Cathay United set to fall into the red

Cathay United Bank (國泰世華銀行), the banking unit of Cathay Financial Holding Co (國泰金控), will dip into the red this year after its board decided to book extra reserves totaling NT$7.3 billion (US$223.9 million) yesterday, the bank said.

Cathay Financial is the nation's largest financial group by assets.

News of the additional reserves was announced after its shares closed 0.28 percent higher at NT$72.2 on the Taiwan Stock Exchange yesterday.

Cathay United is expected to incur a net deficit of NT$3 billion, registering its first loss since parent Cathay Financial was established in 2001.

This follows the round of extra provisioning to cover mounting bad debts, Cathay United spokesman Joseph Jao (饒世湛) said in a phone interview yesterday.

The bank earned more than NT$3 billion last year despite the fact that it booked an extra NT$9 billion in provisions to cover consumer bad debts.

For this year, Cathay United said it would provide additional reserves of NT$4 billion to cover potential bad debts stemming from a restructured loan program.

Another NT$3.3 billion is to be set aside to cover soured loans stemming from unsecured consumer business.

The decision will boost the bank's annual provisioning cost to NT$32 billion compared with NT$18 billion last year, Jao said.