Shin Kong Financial Holding Co (新光金控) has improved its finances in the second quarter, but it is unlikely to swing to profit for the rest of this year, the company said yesterday.
Shin Kong Financial narrowed its net loss to NT$70 million (US$2.19 million) in the second quarter, from a loss of NT$2.93 billion in the January-to-March period, on improving insurance premium income and declining hedge costs at its insurance unit, company president Victor Hsu (許彭) told an investors’ conference.
In the first half, the company’s net loss widened to NT$3 billion, compared with a loss of NT$622 million a year earlier.
Compared with its 14 domestic peers, Shin Kong remained the least profitable firm with a net loss of NT$0.14 per share during the first seven months.
“The company will seek to strengthen its foreign exchange and cash management to increase its fee and interest income,” Hsu said.
Marco Liu (劉建賢), a financial analyst at Fuh Hwa Securities Investment Trust Co (復華投信), said Shin Kong Financial may not turn profitable in the coming six to 12 months because of its conservative investment strategy.
“The insurer has focused its overseas investments on low-yield debts and securities, while its premium income is still unable to cover costs,” Liu said.
Shin Kong Life Insurance Co (新光人壽) is the main revenue source of Shin Kong Financial. The insurance unit saw first-year premium income surge 45.2 percent to NT$22.46 billion in the second quarter from three months earlier, a rise of 21.2 percent year-on-year to NT$37.93 billion in the first half, which helped it narrow its quarterly loss to NT$550 million from a loss of NT$3.36 billion in the first quarter.
Shin Kong Life president Jason Tsai (蔡雄繼) said traditional and interest-sensitive products accounted for 25 percent and 63.5 percent of premium income respectively.
As for the company’s banking unit, Shin Kong Bank (新光銀行), posted a net profit of NT$916 million in the first half, nearly three times as much from last year, Shin Kong Financial said.
Chief financial officer Winston Yung (容覺生) said an increase in fee income from wealth management amid recovering risk appetite accounted for the improvement.
Mortgage loans grew 3.5 percent year on year to 40 percent of the bank’s total loans in the first half, while corporate financing took up another 32.6 percent, up 4.5 percent from a year earlier, according to the company’s statement.
Net interest income jumped 41.9 percent to NT$2.9 billion as of June 30 as net interest margin edged up to 1.64 percent in the second quarter, from 1.60 percent in the first quarter, the company’s statement said.
Yung said the central bank’s interest rate hike in June helped widen interest spread by five to 10 basis points, and he expects another hike of 12.5 basis points in the interest rate next month, when the central bank holds its quarterly board meeting.
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