Credit-card debt problem reflected in banks' red ink

Massive 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 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 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.