Taishin expects to post profits this year

Taishin Financial Holding Co (台新金控), owner of the nation's third-biggest credit card issuer, expects to make profits with earnings exceeding NT$7 billion (US$211 million) this year, after two straight years of losses amid the industry-wide consumer credit abuse crisis, the company said yesterday.

"We are not yet strong enough, but already we're in better shape," Taishin Financial president Lin Keh-hsiao (林克孝) told a media briefing.

Profits in the period spanning this month through June are expected to remain stable over the previous quarter, chief operation officer Greg Gibb said, adding that annual profits could reach four times the amount of first-quarter figures.

The return on equity (ROE) ratio was expected to rebound to nearly 10 percent from negative 27.45 percent last year, Gibb said.

Taishin Financial posted earnings of NT$1.83 billion (US$55.2 million), or NT$0.26 per share, in the January to last month quarter, down from NT$3.04 billion, or NT$0.57 per share, a year ago.

As asset quality of unsecured lending gradually improve, provisioning costs for this year could be halved in comparison with last year's NT$37 billion, Taishin Financial chief financial officer Carol Lai (賴昭吟) said.

The company booked reserves worth NT$3.5 billion in the first quarter to cover potential bad loans.

Based on an estimated loss ratio as high as 45 percent of restructuring loans worth NT$36 billion, extra bad debt losses of NT$5 billion to NT$6 billion were expected for this year, the company said.

The losses, however, could be digested as the company returns to profitability this year, Gibb said.

Net profits next year could match the 2004 level, when the company earned NT$11.31 billion, which in turn would raise ROE ratio back to a double-digit level, he said.

Analysts, however, were not as optimistic, with Macquarie Equity Research downgrading its rating on Taishin Financial to "underperform" from "outperform" earlier this month.

The Australian brokerage said Taishin Financial is still suffering from the credit-card crisis, with margins hurt by write-offs and substantially squeezed pre-provision operating profitability.

Over the past two years, Taishin Financial booked provision costs totaling NT$75.7 billion to address rapidly deteriorating credit and cash card lending.

To improve asset quality, the company made adjustments in its lending portfolio by reducing outstanding unsecured loans to NT$116 billion from a peak of NT$198 billion at the end of 2005, its data showed.

Despite this, "There is still room for growth in the high-yield consumer finance portfolio," Gibb said.

The financial group will shift its focus to the credit card business, with an estimated growth of 5 percent to 10 percent in the number of cards and credit balance this year, he said.

As of last month, Taishin International Bank (台新銀行) had 3.19 million credit cards in circulation and an evolving credit balance of NT$11.24 billion.