Fri, Nov 02, 2007 - Page 12 News List

Cathay Financial's 3Q net income climbs 15 percent

By Joyce Huang  /  STAFF REPORTER

Cathay Financial Holding Co (國泰金控), the nation's biggest financial service company by assets, yesterday said its third-quarter profit grew 15 percent quarter-on-quarter to NT$12.3 billion (US$380 million).

Net income in the first nine months more than doubled to NT$33 billion from NT$13.1 billion a year earlier as a result of stock investment gains by insurance subsidiary Cathay Life Insurance Co (國泰人壽) and lower provisions for bad loans at banking unit Cathay United Bank (國泰世華銀行).

Nine-month profits exceeded the company's record for full-year profits -- NT$29.8 billion in 2004 -- Bloomberg said.

Among its asset allocation, the return on its NT$201 billion investment in domestic stocks was the highest at 21.87 percent, followed by a 7.6 percent return on NT$59.8 billion in investment in overseas stocks.

Speaking at an investor conference, chief strategy officer Lee Chang-ken (李長庚) forecast stable growth for the company in the current quarter.

"I don't think we'll post any major losses in the near future given that 85 percent of our assets are NT dollar-denominated and the remaining investments are secured with low risk," Lee said.

Lee said the US subprime mortgage crisis has limited impact on Cathay Financial, as the company has only NT$4 billion in subprime-related investments, most of which are bank-secured, while its NT$4.3 billion in provisions on NT$14 billion in bad loans is also adequate.

The company's dividend pay-out ratio may average between 65 percent and 80 percent, Lee said.

The company's insurance segment contributed NT$10.9 billion, or 73 percent, to its nine-month profit after seeing a nearly 33 percent growth in premium income from last year.

Its second-most profitable unit, Cathay United Bank, saw a slight growth in corporate lending and mortgages with the shrinking of problematic consumer lending. Its wealth-management businesses reaped a 137 percent growth from a year earlier.

Cathay Life is set to speed up its expansion into 11 Chinese cities, aiming to increase its Shanghai subsidiary's first-year premium income from 1 percent to 3 percent of its total contribution in 2010, Lee said.

Cathay Life (Shanghai) posted 328 million yuan (US$75.5 million) in first-year premium income in the first nine months of the year, up 43 percent from last year.

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