UBS Taiwan Conference 2009 - 安泰商業銀行 Taiwan Conference 20… · UBS Taiwan Conference...

Entie Commercial Bank

Confidential Presentation to

UBS Taiwan Conference 2009

A PE-Backed Turnaround Story

Jesse Ding, Chairman and CEOAndrew Lee, CFOJune 16, 2009

Table of ContentsExecutive Summary

Overview of EnTie Commercial Bank

Building Blocks for Turnaround

Recent Developments

Financial Performance

Appendix

Executive Summary


Jesse Ding – Chairman & CEO29+ years in commercial banking with diversified exposures

1

Executive Summary

Experience

May 2009 to date Chairman, President & CEO, EnTie Commercial Bank

Dec 2007 – May 2009 President & CEO, EnTie Commercial Bank

2005 – 2007 President, Taipei Fubon Commercial Bank

1999 – 2004 President, Taipei Bank

1998 – 1999 Executive Vice President, Preparatory office of China Industrial Bank

1993 – 1998 MD & Country Head, Chase Manhattan Bank Taipei

1989 – 1993 Vice President & Head of Corporate Banking Group, Bankers Trust Taipei

1988 – 1989 Vice President & RE Dept Head , Citibank Taipei

1987 – 1988 Vice President & RM in RE Group, Citibank Hong Kong

1982 – 1987 Manager to Vice President, Citibank Taipei

1981 – 1982 Deputy Manager, Seattle-First National Bank Taipei

1980 – 1981 Deputy Manager, Seattle-First National Bank Seattle

Education

1980Ph.D. Program, Wharton School of U. Penn

1979 MBA, U of Detroit

1975 BA, National Taiwan University


Andrew Lee – Chief Financial OfficerExecutive Summary

Ex-investment banker focusing on strategic and financial planning

2

Experience

Dec. 2007 to date Chief Financial Officer, EnTie Commercial Bank

2006 – 2007

Vice President, Investment Banking Division, Lehman Brothers TaipeiPrimarily focused on M&As and leverage finance transactions in financial services industry

2004 – 2006

Associate, Investment Banking Division, Lehman Brothers TaipeiCompleted numerous M&As, securitization and fundraising for FIG clients

2000 – 2004Analyst, Investment Banking Division, Lehman Brothers TaipeiGeneralist covering all major industries in Taiwan, such as semiconductor, optical storage, TFT-LCD and financial services

Education

2000 MBA, National Taiwan University



Key Investment HighlightsExecutive Summary

A fundamentally turned around bank with opportunistic China angle

3

First ever private equity-controlled bank transaction in Taiwan

Sound and strong capital base thanks to properly executed capital protection

mechanism

Clean and transparent balance sheet after 18 months of clean-ups

Best-in-class management under strong leadership

Expeditious execution of business line-oriented reorganization

Strong growth momentum in both corporate and retail banking

Adequate investments in IT upgrades and risk management systems

Structural flexibility for cross-strait alliance and cooperation

Relatively low valuation (1.0x clean book)



Overview of EnTie Commercial BankOverview of EnTie Commercial Bank

One of 16 “new” private banks established in the deregulation of 1990s

4

Established in June 1992, and listed on Taiwan Stock Exchange in 1999, EnTie Commercial Bank (“EnTie” or the “Bank”) is a mid-sized commercial bank

As of March 2009, EnTie ranked #22 out of 37 domestic banks(1) in Taiwan by total assets

The Bank is now operated with 1,626 employees and 53 branches(2), of which 34 are in the affluent Greater Taipei area

EnTie offers a range of banking products, including commercial lending, project finance, mortgage, personal loans, credit cards, etc., to both corporate and retail customers

The Bank’s market cap is NT$20.1 billion or US$614 million(3) based on last close of NT$10 per share

The stock of EnTie is currently trading at 1.01x 1Q09 book value

(1) Including two wholly owned subsidiaries of foreign banks, Standard Chartered Bank(TW) and Citibank(TW)(2) Including headquarters in Taipei(3) Including 1,680 million common shares and 278 million convertible preferred shares; close price as of June 5, 2009

Taoyuan6 branches

Tainan City2 branches

Taichung City3 branches

Changhua1 branch

Chiayi City1 branch

Kaohsiung4 branches

Hsinchu City2 branches

Taipei34 branches

EnTie’s Branch Network


Business FocusOverview of EnTie Commercial Bank

Balanced portfolio with limited credit risks due to conservative LTV

5

EnTie has an optimized business portfolio between Corporate Banking, Retail Banking and Treasury Operations given current product profitability

Corporate Banking – target the larger SMEs clients with a diversified spectrum of product offerings which includes: commercial lending, project/structured finance, cash management, trade finance and advisory services

Retail Banking – primary focus on mortgage products, personal loans and credit cards. EnTie also offers wealth management and insurance brokerage services

Treasury Operations – primarily manages the Bank’s excess funds, trades around customer flows and engages in limited proprietary trading activities

Risk management has become part of business development after 18 months of intensive education and implementation, resulting in minimum delinquencies out of newly underwritten credits

Although relatively concentrated in real estate lending, the overall LTV is less than 60%


Snapshot of Loan PortfolioOverview of EnTie Commercial Bank

Loan book by category as of December 2008

6

Gross Loans = NT$184.0B


Distribution NetworkOverview of EnTie Commercial Bank

Well-balanced distribution channels to focus on retail banking products

7

Demographics Branches ATM

Population per km2 (1)

Full License

Limited License (Mini-Branch) Subtotal # of ATMs

Taipei City 9,671 19 6 25 65

Taipei County 1,860 7 2 9 22

Taoyuan & Hsinchu 913 4 4 8 15

Taichung & Changhwa 1,195 4 0 4 10

Chiayi & Tainan 648 3 0 3 8

Kaohsiung City & County 939 4 0 4 11

Total 41 12 53 131

1. As of August 31, 2008


Corporate GovernanceOverview of EnTie Commercial Bank

A responsible management is leading the corporate governance efforts with full support and commitment from the board

8

Responsible Management

Transparent Reporting

Effective Communications

Performance-Driven

Compensation

Seamless Cooperation with

Board

Shareholders Value

Maximization


Board CompositionOverview of EnTie Commercial Bank

Most of directors are professionals in the financial services sector

9

Name Title Appointed by Experiences

Jesse Ding Chairman Longreach Edith Investment Coöperatief 2, U.A.

President & CEO, EnTie Commercial BankEx-President, Taipei Fubon Bank

Po-Yung Chen Vice Chairman

An Chan Co., Ltd. Ex-President (acting), EnTie Commercial Bank

Mark Chiba Director Longreach Edith Investment Coöperatief, U.A.

Chairman, Longreach Group

Simon Yim Director Longreach Edith Investment Coöperatief, U.A.

Partner, Longreach Group

Makoto Inoue Director OLHE Cayman Limited Partnership

Senior Vice President, ORIX Group

Cheng-Lung Huang Director Bao Sheng Investment Co., Ltd. Ex-Senior Vice President, EnTie Commercial Bank

Cathy Lee Director Bao Sheng Investment Co., Ltd. Hungtai Group

Rodney Ward Independent Director

N/A Honorary President, UBS Asia

Hsien-Hsing Liao Independent Director

N/A Associate Professor, Department of Finance, National Taiwan University


New Organizational StructureOverview of EnTie Commercial Bank

Shareholders’ Meeting

Board of Directors

President and CEO

Management CommitteeAuditing Dept

Secretariat of the Board

Corporate Banking Group

Financial Markets Group

Support and Enabling Group

Retail Banking GroupCommittees

Risk Mgmt Comm.

ALM Comm.

Personnel Evaluation Comm.

Pension Management

Comm.

Consumer Banking Dept

Wealth Mgmt Dept

Trust Dept

Credit Mgmt Dept

Operations Mgmt Dept

Channel Mgmt Dept

Product Operation Dept (Int’l Dept

/OBU)

Corporate Finance Dept

Corporate Credit Mgmt Dept

Corporate Sales Dept

Treasury Dept

Treasury Marketing Dept

Treasury Operation Dept

Risk Mgmt Dept

Collection Dept

Legal and Compliance Dept

Corporate DvlpDept

Accounting Dept

Human Resources Dept

Info Mgmt Dept53 Retail Banking Branches

9 Corporate Banking Regional

CentersPromotion Comm.

Pension Supervisory Comm.

Credit Review and Approval Comm.

General Affairs Dept

10


Business Units and EnablersOverview of EnTie Commercial Bank

A functional view of the organization reveals the customer-oriented mindset

11

Retail Customers Corporate Customers

Business Dept.

Hsinyi Branch

Fengshan Branch………

53 Retail Branches

Product Managers Credit Management

Operations Management

Retail Banking Group

North I Regional Center

North II Regional Center

Kaohsiung Regional Center

……………………

9 Corporate Banking Regional Centers

Cash & Trade Credit Management

Structured Finance

Corporate Banking Group

Money Market Financial Markets Group (Treasury)

AccountingCorporate Development IT

Risk Managemen

t

Legal & Compliance

General Affairs HR

NPL Managemen

t

President & C-Level Executives

Capital Market

Enab

lers

Bus

ines

s U

nits

4 Customer Service Centers

Taipei

Kao-hsiun

g……



Turnaround Plan: The Building BlocksBuilding Blocks for Turnaround

A three-stage turnaround plan to achieve predetermined goals and targets

Balance sheet restructuring Clean up loan portfolio and investmentsIncrease ROA by off-loading idle assets

Reorganization and recruiting of talentReorganize the Bank by business linesRecruit a team of professionals with international and local experience

Business growth in a new risk management frameworkEmbed risk management measures in product and process designsPursue aggressive growth strategies within such risk management framework

12


Balance Sheet Restructuring

NT$18.8 billion Tier 1 common and preferred capital injected by the Longreach consortiumNT$11 billion convertible bonds provides further capital protectionCommon, preferred and convertible capital provides direct support for past losses and future growth

Write-off unamortized loss on NPL sales and provide additional reserves for bad debtsOngoing write-offs of legacy NPLs and CDOsMake sufficient provisions against potential credit losses to achieve 100%+ coverage on NPLs

Accelerated conversion of convertible bonds in light of global financial turmoilNT$7.5 billion common equity injected via conversion makes the bank one of the best-capitalized banks in Taiwan (11.7% BIS)

Inject Fresh Capital

Write off Impaired Assets

Execute Capital Protection


13


Balance Sheet Restructuring (Cont’d)Building Blocks for Turnaround

Clean-up of credit losses and divestment of non-core assets while growing the loan book to improve returns

• Corporate and consumer loan book clean-up commenced immediately after Closing:

• NT$20.5 billion written off in Dec 2007• Capital reduction

• Further write-offs continued through 2008:• NT$2.1 billion of NPL write-offs• NT$2.9 billion of CDO impairment

Loan Portfolio Clean-up

• Sell off idle fixed assets• Explore possibilities in sell-and-lease-backs• Stop the assumption of foreclosed collaterals• Aggressive auction out legacy portfolio of assumed

collaterals (reduced from NT$830M in Sep 07 to NT$108M in Mar 09)

Streamline Assets

14


Reorganization and Senior RecruitmentBuilding Blocks for Turnaround

Cross-division coordination efforts will be carried out by strong leaders in a Bank organized by business lines

Jesse DingPresident & CEO

Jeson LiuTreasury

(ex. Yuanta Bank)

HE ChangCorporate Banking

(ex. Ta Chong Bank)

Andrew Lee, CFO(ex. Lehman

Brothers)

Spring LieuRetail Banking

(ex. Jih Sun Bank)

Jesse DingChairman

9 regional corporate banking centers

Product design and sales in corporate banking

53 retail branches

Mortgage, auto and personal loans, credit cards and wealth management

Asset-liability management

Investment and trading

Design of treasury products for customers

Strategic planning and corporate development

Capital planning

Enabling organizational changes

Internal & external growth plans

Eddie Chen, CRO(ex. Asian

Development Bank)

Design and implement the Bank’s overall risk management framework

Monitor the Bank’s risk levels from credit, market and operational perspective

15


Management Profile – Chief Risk OfficerEddie Chen has 17+ years of experiences in risk management and financial markets

16

Experiences

Sep 2008 to date Chief Risk Officer, EnTie Commercial Bank

2000 – 2008 Risk Management Specialist, Risk Management Unit, Asian Development Bank

1998 – 2000 Head of Treasury Risk Advisory/ Derivative Marketing, HSBC

1997 – 1998 Manager, Fixed Income and Financial Derivative Group, ABN AMRO Bank N.V.

1996 Summer Associate, Financial Derivative Group and Fixed Income Group, ABN AMRO Bank N.V.

1992 – 1995 Treasury Officer/ Trader, Foreign Exchange Trading Group, ABN AMRO Bank N.V.

1991 – 1992 International Marketing Professional, Itochu Corp., Japan

Education

1997 MBA, Universityof Chicago




Management Profile – Corporate BankingOverview of EnTie Commercial Bank

HE Chang has 27+ years of experiences as a life-time corporate banker

17

Experiences

Apr. 2008 to date Head of Corporate Banking Group, EnTie Commercial Bank

2004 – 2008 Head of Corporate Banking, Tachung Bank

2003 – 2004 Head of Corporate Marketing, Taishin Bank

1997 – 2003 SVP, Diversified Sector Head in Wholesale Banking, ABN AMRO Taipei

1996 – 1997 VP, Credit Structuring & Advisory, ABN AMRO Chicago

1994 – 1996 Head of Foreign Credit Dept. Asia Region, ABN AMRO Amsterdam

1986 – 1993 VP & Group Head, Corporate Banking, ABN AMRO Taipei

1981 – 1986 Credit Analyst, Hollandsche Bank Unie, Taipei

1980 – 1981 Specialist, Training Dept., Banking Institute of R.O.C.

Education

1980 MBA, Eastern Michigan University

1975 BA, National Chung Hsing University


Management Profile – Retail BankingSpring Liu brings with him 26+ years of experiences in foreign and local commercial banks

18

Experiences

May 2008 to date Head of Retail Banking Group, EnTie Commercial Bank

2007 – 2008 Senior Executive VP, Jih Sun Financial Holding CompanyPresident, Jih Sun Bank

1996 – 2007 Executive Vice President, Far Eastern International Bank

1991 – 1996 Vice President, Bank Sinopac

1982 – 1991 Assistant Vice President, Citibank N.A.

Education

1986 MIBS, Universityof South Carolina




Management Profile – Financial MarketsJeson Liu spends 28+ years in financial and treasury markets

19

Experiences

Sep. 2008 to date Head of Financial Markets, Entie Commercial Bank

2006 – 2008Head of Financial Markets/Corporate Banking, YuantaCommercial Bank

2004 – 2005 Head of Financial Markets, First Commercial Bank

2003 – 2004 Director, Head of Financial Markets Taiwan, ING Bank Taiwan

2000 – 2003General Manager of Treasury Department and Offshore Banking Unit, TaipeiBank

1998 – 2000Head of Treasury Marketing and Derivative Group, ABN AMRO Bank, Taipei Branch

1996 – 1998Head of Fixed Income and Derivative Group, ABN AMRO Bank, Taipei Branch

1994 – 1996 Head of Treasury Marketing, ABN AMRO Bank, Taipei Branch

1989 – 1994 Head of FX desk, ABN AMRO Bank, Taipei Branch

1988 – 1989 FX trader, Bank of America, Taipei Branch

1981 – 1988 Senior Clerk, Bank of America, Taipei Branch

Education

2001MBA, University of Chicago GSB



Business Growth in a New RM FrameworkBuilding Blocks for Turnaround

Introduce risk management into product designs and devise SOPs with risk control measures

20

Market Risk

Operational Risk

Credit Risk

Centralize credit approvals for both corporate and retail bankingImplement internal customer ratingsProactively monitor credits by industry trends and specific company financials through Watch List and Rapid Portfolio ReviewRegionalize service centers for retail customers retention as well as credit surveillance

Separate middle and back offices from front desk in the organizationInstall Kondor+ for trading and real-time risk feedbacksFrequently review trading and stop loss limits by products, traders and counterpartiesDevelop more sophisticated risk measurement and real-time reporting to assist the monitoring

Centralize loan processing operationsReview all SOPs in deposit taking, loan underwriting, collections, etc.Establish Key Risk Indicators (KRIs) and collect data of operational risk events in order to comply with requirements in the new Basel accord


Corporate VisionsBuilding Blocks for Turnaround

Clear corporate vision and goals are defined and well communicated to all employees

21

Become preferred banking partner of our targeted customers

Triple our sales forces in 3 years

Grow our deposit and loan balance aggressively into 2011

Achieve best-in-class net revenue by the end of 2011

Improve efficiency by reducing cost to income below industry average

Deliver superior and sustainable ROA in three years

Corporate Vision Goals

Right products

Aligned channels

High performance organization

Clear customer

focus

Speed and quality

Preferred Bank for Targeted

Customers

Recent Developments


Key Actions Taken in 2008Recent Developments

Keep up well-planned works in challenging times

22

Restructuring in 1H08

− Reorganized EnTie into business-oriented structure

− Recruited talents and completed 90% of team building

Demonstrated growth momentum in 3Q08

− Increased over NT$4 billion of mortgage per month

− Led several syndicated loans and project finance of large amount

− Total loans returned to pre-closing level after significant losses in early 2008

Stabilized the Bank in 4Q08

− Deposit run caused by the failure of Lehman Brothers

− Stabilized deposit base by increasing deposit rates and attracting large depositors

− Cut marginal loans by daily CEO’s follow up to protect capital adequacy

− First in the sector to cut personnel costs and defer capital expenditures

− Secured leverage financing by amending covenants

Strengthened capital at year end

− Discussed with Hungtai Group for accelerated conversion of CBs

− Repurchase of remaining CBs to lower cost of funds

Our efforts and investments in 2008 positioned EnTie on a solid foundation to leapfrog our competitors in 2009 and beyond


Key Achievements in 2008Recent Developments

Resolving legacy issues

23

Balance Sheet Clean-up

Proper Capitalization

Wrote off significant unamortized losses from legacy portfolio in December 2007Aggressive provisioning in December 2008 in anticipation of credit deteriorationRecognized significant impairment on legacy CDOs and subprime exposures

Completed capital reduction in July 2008Accelerated execution of Capital Protection Mechanism through CB conversion in Dec 2008EnTie now has a stable capital base and is one of the best capitalized banks in Taiwan


Key Achievements in 2008 (Cont’d)Recent Developments

Improving management and operations

24

Operational Improvements

Revised all standard operating procedures and manualsEstablished customer service centers for existing customer retention as well as telemarketing functionsCentralized loan processing for corporate banking and bills/remittance processing operationsRegionalized consumer loan disbursement/repayment

Credit Risk Management

Proper and comprehensive credit risk framework initiated with centralized approvals and internal credit rating systemExtensive credit monitoring via rapid portfolio review, annual and semi-annual review, watch list and exit list for corporate bankingVintage/flow-through analyses for retail bankingMetrics combining location and borrowers’ characteristics for mortgage LTV and pricing

Human Resources Management

Recruited and installed new management team and CROImplemented Performance Development Process and Balanced Scorecard approaches for performance managementFirst among peers to initiate personnel cost management when facing the financial crisis


Key Achievements in 2008 (Cont’d)Recent Developments

Improving management and operations

25

Enhanced Operational Risk

Control

Adapted to Changing

Environment

Ongoing efforts in loss event data collection for operational risk managementCompleted first stage of operational risk self assessmentDeveloping comprehensive KRIs for future implementation

Managed liquidity carefully and prudently when the industry was facing depositors’ move to safety in Sep/Oct 2008Active and continual lobby for government supports via deposits or other measures, potentially sub-debt subscription

Infrastructure for Financial Markets

Group

Risk management was built in the design of the infrastructure for Financial Markets Group (i.e. Treasury)Proper control on tradable products and trader’s limit to avoid losses experienced in legacy CDOs investmentsIndependent middle desk to monitor and control trading activities and execute stop-loss mechanism


Business Strategies for 2009Recent Developments

Despite economic downturn, cautious growth and profitability under sound risk management structure remains the strategic theme for 2009

26

Further diversification of corporate portfolio to dilute concentration on real estate sector

Larger SMEs remain key customer segment for growth, expanding share of wallet while cross-selling multiple products

Mortgage loans as foundation of retail banking; bundling with other consumer products

Repositioned wealth management business with focus on affluent existing depositors

Wealth management product offerings switch to conservative and protective instruments such as insurance, ETFs and principal-guaranteed debts

Cooperation between Corporate Banking and Financial Markets in marketing treasury/derivatives products for corporate hedging purpose

Prudent risk control and management in all three major risk areas: credit, market and operations


Execution of 2009 Business Plan

27

2009 business plan remains part of our broader turnaround strategy

Cautious growth in a controlled path demonstrates ambition to grab market share in a highly competitive market

Risk control and management tools will be further sharpened

Thus, a quick ramp-up in 1Q09 demonstrated smooth execution of the new business plan

− Refine internal credit rating system

− Establish scoring systems for consumer banking

− Install Reuters Kondor+ straight-through system for treasury operations, trading activities and risk control

− Conduct data cleansing and warehousing for both database marketing and advanced credit risk systems

− Synchronize Basel II’s IRB with IAS 39

Recent Developments

Financial Performance


Review of 2008 Performance Financial Performance

Milestones in stabilizing capital structure

28

Capital Reduction CB Conversion and BuybackPaid-in capital (common and preferred stock) was used to make up accumulated deficits in retained earnings

Equivalent to a reverse stock split of 1 for 0.4474 share

Same-day settlement restriction on stock trading lifted on May 6, 2009

Original 3.5 year capital protection of NT$14.66 billion restructured to one-off conversion of NT$7.5 billion CBs in December 2008

Remaining NT$3.5 billion CBs redeemed and CPPS2 waived

Management was comfortable with such level because

− Prior loss estimate on secured personal lending was too conservative

− Real estate portfolio performs better than expected despite property market corrections

Resulted in YE08 Tier 1 ratio of 11.2%, “best-in-class” platform for growth


Trends in Key Revenue DriversFinancial Performance

Stabilizing NII and fee income while reducing volatility from trading

29

779 701900 976 824

1Q08 2Q08 3Q08 4Q08 1Q09

Net Interest Income

128 143

14

86 102

1Q08 2Q08 3Q08 4Q08 1Q09

Net Fee Income

154

-78

-620-743

66

1Q08 2Q08 3Q08 4Q08 1Q09

Trading and MTM Gains

60

-284

824566

212

1Q08 2Q08 3Q08 4Q08 1Q09

FX Gains

Accounting changed to amortization of fees associated with 1+ year credit

Significant growth momentum observed since 3Q08 in commercial lending and mortgage

Negative impact of global financial turmoil

Profit from increased FX volatility


Improving Balance SheetFinancial Performance

Low NPL level with over 100% coverage and BIS among the highest in the market

30

4.87% 5.85% 5.22% 6.15% 2.48% 3.28% 2.23% 2.42% 1.86% 1.95%

52.35% 49.89% 51.17% 52.49%35.50% 43.34% 33.67% 34.80%

101.31% 100.18%

0%

50%

100%

150%

0%10%20%30%40%50%

4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09

NPL Coverage

Assets Quality

8.88%6.37%

10.71%8.76%

11.71%

4Q06 2Q07 4Q07 2Q08 4Q08

Capital Adequacy

Target

10.00%

Target >100%

Target <1.5%


Review of 2008 Performance (Cont’d)Financial Performance

31

(NT$ million) FY2007 FY2008 1Q08 2Q08 3Q08 4Q08 1Q09

Net interest income 4,134 3,356 779 701 900 976 824

Net fee income 640 371 128 143 14 86 102

Trading/MTM gain/loss 121 (1,287) 154 (78) (620) (743) 66

FX gain/loss 170 1,166 60 (284) 824 566 212

Investment income (83) (68) 11 (1) (13) (66) 8

Other non-interest income 54 636 15 82 384 154 23

Total operating income 5,036 4,173 1,147 564 1,489 973 1,233

Operating expenses (2,393) (2,590) (636) (646) (683) (625) (600)

Pre-provision profit 2,643 1,583 511 (82) 806 348 633

Provisions (23,258) (3,796) (824) (876) (302) (1,794) (200)

Asset impairment (827) (2,952) (340) (598) (365) (1,648) (107)

Pre-tax income (21,442) (5,164) (653) (1,557) 139 (3,093) 326

Income tax expense 4,663 (609) (280) 559 (503) (385) (181)

Net income (16,779) (5,773) (934) (998) (364) (3,478) 145

Net interest margin 1.44% 1.28% 1.17% 1.09% 1.44% 1.44% 1.20%

Fee income % 12.71% 8.89% 11.16% 25.35% 0.94% 8.84% 8.27%

Cost to income 47.52% 62.07% 55.45% 114.54% 45.87% 64.23% 48.66%

Provisioning cost 10.60% 1.99% 1.78% 1.98% 0.63% 3.43% 0.43%


Review of 2008 Performance (Cont’d)Financial Performance

Strengthened capital base de-leveraged the balance sheet

32

(NT$ million) Dec 31, 2007 Dec 31, 2008 Mar 31, 2009Liquid assets $ 64,199 $ 69,945 $ 77,384 Net loans 184,565 180,500 183,073 Investments 30,819 19,109 23,120 Fixed assets 3,734 2,958 2,933 Other assets 7,738 7,100 7,204

Total assets $ 291,055 $ 279,612 $ 293,714 Current liabilities 15,920 7,738 7,775 Customer deposits 209,567 217,146 231,082 Financial debentures 36,650 34,500 34,500 Convertible bonds 10,926 - -Other liabilities 334 528 531

Total liabilities 273,397 259,912 273,889Common stock 33,599 16,797 16,797 Preferred stock 3,442 1,415 1,415 Capital surplus 2,658 7,234 7,234 Retained earnings (22,041) (5,746) (5,620)

Shareholders’ equity $ 17,659 $ 19,700 $ 19,826 NPLs/Gross loans 2.48% 1.86% 1.95%NPL coverage 35.50% 101.31% 100.18%Tier I capital 6.07% 11.18% N.A.Tier II capital 4.64% 0.53% N.A.Total CAR 10.71% 11.71% N.A.Equity/Assets 4.88% 6.54% 6.75%

Appendix


Profile of Longreach GroupAppendix

An Asia-focused fund with clear investment style and tailored solutions

33

Core sector focus: technology and industrial, financial services and consumer/other services

Focused on control buyouts, with some heavily structured minority investments

Special opportunities given Longreach’s network and positioning, relationships and deal structuring skills

Cross border situations

Corporate partnering

Japan-Asia and Asia-Global situations

Intensive, proactive and patient approach to deal origination remains key

Focus

SourcingRelationship intensiveStrategically intensiveSector focusedAuction averseImportance of global networks and co-investor relationships

StructuringDefensive to protect downsideCreative to exploit upsideIntensive to fully capitalize on relationship driven sourcing

OperationsStrategic repositioning to reflect globalization and sector thesisHeavy restructuring to drive globally benchmarked performanceManagement change as necessary

ExitGlobal networking plus local market positioning to fully capture strategic sale opportunitiesStrong capital markets capabilities (IPO, leveraged recap, etc.) to maximize exit opportunities


The Longreach Group TeamAppendix

Longreach directors for EnTie have substantial relevant experiences in the financial services sector

34

Mark ChibaGroup Chairman & PartnerDirector of EnTie Commercial Bank

Yasuyuki MiyoshiRepresentative Director & PartnerSupervisor of EnTie Commercial Bank

Background CEO, UBS Securities Japan; Member UBS Investment Bank Global Management BoardHead, UBS Investment Banking Japan and Asia Financial Institutions GroupLead execution on complex financial institutions M&A

Selected Value Creation Experience

Executive and operating experience at UBS Japan and globally—repositioned UBS to top tier investment banking market position in Japan with increased profitabilityInvestment and divestment in Aozora Bank—realized 2x return (27% IRR) through sale to CerberusExtensive financial services market entry and expansion during Asian financial crisis 1997–99. Clients included: Prudential PLC, Chase Manhattan, AXA, DBS, Lippo Life, Housing and Commercial Bank, Kwong On Bank, Bank of ThailandExecuted various significant M&A and strategic advisory assignments covering the banking, life insurance and credit card sectors, and geographically covering Japan, South Korea, Hong Kong, Singapore, Thailand, Malaysia and Indonesia

Background Managing Director, Head of Restructuring Advisory, Merrill Lynch JapanManaging Director, Head of Debt Capital Markets/Leveraged Finance, Merrill Lynch JapanHead of Financial Products, Sumitomo Bank New YorkLead execution on complex restructurings

Selected Value Creation Experience

14 years of operating experience at Sumitomo Bank, ranging from retail banking, wholesale banking, derivatives and capital markets both in Japan and the U.S.Responsible for all debt capital markets activities ranging from corporate bonds, structured finance, loans, derivatives at Merrill Lynch JapanBankruptcy restructuring and sale of Taisei Fire and Marine to Sompo Japan—successfully executed the largest corporate restructuring procedures of a Japanese P&C insurer, completed a $840 million global tender offer of reinsurance related liability, sold the surviving retail business ($2 billion) to Sompo Japan with full utilization of tax loss benefitsChapter 11 restructuring of Federated Department Stores—2nd largest Chapter 11 restructuring in the history of the USRestructuring of Isuzu—led the overall restructuring of Isuzu’s capital structure and operations along with sale of the Diesel Engine operations to General Motors in 2002


Management Excellence Complement and strengthen management team with new executives as necessaryBenchmark management to global standards and new business planAlign interests through management equity participation

Corporate Governance

Strategic Focus and Clarity

Operational Excellence

Exit

Board of Directors with relevant industry expertiseProper guidance and control by Board of DirectorsEffective financial control

Develop and agree strategy and business plan with managementInitiate divestment of non-core businesses and assetsSupport strategic acquisition projects

Review and optimize cost structures (facilities, sourcing, outsourcing)Push new growth initiatives and optimize product portfolio mixEnsure optimal usage of working capital

Prepare company for multiple exit alternativesManage / support processDefine and capture any opportunistic exit

Measures

Longreach Value Creation ProcessAppendix

35

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