Fri, Feb 01, 2008 - Page 12 News List

Chinatrust profits from lower loan loss provisioning

By Joyce Huang  /  STAFF REPORTER

Chinatrust Financial Holding Co (中信金控), the nation's sixth-biggest financial service provider, yesterday reported that net profit last year reached NT$13.34 billion (US$414 million), or earnings per share of NT$1.49, on lower bad-loan provisions and growing fee income. This compared with a net loss of NT$10.17 billion in 2006.

The company expects continued growth this year, with earnings possibly approaching historical high levels in 2005, when it posted net profits of NT$16.1 billion and pre-tax profits of NT$20.4 billion, a company executive said.

"Our strategy to transform [Chinatrust's] business focus from asset growth to fee income has paid off," chief financial officer Hsu Miao-chiu (許妙靜) told an investor conference yesterday.

Thanks to contributions from its wealth management business, which saw 50.7 percent growth, Chinatrust's fee income climbed 33 percent year-on-year to NT$25 billion last year, accounting for 42.5 percent of its total revenue.

The company expects its wealth management business to see steady growth this year, while it expands into new businesses such as bancassurance and overseas corporate markets.

"We're studying the possibility of forming a joint venture with an insurance partner to explore banc-assurance service, but it's still in the planning stage," Hsu said.

Chinatrust will also increasingly tap into corporate markets in India, Indonesia, the Philippines and Singapore, after seeing a 13.8 percent revenue growth from overseas businesses, including a combined 55 percent revenue growth from branches in Hong Kong and Vietnam, said Chen Yong-jin (陳永晉), a vice president at Chinatrust's corporate banking division.

Dexter Hsu (許世德), an analyst with JPMorgan, said yesterday he had a neutral view on Chinatrust's outlook.

"The worst-case scenario is that growth remains flat this year," he said, adding that the company's target of reaching its previous historical high was "possible" and bad-loan provisions should further decline this year.

Chinatrust set aside NT$9.9 billion for bad-loan provisions last year, down from NT$48.28 billion in 2006, and is expected to see a small 2 percent growth this year as defaults on its unsecured cash-card loans may slightly widen when the Personal Bankruptcy Law (破產法) comes into effect in April, Chinatrust's Hsu said.

The firm's non-performing loan ratio stood at 1.66 percent as of last month, government statistics showed.

Negatively impacted by the US' subprime mortgage crisis last quarter and the recent stock slump, Chinatrust suffered an investment loss of NT$336 million last year and booked NT$780 million in outstanding losses from investment in structured-investment vehicles, as well as potential losses of NT$546 million from the closure of the Alexander Group (亞力山大集團) fitness chain last month.

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