Thu, Dec 28, 2006 - Page 12 News List

Shin Kong Bank plans extra reserves

By Amber Chung  /  STAFF REPORTER

Shin Kong Bank (新光銀行), the banking unit of Shin Kong Financial Holding Co (新光金控), announced yesterday that it would make extra reserves in order to deal with mounting bad consumer loans.

The bank said it plans to book an additional NT$4.47 billion (US$136.7 million), which is expected to cut the overall bad debt ratio down to 2 percent from the current 2.43 percent while doubling the coverage ratio up to 80 percent from the current 41.41 percent.

"The move will boost the bank's annual reserve cost to NT$10.7 billion and in turn the annual loss to nearly NT$8 billion this year," Victor Hsu (許澎), spokesman of the nation's eighth biggest financial group, said yesterday.

Shin Kong Bank posted a loss of NT$258.56 million with a provisioning cost of NT$4.73 billion last year.

Earnings of parent Shin Kong Financial this year will fall far short of market expectation for a level over NT$10 billion, Hsu said, declining to give a forecast figure.

Its banking business is expected to return to profitability next year as the bad consumer credit crisis eases off, he added.

Earlier this week, Cathay United Bank (國泰世華銀行) announced it would set aside another NT$7.3 billion to bring annual reserves to NT$32 billion, following Chinatrust Commercial Bank's (中國信託銀行) move to allot an extra NT$6.33 billion to boost annual reserves now exceeding NT$47 billion.

Chinatrust Commercial said yesterday that its board would auction off NT$7.98 billion of car loans to streamline its lending resources.

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