Fri, Aug 11, 2006 - Page 12 News List

Fubon Financial says profitability will improve

DISAPPOINTING The company's earnings declined by 47.6 percent from a year ago to NT$3.65 billion, with analysts saying that its bad debts were worse than they should be

By Amber Chung  /  STAFF REPORTER

Fubon Financial Holding Co (富邦金控), the nation's sixth largest financial services provider, expects its profitability to strengthen significantly in the second half of this year, backed by its anticipation of declining provision expenses in the fourth quarter, the company said yesterday.

In the first half of the year, Fubon Financial's earnings plummeted by 47.6 percent from a year ago to NT$3.65 billion (US$112 million), or NT$0.47 per share.

The drastic decline resulted from its banking arm's skyrocketing expenses incurred to cover potential consumer bad debts, which amounted to NT$7.48 billion in the January-June period, up 166.4 percent from a year earlier.

Last month alone, the financial holding firm generated NT$886 billion in after-tax net income, bringing total earnings to NT$4.53 billion, or NT$0.59 per share, for the first seven months of this year, the company said in a filing yesterday.

Despite its less-than-impressive performance, Fubon Financial president Victor Kung (龔天行) said that the company's earnings were expected to grow substantially in the remaining half of this year.

"Bad debt provision is likely to decrease significantly in the fourth quarter," Kung said.

However, the provision could remain stable at around NT$4.4 billion in the third quarter, before declining to around NT$2 billion in the final quarter.

Fubon Financial's bad debt provision is estimated at NT$6 billion for the second half of the year, down 20 percent from the first half of the year, according to the firm.

The company also said it expected to garner NT$2.6 billion in dividends from its investment portfolios in the current quarter.

As of June, flagship Taipei Fubon Bank (台北富邦銀行) was the nation's sixth largest credit card issuer with 2.17 billion cards in circulation and NT$25.07 billion in revolving credit balance, according to the Banking Bureau's data.

"The bank's bad debts are larger than they should be considering the scale of its credit card business," said Chu Yu-chun (朱玉君), an analyst with SinoPac Securities Corp (建華證券).

The lender should make improvements in its credit check and risk management mechanism, Chu said.

The analyst predicted annual earnings of around NT$8 billion for Fubon Financial this year, down from NT$14.32 billion last year.

A good target price for the firm's shares would be between NT$28 and NT$32, Chu said. Fubon Financial shares closed down 0.79 percent yesterday at NT$25.40 on the Taiwan Stock Exchange.

Fubon Financial has been eager to expand across the Taiwan Strait by investing in Chinese rivals via its Hong Kong-based subsidiary, Fubon Bank (Hong Kong) Ltd.

Kung said that news in this regard could be expected by the end of the year, adding that the final result would, however, depend on the financial regulator.

The company has NT$12 billion at its disposal for acquisitions, the executive said.

Fubon Financial is reportedly engaged in talks with a lender in Fujien Province, China.

The nation's banks are banned from investing in Chinese lenders. The outlook for policy relaxation remains uncertain following the Conference on Sustaining Taiwan's Economic Development.

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