Cathay Financial Holding Co (
Fubon said profit for last year will be about NT$9.1 billion (US$263 million) -- 16 percent short of its earlier estimate. The lower figure can be attrrbuted to higher provisions for bad loans. Cathay said it will meet its NT$13 billion forecast only because regulatory changes allowed it to claw back some provisions and show a one-time gain of NT$5 billion.
"We're still in a dream-like state, where every financial company is shouting out forecasts," said Lai Jan-hong, who helps manage NT$3 billion of stocks at EnTrust Investment Trust Corp (
"I would still wait at least another quarter or two to see the actual benefits," he said.
Cathay took over Cathay Life Insurance Co (國泰人壽) and United World Chinese Commercial Bank (世華銀行). Fubon took over TaipeiBank (台北銀行) and five Fubon-related companies, including Fubon Securities Co (富邦證券), Fubon Life Assurance Co (富邦人壽), Fubon Commercial Bank (富邦銀行), Fubon Insurance Co (富邦產險) and Fubon Securities Investment Trust (富邦投信).
An IBES Inc survey of analysts predicts the holding company will show NT$10.6 billion of profit for last year and NT$15.6 billion this year.
Domestic banks still have a way to go in cleaning up their books. The bad-loan ratio, including loans under supervision, comprised 8.86 percent of total credit last year. By comparison, the bad-loan ratio in South Korea stood at 4.3 percent of all credit at the end of September.
* Fubon cut its estimate by 16 percent to NT$9.1 billion.
* Fubon's aggressive handling of its load of non-performing loans last year was a main contributing factor in its lower earnings.
* One research body predicts that Cathay Financial may see NT$10.6 billion in profit, for 2002 and that could rise to NT$15.6 billion for this year.
* The nation's bad loan ratio is at 8.86 percent.
Fubon Financial expects profit to be "significantly higher" this year after completing the purchase of TaipeiBank last month, chief financial officer Victor Kung (龔天行) said.
The company will announce earnings details after the board meets this afternoon. It will hold an investors' meeting on Feb. 10.
"Since [Fubon Bank] made more aggressive provisions in 2002, this would help to ease the provision burden in 2003," wrote Sophia Cheng (
Fubon Financial, which owns the nation's largest non-life insurer, also may take over International Investment Trust Co (國際投信) to expand its asset-management business, Kung said.
As for Cathay, it's benefiting from a one-time gain because of regulatory changes. The government has been easing rules, such as allowing insurers to invest as much as 35 percent of their assets abroad instead of 20 percent.
That's aimed at helping insurers who suffered falling returns on stock investments and higher interest rate payments guaranteed on older policies.
With the financial sector lagging behind others recently, investors seeking safe plays amid the prevailing geopolitical concerns bought financial stocks in late trade, Fubon Securities Investment Services manager Cooper Leow said yesteday.
"Financial holding companies in particular attracted interest as their asset quality has improved following equity market gains previously," Leow said. Yesterday, Cathay Financial shares dropped NT$0.1, to NT$46.30. Fubon Financial shares rose NT$0.4, to NT$30.40.
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