Credit-card debt problem reflected in banks' red ink

Massive consumer loan defaults continue to haunt the banking sector as major financial institutions reported losses last month.

Chinatrust Financial Holding Co (中信金控) -- which owns the nation's largest credit card issuer, Chinatrust Commercial Bank (中國信託商銀) -- posted a pre-audit net loss of NT$2.19 billion (US$67.5 million) last month.

Chinatrust Financial, the nation's fourth-biggest financial services company by market value, attributed the loss last month to a loan provision of NT$4.53 billion which it set aside to cover potential bad debts, it said in a statement to the Taiwan Stock Exchange on Saturday.

NPL RATIO RISING

The Financial Supervisory Com-mission said on May 31 that the non-performing loan ratio rose to 2.54 percent at the end of April from 2.46 percent in March, raising the bad debt level to NT$423 billion as credit card defaults increased.

According to the commission's latest data, the total revolving credit balance for credit cards surpassed NT$447.3 billion in April with the NPL ratio at 3.38 percent.

Cash card lending in April rose to NT$259.15 billion with the NPL ratio at 6.75 percent.

CHINATRUST

Chinatrust Financial said its accumulative loan reserves during the first five months of the year rose to NT$20.76 billion, an increase of NT$17.06 billion from the same period last year. As a result, its aggregate net loss amounted to NT$2.21 billion between January and last month, the statement said.

The lender, which named its chief risk officer Hsu Chien-chi (許建基) as president last week, expressed confidence that the situation would be turned around in the third quarter, however.

"The asset quality of the credit and cash-advance cards is improving while the non-performing loan ratios continue to drop," Chinatrust Financial said in the statement.

FUBON

Rival Fubon Financial Holding Co (富邦金控), the nation's third-largest financial services company by market value, reported unaudited net loss of NT$108 million last month and net profit of NT$3.61 billion for the first five months of the year with earnings per share (EPS) of NT$0.47.

Earlier this year it said that it would spread its provision expenses over the rest of this year to cope with the growing credit-card debt burden.

TAISHIN

Taishin Financial Holding Co (台新金控), which owns Tiwan's leading cash card issuer, Taishin Interna-tional Bank (台新銀行), posted a pre-audit net profit of NT$250 million last month.

The figure represents a big drop from the NT$810 million Taishin Financial recorded a year ago, after its banking unit decided to stop distributing new cash cards early last month.

On Friday, shares of Chinatrust Financial rose NT$0.2 to close at NT$25.3 and those of Taishin Financial were up NT$0.3 to NT$20.1 on the Taiwan Stock Exchange, while Fubon Financial fell NT$0.9 to NT$27.