Fri, Aug 24, 2012 - Page 14 News List

First Financial eyes China

COUNTRY MARKETS:Although it performed well in the first half of the year, First Financial is looking to rural China as a possible solution to the global slowdown

By Amy Su  /  Staff reporter

State-run First Financial Holding Co (第一金控) yesterday maintained its conservative growth outlook for the second half of this year amid global economic uncertainties led by the eurozone’s debt problems.

The company reported a strong performance in the first half of the year on the back of strong demand for loans from small and medium-sized enterprises.

The company posted NT$6.62 billion (US$220.96 million) in net income, or NT$0.82 in earnings per share, during the first six months, jumping 49.5 percent from a year earlier, company data showed.

Total loans expanded by 6.7 percent to NT$1.4 trillion in the first half from NT$1.31 trillion in the same period last year, pushing the loan-to-deposit ratio to a record-high of 88.28 percent, data showed.

On a yearly basis, the company’s loan business grew by 3.2 percent, statistics showed.

The growing momentum of foreign-currency loans and commercial loans helped drive up the level of total loans in the first six months, with such loans exhibiting 15.4 percent and 8.2 percent year-on-year growth during this period respectively.

“The performance of loans in the first half should make the company’s target of 5 percent growth in loans this year not too hard to reach,” First Financial investor relations head Annie Lee (李淑玲) told an investors’ conference.

Meanwhile, the company saw net interest margin expand by 10 basis points from 1.1 percent to 1.2 percent for the year to date.

However, the slowing global economy has forced Lee to keep a conservative outlook for the second half. She said that with the central bank likely to maintain its policy interest rates over the near future, the banking sector’s interest margins could also stay at a relative low level for longer.

As a result, First Financial will continue looking for chances to deploy in non-banking sectors, but does not have a plan for mergers and acquisitions (M&A), she said.

It will also seek opportunities to expand its business platforms in China, after the company’s board on Friday last week approved investing US$$60 million to set up rural banks in China.

If it receives approval from both Taiwan and China, First Commercial Bank (第一銀行) — First Financial’s banking arm — will become the first Taiwanese lender to launch rural banks in China. However, Moody’s Investors Service yesterday said it viewed the rural bank plan as “credit negative” for First Financial.

“Capital adequacy also presents challenges,” Moody’s associate analyst Ginger Kao (高玟君) said in a report.

Unless the bank enhances its capitalization, Kao said its additional investment in China would be restricted. Such restrictions would constrain the bank’s ability to improve its economic scale and achieve better profitability in China.

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