SinoPac Financial Holdings Co (永豐金控) expects continued global stock market volatility to further erode its earnings this quarter and next as the impact of Europe’s sovereign debt crisis has yet to come into full play, senior executives said yesterday.
The financial services provider reported a 57 percent sequential drop in net profit last quarter to NT$799 million (US$26.4 million), mainly because of its securities subsidiary’s loss of NT$114 million, reversing a net profit of NT$390 million three months earlier.
Compared with a year earlier, SinoPac Financial’s third-quarter earnings shrank 63 percent.
“The landscape is tough going forward as Europe’s debt crisis and [companies’ implementation of] unpaid leave at home are likely to worsen, sapping investor confidence further,” SinoPac Financial chief strategy officer Michael Chang (張晉源) said. “It remains to be seen if the leadership reshuffle in Greece and Italy is the end of the problem, or the beginning of a bigger storm.”
SinoPac Financial has no exposure to debt-ridden European countries like Italy, Greece, Portugal and Ireland, and its other European bonds and shares make up a mere 1.37 percent, or NT$3.8 billion, of its investment portfolio, Chang said.
The group accumulated NT$41.29 billion in net income in the first nine months of the year, an increase of 4.2 percent from a year -earlier on improving fee and interest income prior to the sentiment change, the report said.
That translated into NT$0.56 in earnings per share (EPS), making SinoPac Financial the second-worst performer among 14 peers after China Development Financial Holding Corp (中華開發金控), with EPS of NT$0.25.
The modest earnings may further weaken this quarter as Bank SinoPac (永豐銀行), the group’s main source of income, plans to raise its loan loss reserve to 1 percent from the present 0.76 percent, at the urging of the Financial Supervisory Commission to fend off a potential default. That would entail an extra NT$1 billion in provisions, Chang said.
Bank SinoPac’s loans to domestic flat-panel manufacturers total NT$15 billion, while those to solar energy and LED companies stand at NT$300 million, Chang said.
However, the lender has no exposure to financially stressed computer memory chipmakers, he added.
The four sectors have reported sharp losses this year and showed no sign of picking up as an industry oversupply and government austerity measures will likely continue to suppress demand.
The bank’s new offshore yuan business, while positive to -earnings, will not be a significant catalyst unless Taiwan allows investment in bonds issued by the Chinese government and enterprises, SinoPac Financial chief executive officer Stan Siao (蕭子昂) said.
“There aren’t many investment vehicles around even after offshore banking units were allowed to take in yuan deposits,” Siao said.
Siao pressed for an extension of the yuan businesses to domestic banking units so that Taiwanese may own savings in the Chinese currency.
The opening would make the yuan the second-largest foreign currency here after the US dollar, Siao said.
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