Fri, May 25, 2012 - Page 12 News List

First Financial cautious despite strong Q1 profit

CAUTION FIRST:Despite Europe worries, the bank is poised for greater growth in Asia, especially an extension of yuan financing services, pending regulatory easing

By Crystal Hsu  /  Staff reporter

Despite a strong first-quarter performance, First Financial Holding Co (第一金控) yesterday said it was maintaining its conservative growth guidance for this year amid concern over Europe’s worsening debt problem.

“We are holding on to our projection of a 5 percent growth in loans this year,” First Financial investor relations head Annie Lee (李淑玲) said. “We met the target in the first three months, but are coming under pressure as uncertainty over the macroeconomy deepens.”

The state-run financial services provider reported NT$3.02 billion (US$101.97 million) in net income during the January-March period, jumping 50.9 percent from a year earlier, thanks to fast-growing demand for foreign-currency loans from Taiwanese firms operating in China, Lee said.

Total loans expanded by 5.3 percent to NT$1.38 trillion in the first quarter from NT$1.31 trillion three months earlier, pushing the loan-to-deposit ratio to a record-high of 86.05 percent, company data showed.

The ratio for loans to deposits denominated in New Taiwan dollars climbed to 87 percent last month, while that for foreign currencies reached 81 percent, indicating lower idle funds and room for growth, Lee said.

She expected both figures to edge up for the remainder of the year, saying an aggressive advance was unlikely because of restrictions on banks’ exposure.

Taiwanese lenders have pressed for an extension of yuan financing services — currently limited to offshore banking units — to domestic banking units, allowing them to boost profitability. With the second-largest service network among domestic peers in the region, First Commercial Bank (第一銀行), the group’s flagship subsidiary, is poised to take advantage of the proposed regulatory easing, Lee said.

Overseas operations generated 35.7 percent of pre-tax earnings in the first quarter, compared with 30.5 percent a year ago, with Greater China accounting for 60 percent of the increase, according to company statistics.

Consequently, First Financial is more eager to expand in the region than at home, Lee said.

The conglomerate is also waiting for regulatory cues about plans by its British partner, Aviva PLC, to sell a 49 percent stake in the life insurance subsidiary, First-Aviva Life Insurance Co (第一英傑華人壽).

“We will start to search for new partners once the Financial Supervisory Commission allows Aviva PLC to exit the local market,” Lee said.

The life insurance, securities and investment trust units all reported gains in the first quarter, but the trend may not be sustainable amid market volatility, Lee said.

The government’s plan to tax capital gains on securities investments is adding to the weak sentiment, she said.

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