Fri, Aug 26, 2011 - Page 11 News List

First Financial upbeat on business loan potential

FIRST HALF:Corporate lending buoyed earnings, helped by local firms who have benefitted from the ECFA and it should continue through the second half of the year

By Crystal Hsu  /  Staff Reporter

State-run First Financial Holdings Co (第一金控) yesterday said it remained upbeat about corporate loan growth for the rest of the year, after net income picked up 77.8 percent in the first half from a year earlier.

The bank-centric group posted NT$4.43 billion (US$152.47 million) in net profit for the first six months of the year, buoyed chiefly by corporate lending, Annie Lee (李淑玲), head of First Financial investor relations, told an investors’ Web cast.

That figure meant a 21.4 percent increase in the second quarter from the first and translated into earnings of NT$0.65 per share, the company’s report showed. The growth momentum, which was attributable to domestic-oriented industries after the Economic Cooperation Framework Agreement (ECFA) took effect, would extend into the second half and bodes well for earnings expansion, Lee said.

“We are cautious, but not pessimistic about the economic outlook,” she said. “Consequently, we will not tighten credit policy despite the current financial market turmoil.”

First Commercial Bank (第一銀行), the group’s main source of income, saw net profit more than double to NT$4.61 billion in the first half, while the securities and insurance units recorded losses of NT$158 million and NT$113 million respectively, the report indicated.

As of June 30, total loans climbed 13.28 percent on an annual basis to NT$1.31 trillion, with corporate banking making up 73.4 percent, thanks to growing loan demand from small and medium-sized enterprises (SMEs), the report said.

SME lending gained 25 percent to NT$500.2 billion, the report said.

Loan growth and interest rate hikes pushed up net interest income by 15.3 percent to NT$10.07 billion, but net fee income stayed nearly flat at NT$2.35 billion, the report said.

“That is because SME and government loans generated limited fee income,” Lee said.

Net interest margin inched up to 1.1 percent at the end of June, from 1.07 percent three months earlier, in line with the projected increase of 10 basis points for the whole of this year, Lee said.

While the US and European economies stagger, growth in emerging economies continued, Lee said.

Major technology firms have delivered flagging financial results, while real-estate prices stayed firm amid excessive liquidity and low borrowing costs.

Mortgage lending increased 3.2 percent to NT$338.7 billion at the end of June from a year earlier, accounting for 27.2 percent of total loans, the report said.

The government has discouraged aggressive home loans expansion.

Shares of First Financial closed down 2.2 percent to NT$22.25, worse than TAIEX’s 1.23 percent drop.

Citigroup Global Markets yesterday maintained its “sell” rating on First Financial because of concerns over sustained capital adequacy strains.

“We see headwinds to growth and fees going into the second half,” the brokerage said in a note following the announcement of earnings results. “Overhang on raising capital should ease in the short term, but it won’t be completely resolved due to its high balance sheet leverage and low core capital ratio.”

First Financial will raise about NT$15 billion in new capital to address the issue, a process that will last through the end of next month.

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