Chinatrust Financial anticipating profits in the fourth quarter

Chinatrust Financial Holding Co (中信金控), the nation's largest credit card issuer, expects to announce a profit for the fourth quarter of this year, once the consumer bad debts headache begins to ease, the company said yesterday.

For the first half of this year, Chinatrust Financial posted a deficit of NT$2.25 billion (US$68.56 million), or a loss of NT$0.44 per share, compared with NT$9.83 billion in profit, or NT$1.63 earnings per share, for the same period a year ago.

The company attributed the loss to the provision of expenses amounting to NT$24.36 billion in the first six months to cover potential consumer defaulted loans.

Last month alone, the financial holding firm posted a net loss of NT$560 million, lifting the total deficit to NT$2.81 billion for the first seven months of this year.

"Credit and cash card bad loans are abating ? after a peak in March and April," Chinatrust Financial's president James Sheu (許建基) told a media briefing yesterday.

Breaking even

"We expect the company to break even this month or next month and see profits in the fourth quarter," Sheu said.

He declined to give a profits forecast for this year. Chinatrust Financial generated a profit of NT$16.12 billion last year.

However, Chinatrust Financial's flagship banking unit Chinatrust Commercial Bank (中國信託商銀) may stay in the red for the rest of this year.

During the first half of this year, the bank incurred a pre-tax loss of NT$4.93 billion, according to company data.

The bank could also break even on a month-per-month basis by the end of this quarter, on expectation of a steady decrease in provision expenses by NT$300 million to NT$400 million, the bank's chairman Charles Lo (羅聯福) said.

But the bank cannot ascertain if it will return to the black this year, eyeing a huge cumulative loss, Lo said.

Reserve expenses

Chinatrust Commercial expected that the amount of its reserve expenses, made to cover potential consumer bad debts, could decrease to about NT$13 billion in the second half of this year.

"The bank will rebound next year ? after weathering the consumer debt storm [of last year] and cleaning up bad assets this year," Lo said.

Provisioning could be back to normal at NT$500 million per month next year, he added.

On Chinatrust Financial's controversial takeover bid of larger rival Mega Financial Holding Co (兆豐金控), the company said that it will offload a 3.99 percent stake acquired through an inappropriate buy-up deal in a way that will minimize impact on the market within the next year, as required by the regulator.

There are several investment institutions that have approached the company and expressed their interest in taking over the holdings in Mega Financial, Sheu said, adding that the disposal would not affect their earnings.