Taishin Financial Holding Co (台新金控), the nation's second-largest cash card issuer, said yesterday it would stop issuing new cash cards, after seeing bad debts reach as high as NT$10 billion (US$317.49 million) during the first quarter of the year.
"We decided to halt the issuance of new cash cards and review our business portfolio and risk control," Taishin Financial's spokeswoman Carol Lai (賴昭吟) told a press conference yesterday.
Taishin Financial is not alone, as a group of rivals including Cathay United Bank (國泰世華銀行), Chinatrust Commercial Bank (中國信託商銀) and Taipei Fubon Bank (台北富邦銀行) have all stopped issuing new cash cards.
Flagship unit Taishin Internat-ional Bank (
The large amount of write-offs has consumed two-thirds of the NT$19.1 billion extra provision it made available at the end of last year, Lai said.
Taishin Financial generated NT$3.04 billion, or NT$0.57 per share, in its first-quarter earnings this year, down from NT$3.25 billion, or NT$0.77 per share the previous year.
Its banking unit booked provision expenses of NT$4.4 billion during the January-March period this year, up from about NT$2 billion during the same period last year, to cover potential bad debts.
The company was tightlipped about the outlook for profits and provision costs for the second quarter, saying this would depend on whether debtors could stick to the new payback schemes that they had agreed to during debt negotiations.
"The first month of repayments are due [today] and it will take one to two months for us to see how things will go," Lai said.
Nevertheless, financial anal-ysts appeared pessimistic about Taishin Financial's profitability in the near future.
"The company's decision to suspend its cash card business sends a strong signal ? that could reflect its despair in the market and a possible worsening of credit conditions," said Jesse Wang (王嘉樞), head of research at BNP Paribas Securities (Taiwan) Co.
Given that only one-third of its previous reserves were left, the company's second-quarter profits are expected to weaken from the previous quarter under rising pressure for more provisions to cover potential bad debts, Wang warned.
BNP Paribas retained its "hold" rating on Taishin Financial with a target price of NT$22.10, keeping the price that it announced in February.
Taishin Financial's president Julius Chen (陳淮舟) said he expected the bad loan trouble to ease during the fourth quarter.
"The next six months is a critical time for us," he said.
As growth in high-yield unsecured consumer loans is under pressure because of credit and cash card bad debts, the bank unit will refocus on corporate lending and mortgages to bolster lending growth this year, the company said.
However, net interest margins could narrow further as rivals are also shifting their focus to these two areas, it added.
Taishin International's net interest margin dropped to 4.69 percent in the first quarter, down from 5.34 percent a year earlier, according to the bank.