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Fubon aims to be first to China

Fubon Financial Holding Co (富邦金控), the nation's second-largest financial services company by market value, yesterday gave a thumbs-up to the Cabinet's decision to relax restrictions on local banks' China-bound investments and said it hoped to become the first Taiwanese bank to enter the Chinese market.

"We're very happy to learn of the government's policy decision and will aggressively facilitate [its Hong Kong-based subsidiary's] planned acquisition of a maximum 20 percent stake in a Chinese bank, hoping to strike a deal by the end of the year," Fubon Financial president Victor Kung (龔天行) told an investors' conference yesterday.

Local media had speculated that Fubon Bank (Hong Kong) Ltd, formerly known as the International Bank of Asia (港基銀行), had struck a deal to buy a 20 percent stake in Xiamen City Commercial Bank (廈門市商銀).

Kung refused to confirm the deal yesterday, saying "the bank looks forward to entering China, but hasn't bought any shares in any Chinese banks ? that would be a violation of local regulations."

"We hope our future expansion into China will help us provide a better service to our clients and a better performance," Kung said.

He was positive on the Hong Kong subsidiary's outlook for this year, saying growth momentum from Taiwan-related businesses would offset the global financial market turmoil after the bank saw a 41 percent growth year-on-year in its net profits last year.

With NT$1.84 trillion in assets, Fubon Financial told investors yesterday that it made NT$14.43 billion (US$470.2 million) in net profit, or NT$1.87 per share, last year, up 72 percent from the NT$8.4 billion net profit, or NT$1.09 a share, it made a year earlier.

The group's return on assets and return on equity (ROE) climbed by 0.42 percent and 3.5 percent respectively, to 0.82 percent and 8.8 percent, the financial report showed.

"We are not satisfied with the 8.8 percent ROE and hope to lift it to 10 percent in the short term and ultimately to 15 percent," Kung said.

Fubon Life Assurance Co (富邦人壽) contributed 28 percent of the net profits, or NT$3.96 billion, Fubon Securities Co (富邦證券) also generated 28 percent, while Taipei Fubon Bank (台北富邦銀行) made 24 percent, or NT$3.3 billion.

Taipei Fubon Bank's net income saw the biggest growth, up from NT$440 million in 2006, on fewer loan provisions and a growing wealth management business, which saw 60 percent growth in sales and 90 percent growth in fee incomes.

The bank's loan provisions declined from NT$15 billion in 2006 to NT$10.3 billion last year, NT$1.2 billion of which was reserved for possible defaults when the new Bankruptcy Law (消費者債務清理條例) takes effect next month, Kung said.

After writing off NT$3.67 billion in subprime-related investments last year, the group still has NT$11.35 billion invested, 55 percent of which is principal protected, while the remaining 45 percent may be subject to losses, Kung said.

Fubon shares have surged 16.32 percent so far this year, closing at NT$33.5 yesterday.
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