Cathay to boost provisions for bad consumer loans

Cathay Financial Holding Co (國泰金控), the nation's largest financial group by assets, said yesterday that its banking unit will increase provisions to address mounting bad consumer loans.

In a filing made to the Taiwan Stock Exchange, Cathay Financial said its banking arm, Cathay United Bank (國泰世華銀行), has decided to add another NT$9 billion (US$274 million) to reserves, in a bid to deal with possible losses from defaults on credit and cash-advance card loans in the future.

The coverage ratio for the consumer banking business will jump to 300 percent from the current 100 percent, Cathay Financial spokesman Lee Chang-ken (李長庚) told reporters yesterday.

The additional provisions are expected to boost Cathay United Bank's total provisions this year to above NT$18 billion, and move the bank into the red with a loss of over NT$7 billion this month alone, the Central News Agency reported yesterday.

The bank's annual profits could drop to NT$6.5 billion from the NT$14.46 billion it predicted last month, the report said.

As such, Cathay Financial would incur an estimated loss of NT$5 billion this month, lowering annual profits to NT$22 billion, or NT$2.6 per share, it added.

The United Bank of Taiwan (聯邦銀行) yesterday also announced that it would write off losses incurred by the sale of bad loans. The move will cut the bank's earnings for this year by NT$3.41 billion, the bank said in a statement to the stock exchange.