Hua Nan Financial Holdings Co (華南金控) aims to improve its profitability this year by expanding its corporate banking and foreign currency loan businesses, as the central bank is likely to retain its low-interest rate policy for a period, senior executives said yesterday.
The bank-centric financial services provider has set a modest target of 5 percent growth for its loan book this year, slightly higher than the government’s GDP growth forecast of 3.85 percent, Derek Chang (張雲鵬), an executive vice president, told an investors’ conference.
The growth target is the same as last year, as uncertainty will continue to weigh on the global economy, Chang said.
The company’s banking arm, Hua Nan Commercial Bank (華南銀行), had NT$1.31 trillion (US$44.48 billion) in outstanding loans at the end of last year, from NT$1.24 trillion a year earlier, a Hua Nan Financial report showed.
Loans to small and medium-sized enterprises (SMEs) picked up 13 percent to NT$341.1 billion as of December last year, while big-cap lending dropped 15 percent to NT$243.2 billion, the report said.
The state-run lender seeks to increase SME loans by 6 percent this year and to reach out to new customers through existing clients in the same supply chain, Chang said.
Hua Nan Bank president Alex Wang (王濬智) said the adjustment was necessary to survive, as the low-interest rate environment squeezes profits.
The interest margin on SME loans averages 72 basis points higher than that for loans to big corporations, Wang said.
The bank will also boost -foreign-currency financing, which generates a higher interest margin than local-currency loans, Wang said.
The interest margin on local-currency loans is likely to stagnate or rise only slightly this year, as the central bank is widely expected to hold policy rates steady to support economic growth, he said.
Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s, said local banks are set for another year of mediocre profits constrained by stiff competition and their slow efforts to diversify product offerings.
However, the slowdown in the global economy is unlikely to cause significant harm to their credit profiles given the sector’s adequate capitalization, the agency said.
“We are keeping our stable outlook on Taiwan’s banking sector over the next few quarters, because we believe local banks have adequate capital strength and satisfactory liquidity to ride out a mild economic downturn,” credit analyst Eunice Fan (范維華) said yesterday.
While a potential price correction in the real-estate market would raise credit costs, Fan said the banking sector has tightened capital management this year.
The measures include plans to raise capital, reduction in cash dividend payouts and retention of earnings to buffer against a volatile market over the next few quarters, she said.
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