Hua Nan Financial Holding Co (華南金控), which saw its net profit expand sharply in the first half of the year, expects stable growth in the second half, driven by its overseas units and lending to small and medium-sized enterprises (SMEs), senior executives said yesterday.
The bank-centric financial services provider posted NT$43.6 billion (US$150.96 million) in net earnings for the first six months of the year, surging 37 percent from the year-earlier level, as net interest income gained 15 percent to NT$9.3 billion, Hua Nan Financial vice president David Cheng (鄭永春) told an investors’ conference.
The results translated into earnings of NT$0.66 per share, with the ratios of returns on assets and equities improving to 0.46 percent and 8.62 percent, from 0.35 percent and 6.78 percent respectively, company data showed.
“We aim to boost SME lending for the rest of the year as interest rates for such loans are about 70 percent higher than those for institutional financing,” Cheng said.
SME loans increased 12 percent in the first half of the year to NT$28.8 billion and are expected to climb another 4.5 percent in the coming months, he said.
Net interest margin inched up 9 basis points to 1 percent as of June from a year earlier, while the interest spread widened only 3 basis points to 1.32 percent, a bank report showed.
That pace lags significantly behind the central bank’s rate hikes over the past year, which brought the discount rate from 1.25 percent to the current 1.875 percent.
Hua Nan Bank president Alex Wang (王濬智) said intense competition limited its room for adjustment.
“Market competition is the most important factor [that affects] pricing, not the Financial Supervisory Commission,” Wang said.
The commission has voiced concern over the nation’s ultra-low interest margins and warned it might tighten lending rules if banks failed to show restraint.
Overbanking has prompted the state-run bank to seek expansion overseas, especially in China, where Hua Nan intends to acquire stakes in city-level peers and has hired a consultant to assess the investment environment, Wang said.
Hua Nan Bank also plans to open a second branch in China, after setting up its first branch in Shenzhen, to expand its customer base and take advantage of the larger interest spread there, Wang said.
The bank is planning to set up a capital leasing subsidiary to give the bank an extra channel to expand in China, Wang said.
Offshore units contributed 20 percent to Hua Nan Financial’s pre-tax earnings, he said, adding that the group aims to lift the ratio to 30 percent by the end of the year.
Hua Nan Bank, which loaned NT$4.83 billion to cash-strapped ProMOS Technologies Inc (茂德科技), will raise the provision higher at the end of this quarter, from the current 50 percent, executive vice president York Lai (賴明佑) said.
Lai did not give an exact number, but said full provisioning is not necessary because the loan is secured.