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Taishin Financial expects to return to profit this year

"We will become profitable again as provisioning costs shrink this year."

Carole Lai, Taishin Financial's chief financial officer

Following two years of heavy losses, Taishin Financial Holding Co (台新金控) yesterday said it expected to return to the black this year, backed by a decrease in reserves needed to address bad consumer loans.

"We will become profitable again as provisioning costs shrink this year," Taishin Financial's chief financial officer Carole Lai (賴昭吟) told reporters yesterday.

Lai declined to give detailed forecasts, citing a blackout period in light of the company's plan to issue financial debentures.

Taishin Financial, the parent company of the nation's second-biggest credit card issuer, said a huge reserve cost of NT$34 billion (US$1 billion) resulted in losses of NT$16.1 billion last year.

The company booked a total of NT$73 billion in provision expenses over the past two years to address its banking arm's mounting credit and cash card bad loans.

As the consumer credit abuse storm subsides, Taishin Financial is expected to post net earnings of NT$7.9 billion this year, including nearly NT$3 billion in investment returns from its subsidiary, Chang Hwa Bank (彰化銀行), said Chu Yu-chun (朱玉君), an analyst at SinoPac Securities Corp (永豐金證券).

Chu gave a target price of NT$20 by the end of the month and recommended investors pick up the stock if the share price drops below NT$16.

Meanwhile, the firm's plan to issue NT$17 billion of subordinated bonds before the end of the month to strengthen its financial structure remained in the air after the financial regulator announced a change in calculating financial institution's capital adequacy ratio earlier this month.

The change may enable the company to meet the regulator's requirements for capital adequacy ratio of above 100 percent for financial holding firms without the need to raise more funds, Lai said.

The company expects to make a decision on whether or not to continue with the bond issue and the size of the issue before the end of the month, she said.

That will also affect the company's decision on how to dispose of a 2.5 percent stake in Chang Hwa required by the regulator to meet the regulator's requirement on capital sufficiency, Lai added.

Taishin Financial will still control 22.5 percent of Chang Hwa after the share disposal is made.

Taishin Financial gained 4.85 percent to close at NT$17.30 on the Taiwan Stock Exchange yesterday.
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