Thu, Nov 09, 2006 - Page 12 News List

Taishin set to record two straight years in the red

By Amber Chung  /  STAFF REPORTER

Taishin Financial Holding Co (台新金控) will remain deep in the red this year, the second year consecutively, the company said yesterday, attributing the result to large outlays required to cover bad unsecured debts.

The nation's second biggest credit card issuer incurred a net loss of NT$4.84 billion (US$147 million), or NT$1.01 per share, during the first nine months of this year. After booking an extra provisioning cost of NT$13 billion, Taishin Financial said it would see provisions total NT$25.7 billion this year.

Annual reserve costs this year could amount to NT$30 billion, including NT$28 billion specifically to cover defaulted unsecured loans, compared with NT$36.6 billion last year.

"We expect break-even, or even minimal profits, in the current quarter," Taishin Financial spokeswoman Carol Lai (賴昭吟) said at an investor conference yesterday. "But for the whole year, the company will incur a loss similar to that of the third quarter."

Taishin Financial posted a net loss of NT$2.91 billion, or NT$0.68 per share, last year after the outbreak of the consumer credit abuse storm mid-year.

As the problem ebbs away, the company expects to return to profitability next year, Lai said.

"The company is gradually entering a recovery stage," said Chu Yu-chun (朱玉君), an analyst with SinoPac Securities Corp (建華證券) who tracks the financial sector.

Chu suggested the company would write off NT$9.7 billion of losses incurred by the disposal of NT$15-billion in bad debts early next year to prevent a prolonged impact on profitability.

This was feasible as the capital adequacy ratio of the institution's banking arm would remain above the regulatory 8 percent and the company would still be profitable after the proposed one-time write-off, she said.

The analyst retained a "buy" rating on Taishin Financial shares with a target price of NT$20 for the next three months.

Meanwhile, Taishin Financial said it was in talks with several interested foreign investors to raise NT$4 billion in fresh funds through a private placement to strengthen its financial profile.

The capital could be injected in December to sustain the company's capital adequacy, Lai said.

In February, Newbridge Capital of the US and Nomura Group together invested NT$31 billion for a 26.5 percent stake in Taishin Financial.

Taishin Financial may not have more recapitalization activities next year as board directors would not like their holdings to be diluted, Lai said.

The company would instead try to replenish its capitalization on its own by adjusting its asset allocation and cutting low-yield investments, she said.

Looking ahead, Taishin Financial expected its unsecured lending portfolio to return to normal in the first quarter of next year, due to a shrinking amount of defaulted loans to NT$120 billion in September from NT$198 billion in December last year, Taishin Financial's chief operations officer Greg Gibb said.

Gibb, who took up the position in September, predicted that Taiwan's unsecured consumer lending market would continue to shrink by 10 percent to 15 percent next year before a rebound in 2008.

To sustain future growth, Taishin Financial would refocus on prime and super-prime customers to promote its wealth management and secured home equity business for higher fee and interest income, Gibb said.

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