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First Financial warns on fee income-based business

By Joyce Huang
STAFF REPORTER
Saturday, Aug 30, 2008, Page 12

Because of a slowing economy, First Financial Holding Co (第一金控) expects its fee income-based businesses to suffer a 20 percent decline this year, a company executive said yesterday.

The state-run financial service provider’s revenues from its wealth management businesses, which make up almost 60 percent of its fee income-related business, were likely to see a larger 30 percent decline this year after contracting in the first half, Annie Lee (李淑玲), company vice president and head of the strategy and planning department, told an investors’ teleconference yesterday.

Fee incomes from the wealth management business saw a 23.7 percent decline year-on-year to NT$1.566 billion (US$49.7 million) in the first six months of this year, she said.

First Financial said its net profit reached NT$6.115 billion in the first half, 12.2 percent year-on-year growth, or NT$1.01 per share, which tops the 13 other domestic financial service providers. Although it has an exposure of US$181 million to US mortgage lenders Fannie Mae and Freddie Mac, First Financial has no plans as yet to set aside more provisions for potential bad loans.

The company has a bad loan provision of between 52 percent and 56 percent, which “will be appropriate and sufficient,” Lee said.

However, if more losses are incurred from bad loans, the company would adjust its provisions, she said.

First Financial currently has a capital adequacy ratio of 103 percent, the company said.

Lee also expressed a conservative view toward the company’s loan growth, which she expects to see “single-digit” growth this year, but she said that would outperform the nation’s full-year economic growth.

Looking forward, the company will seek to expand its non-bank businesses, Lee quoted her chairman Michael Chang (張兆順) as saying.

That includes businesses dealing in the cross-sales of financial products, securities brokerage and asset management, she said, adding that the company’s joint venture with the UK’s largest insurance services provider, Aviva Group, First-Aviva Life Insurance Co (第一英傑華人壽), would likely only start to turn a profit in four years’ time.
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