Cathay Financial Holding Co (國泰金控), Taiwan’s biggest financial services provider, said it would tap into China’s equity and property markets once governments on both sides sign financial memorandums of understanding later this year.
Cathay Financial President Chen Tsu-pei (陳祖培) said the company’s subsidiary, Cathay Life Insurance (國泰人壽), would invest NT$100 billion (US$3 billion) in Chinese stocks and real estate after the two sides enact regulations.
“We have a competitive edge over our rivals, as Cathay Life has had a branch in China for five years and already has many clients,” Chen told an investors conference.
Chen said Cathay Financial would also seek to expand its business in Vietnam, where its banking and insurance units have several offices with total assets worth US$5.2 billion.
In addition, Cathay Financial will adjust its product mix, strengthen its asset management business and cut down on its capital costs amid the economic downturn, Chen said.
The group posted an after-tax profit of NT$5 billion, or NT$0.77 earnings per share, in the first quarter, compared with a NT$6 billion loss in the same period last year, the report showed.
Lin Chao-ting (林昭廷), senior vice president at Cathay Life, said the earnings came mostly from the insurance unit, which contributed NT$360 million, while Cathay United Bank (國泰世華) generated NT$120 million.
Lin attributed the gains chiefly to slumping currency hedging costs that shot up drastically in the first half of last year following surging fuel prices.
In terms of domestic securities investment, Cathay Financial reported a modest 1.5 percent profit in the first quarter when the stock index rose by two digits, Lin said.
Lin said the showing was tied to the company’s decision to dump undesirable assets and focus on products with high margins.
To that end, Cathay Financial will pump more funds into the local bourse, he said.
James Wu (吳永新), an analyst at BNP Paribas Securities Taiwan, said foreign exchange rates and a rally in share prices had much to do with Cathay’s financial improvement.
“Anticipation of a cross-strait MOU is boosting interest in financial sector stocks and real estate,” Wu wrote in a note. “A higher stock market reduced the pain of unrealized stock loss and boosted book value.”
First-quarter earnings at Cathay Financial beat Wu’s previous estimate of NT$0.51 earning per share.
Wu raised his forecast for Cathay Financial’s net income to NT$9 billion for this year, but added that earnings would be volatile as a result of currency rate fluctuations.
Despite the improvement, Wu said Cathay Financial’s balance sheet would remain the most leveraged in the sector.
RSS