Thu, Aug 16, 2007 - Page 12 News List

Fubon reports robust income growth

SOLID FUNDAMENTALS The sharp growth came from its insurance unit's strong first-year premiums and its brokerage arm's high fee income from brisk stock trading


Fubon Financial Holding Co (富邦金控), the nation's second-largest financial services group by market value, reported yesterday that first-half earnings jumped 137.4 percent from a year ago, boosted by strong growth in its insurance and securities units.

Addressing concerns about the impact of the US subprime mortgage storm that has swept the Asian markets and weighed on financial stocks, the financial holding company said that its units have US$27.54 million investment linked to US subprime home loans.

"The market has overreacted to the crisis," Fubon Financial president Victor Kung (龔天行) told an investor conference yesterday. "The direct impact on the local banking industry is actually small."

Fubon Life Assurance Co (富邦人壽) has US$18 million linked to US subprime loans, guaranteed by an AA- rated bank, and Taipei Fubon Commercial Bank (台北富邦銀行) holds NT$314.8 million (US$9.54 million) of collateralized debt obligations linked to US subprime-related products.

The Financial Supervisory Commission (FSC) said last Friday that local banks' exposure to US subprime mortgage-related instruments was NT$40.4 billion, with losses reaching approximately NT$1.2 billion.

Shares of Fubon Financial declined by 2.5 percent to close at NT$27.6 on the Taiwan Stock Exchange yesterday. That compared with a 3.6 percent decline in the banking index and a 3.6 percent fall in the benchmark TAIEX.

For the first half of the year, Fubon Financial's net income increased to NT$8.66 billion, or NT$1.12 per share, compared with NT$3.65 billion, or NT$0.47 per share, during the same period last year.

Return on assets rose to 0.99 percent from 0.46 percent, and return on equity climbed to 10.5 percent from 4.7 percent a year ago.

Earnings generated by Fubon Life Assurance for the first half of the year rocketed by 583.1 percent to NT$2.73 billion thanks to strong first-year premiums. It contributed 31 percent to the parent company's earnings, up from nearly 11 percent from a year ago and replaced Fubon Financial's securities unit as the biggest contributor.

Fubon Securities Co (富邦證券), the nation's second-largest brokerage firm, earned NT$2.55 billion, mainly from fee income thanks to brisk stock market trading.

Its banking unit, Taipei Fubon Commercial Bank, saw net income increase 126.3 percent to NT$1.88 billion in the first half of the year, propelled by wealth management fees. With the credit abuse storm easing, its non-performing loan ratio dropped to 1.41 percent at the end of June, from 1.51 percent at the end of March.

"Fubon Financial's first-half result was slightly better than we expected, helped by a vibrant stock market," said Greg Ou (歐正宏), an analyst with Masterlink Securities Corp (元富證券).

With the banking unit expected to continue recovering from the bad-debt crisis, the group's performance in the second half of the year is expected to improve further, Ou said.

While working to secure its domestic business, Fubon Financial is also keen to expand overseas.

Fubon Financial's Hong Kong banking subsidiary will qualify for investment in Chinese banks when the Closer Economic Partnership Arrangement, which allows the territory's banks with US$6 billion in assets to invest in China, goes into effect next year, Kung said.

The asset threshold was lowered from US$10 billion.

Kung declined to comment on whether the company was in talks with any Chinese banks for investment, which requires approval from the FSC.

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