Fubon Financial Holding Co (富邦金控) yesterday said it restated its consolidated net income for last year to NT$21.21 billion (US$712.7 million), a 9.55 percent downward revision from the figure it released last month after using a new foreign exchange conversion rate.
The nation’s second-largest financial services provider by assets posted on Jan. 10 a net income of NT$23.45 billion for last year.
The Fubon earnings revision followed that of Cathay Financial Holdings Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) on Wednesday as financial firms aimed to better present their business performance amid a volatile exchange-rate environment.
In a Taiwan Stock Exchange filing yesterday, Fubon said its -revision was in line with a recommendation by the Accounting Research and Development Foundation (會計研究發展基金會) on Friday that suggested companies should use the average intraday rate of exchange for the US dollar against the New Taiwan dollar set by the state-run Bank of Taiwan (BOT, 台灣銀行) rather than the closing rate set by the central bank, which allegedly intervened in the local market in late sessions.
Fubon Financial said yesterday it used NT$29.152 per US dollar on Dec. 31 set by the BOT, instead of the NT$30.368 rate set by the central bank, to calculate last year’s earnings. As a result, earnings per share would be revised to NT$2.48 for all of last year, compared with the NT$2.75 the company reported last month, the filing said.
The net income figure for last month was also restated at NT$5.11 billion, or NT$0.6 per share after the company used the new exchange rate, up from the initial figure of NT$2.87 billion, or NT$0.34 a share, posted earlier this month, it said.
Goldman Sachs said on Wednesday in a note that the use of the new exchange rate in the financial sector could have a more severe impact on life insurers than banks and securities firms, citing the insurers’ “large overseas investments on their asset portfolio, while most of their liabilities are in NT dollar terms.”
Based on Goldman Sachs’ estimates, Fubon should be less affected by the restatement than Cathay or Shin Kong, because of its “higher portion in cross--currency swap hedges and a more diversified business mix,” analysts Vincent Chang (張進森) and Justin Chen said in the note.
On Wednesday, Cathay Financial restated its net income at NT$4.58 billion last year, a 44.35 percent downward revision from the NT$8.23 billion it announced on Jan. 7, while Shin Kong Financial saw net income revise down to NT$2.51 billion for last year, 44.1 percent less than the NT$4.49 billion figure it reported on Jan. 10.
“Forex fluctuation would inevitably increase life insurers’ earnings volatility, making its earning delivery more unpredictable, and from time to time, life insurers would have to offload gains from their equity/fixed income investments to offset the negative impact from soaring forex hedge costs,” Goldman Sachs analysts wrote.