Chinatrust Financial Holding Co (中信金控), the nation’s third-largest financial service provider by assets, yesterday repeated its confidence in stable earnings growth for this year, predicting that the ongoing global financial market turmoil would soon be over, probably leaving the world economy and the firm’s profitability largely unhurt.
The group owns US$231 million in US government bonds and Treasury bills, which may well emerge from the recent US credit downgrade unscathed, said Rachael Kao (高麗雪), senior vice president of the firm’s banking subsidiary, Chinatrust Commercial Bank (中信銀).
“US government debts remain safe as its credit rating of ‘AA+’ has the same risk factor as ‘AAA,’” Kao told an investors’ conference.
In the first six months of the year, Chinatrust Financial earned NT$11.15 billion (US$383.72 million) in net profit, an increase of 48.3 percent from a year earlier on improving institutional and consumer lending, the company’s report said.
That translated into earnings of NT$1.07 per share, lifting the ratio of returns on equities and assets to 16.03 percent and 1.21 percent respectively, recovering to the levels before the domestic credit card debt storm, the report said.
Cheng Wen-huei (鄭文慧), senior economic researcher at Chinatrust Bank, said Taiwan’s export-focused economy may grow 5 percent this year as strong demand from China would continue to offset the economic slowdown in the US and Europe.
The upcoming cross-strait trade talks and Japan’s reconstruction of its quake-stricken areas will also lend support to Taiwan’s economy, Cheng said.
“We expect the New Taiwan dollar to remain under appreciation pressure going forward, trading between NT$28.5 and NT$29.5 despite its recent retreat,” Cheng said.
Against this backdrop, the central bank may raise key interest rates by another 12.5 basis points next month and December, but may halt the tightening cycle next year as inflationary pressures subside, the economist said.
However, Cheng expects the global financial markets to remain volatile in the short term with the US Federal Reserve’s policy meeting overnight to play a critical role.
“The Fed is likely to stand by its loose monetary stance, but may not introduce a fresh round of quantitative easing because the move will fuel inflationary pressure,” she said.
Chinatrust Financial saw its net profit rising 28.2 percent to NT$6.26 billion in the second quarter from three months earlier on improving core businesses, the report said.
The banking unit posted NT$5.29 billion in net income during the April-to-June period, accounting for 84.57 percent of the group’s after-tax earnings, the report said.
The net interest margin stayed unchanged at 1.48 percent in the second quarter, as sharp competition kept borrowing costs low.
The lender now expects the margin to gain six to eight basis points this year, from the 10 basis points previously predicted.
The shares of Chinatrust Financial ended down 2.75 percent to NT$22.95 yesterday, faring worse than the TAIEX’s overall 0.79 percent fall.