Cathay Financial Holding Co (國泰金控), the nation’s largest financial service provider by assets, yesterday reported third-quarter net profits of NT$5 billion (US$166 million), as a weaker local currency lowered foreign exchange hedging costs and therefore eased earnings erosion at its life insurance subsidiary.
The third-quarter results meant a 6.4 percent sequential improvement from three months earlier, but a 4 percent decline from the level a year earlier, as global market turbulence dampened earnings, a company report showed.
“Foreign exchange hedging costs, a considerable drag on the group’s financial performance, dropped from 3.4 percent to 3 percent of [overseas investment],” Cathay Financial spokesman Alan Lee (李偉正) told an investors’ conference.
Still, the mild decline in its foreign exchange hedging costs missed the company’s guidance of keeping costs at between 150 and 200 basis points.
Lee pinned the blame on the accounting requirement to book foreign exchange recoveries as shareholder equity gains rather than earnings.
“Actual hedging costs would have accounted for only 0.9 percent if we factor in the recoveries,” Lee said.
Cathay Life Insurance Co (國泰人壽), the group’s flagship subsidiary and the nation’s largest by market share, earned NT$1.7 billion during the July-to--September period, falling 37.03 percent because of lower returns on its investment versus liability costs, Lee said.
The insurer had NT$2.87 trillion in funds available for investment as of September with cash and cash equivalents totaling NT$257.7 billion, the report said.
Cathay Life executive vice president Lin Chao-ting (林昭廷) said the company aims to raise foreign investment to 45 percent in the coming months from the current 41.2 percent.
Overseas bonds generated 6.4 percent return in the third quarter, while foreign equities yielded a mere 2.1 percent because of market volatility, the report said.
Cathay Life increased holdings in domestic shares to NT$256 billion in the third quarter, accounting for 8.9 percent of total investment, compared with 7.8 percent in the second quarter, and generating a return of 11.9 percent, the report said.
Cathay United Bank (國泰世華銀行), the banking arm and main source of income, saw its net profit for the third quarter expand 3.3 percent to NT$3.1 billion from the second quarter on growing fee and interest income, the report said.
Earnings were flat compared with the same period last year, even though its net interest margin widened from 1.06 percent to 1.17 percent, while total loans picked up 15.7 percent to NT$1 trillion at the end of September.
Shares of Cathay Financial ended down 2.07 percent at NT$35.40 yesterday, bucking the TAIEX’s 0.45 percent rise, Taiwan Stock Exchange data indicated.
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