Cathay Financial ranked top holding company

The nation's top three financial holding companies in terms of overall performance last year are Cathay Financial Holding Co (國泰金控), Fubon Financial Holding Co (富邦金控) and Taishin Financial Holding Co (台新金控), according to a report released yesterday.

The report was conducted by the Chinese-language magazine Business Today in conjunction with academics from National Chengchi University and the Department of Risk Management and Insurance at Shih Chien University.

"The holding companies dominate nearly 70 percent of Taiwan's financial industry, and this necessitates an evaluation mechanism as a reference for investors," Liang Yung-huang (梁永煌), president of the business weekly, told a press conference.

Based on financial performance, operational quality, capital adequacy and strategic performance -- the so-called "FOCAS" system -- Cathay Financial outranked its 13 competitors with its strong insurance and banking units, the report said.

Taiwan Ratings Corp (中華信評) on Sept. 6 raised its credit rating for Cathay Financial, which is also the nation's largest holding company by market value, to "twAA+" from "twAA," with a stable outlook.

The ratings agency described Cathay Financial's profitability as satisfactory, posting a return on average assets of 1.2 percent last year as the group benefited from the cost advantages its subsidiaries derive from economies of scale and efficiency gains.

The ranking report placed Fubon Financial, which has the second largest market value among Taiwan's financial holding companies, in second place on the strength of the large market presence of its banking arm, Taipei Fubon Bank (台北富邦銀行).

Taiwan Ratings on Sept. 6 upgraded Fubon Financial's credit rating to "twAA" from "twAA-" as domestic regulatory conditions now permit a higher degree of resource movement between members of financial groups such as Fubon Financial, it added.

Taishin Financial took the third position in the report, followed by Chinatrust Financial Holding Co (中信金控), SinoPac Financial Holding Co (建華金控), state-run Mega Financial Holding Co (兆豐金控) and E.Sun Financial Holding Co (玉山金控).

With the smallest market capitalization, Jih Sun Financial Holdings Co (日盛金控) was ranked last. Shinkong Financial Holding Co (新光金控) was ranked No. 12 and Fuhwa Financial Holding Co (復華金控) took the 13th position.

Peng Jin-lung (彭金龍), a professor at Shih Chien University's Department of Risk Management and Insurance, said that market watchers and investors usually use indicators such as earnings per share to inspect a company.

However, these indicators can only be used to check the financial performance of a single company over a short term, and prove ineffective over the long term in the case of a financial holding company that owns several subsidiaries, he said.

The FOCAS system offers a useful alternative in such cases, as it takes into account a financial holding company's returns on assets and equity, as well as its earnings per share over the past three years, Peng said.

In gauging strategic performance, or efficiency and synergy, the system provides for a comparative analysis of a financial holding company's market share, as well as the growth in market share at each of its subsidiary units.