Wed, Jul 30, 2003 - Page 10 News List

Fubon Financial earnings jump 34 percent

By Joyce Huang  /  STAFF REPORTER

Fubon Financial Holding Co (富邦金控), the nation's second-biggest financial service company, yesterday said it had after-tax earnings of NT$9.03 billion in the six months to June 30, up 34 percent from a year earlier.

At an investor briefing held in Taipei, Fubon's chief financial officer Victor Kung (龔天行) said the company has met 60 percent of its profit target for this year. The company had said it hopes to achieve a NT$15 billion (US$436 million) profit this year.

According to Kung, 74 percent of Fubon earnings in the first half-year came from banking services provided by the Fubon Commercial Bank (富邦銀行) and its subsidiary TaipeiBank (台北銀行), while earnings from sales of property insurance contributed to 13 percent.

"TaipeiBank's performance is very impressive," Kung said yesterday. Fubon Financial purchased TaipeiBank in December.

After securing its profits in banking services, Fubon, which has a core business in consumer banking, plans to generate more profits from securities services with a monthly goal of NT$300 million in net profits, Kung added.

"We have a bullish view on the stock market's rebound in the second half of the year," he said.

But Fubon may have difficulties in expanding profit margins by widening the spread of interest rates between lending and saving in the coming months, said Michael Lan (藍文彥), an analyst at SinoPac Securities Corp (建華證券).

Kung, nevertheless, expects the company's share price to level out at NT$19.03 with earnings per share (EPS) of NT$1.23 at year's end.

Cathay Financial Holding Co (國泰金控), the nation's biggest financial service company, last week also came up with rosy earnings statements, saying the company's net income in the second quarter surged more than 13-fold following its acquisition of the country's 11th-biggest bank by assets -- United World Chinese Commercial Bank (世華銀行).

Cathay made NT$13.8 billion in net profits in the first half of the year, reaching 65 percent of its earnings target this year, according to local media reports.

The challenge facing Cathay, which has a vast investment portfolio as a life insurer, is to enhance its return on investments so as to make up liabilities, SinoPac's Lan said.

According to Lan, Cathay previously paid higher guaranteed interest rates to bond buyers while raising capital, whose returns are decreasing in today's markets.

Despite their optimism in turning a profit, the nation's financial holding companies (FHCs) may still face a tough year ahead, a stock analyst said yesterday.

"The second half-year earnings for most FHCs are unlikely to exceed their earnings in the first two quarters," Lan said.

Facing stiff competition, major FHCs haven't successfully differentiated their core businesses from one another by launching innovative financial services, which is expected to lead to a loss of net profits in the coming year, Lan said.

With high non-performing loan ratios, some banks -- including Hua Nan Financial Holdings Co (華 南金控) and First Financial Holding Co (第一金控) -- may still be busier with cleaning up impaired assets than turning a profit in the near future, Lan said.

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