Thu, Aug 02, 2007 - Page 12 News List

Chinatrust profits soaring on wealth management fees

By Jackie Lin  /  STAFF REPORTER

As the wealth management business booms, Chinatrust Financial Holding Co (中信金控) saw its pre-tax profits in the second quarter jump by 90.3 percent from the previous quarter.

But whether the strong momentum will continue will depend on several factors in a highly competitive sector, the company's chief strategy officer, Jason Wang (王正新), told a media briefing yesterday.

Chinatrust Financial, which owns the nation's largest credit card issuer, posted an unaudited net profit of NT$5.59 billion (US$170 million) for the April to June period.

It posted earnings of NT$8.17 billion for the first half of the year, compared with a deficit of NT$2.55 billion a year ago.

Income deriving from wealth management fees in the second quarter set a record, reaching NT$4 billion, rising by 69.1 percent from the first quarter as a result of strong sales in structured and mutual fund products.

The company expected the figure to reach NT$10 billion for the whole year.

"We're surprised at the contribution of our financial planning personnel. Each of them brought in NT$22.4 million in fees on average during the second quarter, compared with NT$13.5 million in the first quarter," Wang said.

After bad consumer credit dealt a huge blow to the nation's financial sector over the past two years, most banks, especially those focusing on consumer finance, have found an oasis of profit in wealth management.

Chinatrust Financial's ambition to tap into the young segment became apparent when it outbid four rivals in a government auction in late May to acquire the debt-ridden Enterprise Bank of Hualien (花蓮企銀).

The firm plans to recruit another 150 to 200 wealth management specialists, he said.

The merger is expected to take effect on Sept. 8, boosting Chinatrust Commercial Bank's (中國信託商銀) branch network to 142 nationwide, or the 6th largest in the banking industry.

Meanwhile, the bank's net interest margin slid to 2.08 percent in the second quarter, compared with 2.74 percent a year ago, as a result of the fallout from the credit card loan problems.

To write off bad loans stemming from consumer credit risk, Chinatrust Financial set aside a reserve of NT$3.91 billion during the first six months of the year, down by 84 percent from the same period last year.

This may have been a bid to prepare more provisions, as the Consumer Debt Clearance Regulations Law (消費者債務清理條例), the so-called "personal bankruptcy law," passed in June has led to a higher rate of borrowers not paying back their loans in the inter-bank debt relief program, Wang said.

The rate of borrowers not paying back loans remained high at around 2 percent over the past few months as card debtors have taken a wait-and-see attitude, hoping the newly passed law would bring some relief.

"How big the impact will be remains to be seen, but we're worried an additional NT$1.5 billion in bad loans could emerge by the end of the year," Wang said.

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