PROFESSIONAL
Taiwan (7%, 1)
Economics
And
(%,PERSON)
(14% ,2)
Land Bank of
Taiwan)
80-90 Leadership
Managing (13% ,2)
50-60
Director
Banking
(Including TBB Labor Union
an Financial (13% ,2)
Independent 75-80 (13% ,2)
Others
Director)
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Rating A by MSCI ESG Research

Credit: MSCI ESG Research 2016

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Rating Comment ： TBB has been upgraded to 'A' bank's from 'BBB‘ driven by the strong performance related to . privacy and data security

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ESG focus

Environmental		Social		Governance
Prepare to issueGreen Bonds.	 	Set up adata security management level committee. Achieved British Standards	•	Zero casewas found on corruption or against ethical
		Institute’s certification for		management in 2016.
		personal information protection.
Financing Environmental Impact : • Received ‘Excellent Green Purchasing Institution’ from EPA in the past 5 years (2012-2016). • OfferGreen Energy Loans up to54.5 billion NT dollars. Energy Efficiency: • Power reduction of5.05%by 2016(goal setting>1%).		Training & Qualification of Workforce: • Offer online learning with765 courses. • On average, employees in TBB spent39 hoursper year on diverse training. Support more than 200 charitable organizations. • Charity organization • Educational units.		Board & directors: • Diversified board structure and solid accounting practices. Legal Compliance: • 98.25% employees have taken the anti-corruption courses. • Strong policies covering anti-money laundering and
		• Arts group		KYC effort.

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Thank you

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