Wed, Aug 29, 2012 - Page 13 News List

Cathay tapping into China’s banks

BROADENING HORIZONS:Cathay United Bank is looking into opening another outlet in Shanghai as well as a branch elsewhere in China to boost its bottom line

By Crystal Hsu  /  Staff reporter

Cathay Financial Holding Co (國泰金控), Taiwan’s largest financial services provider by assets, aims to tap further into China’s banking market to boost earnings after profits from offshore and overseas banking units grew rapidly in the first six months, senior executives said yesterday.

Cathay United Bank (國泰世華銀行), which currently has a branch in Shanghai, China, is looking to take a stake in a Chinese partner with an extensive service network to improve cross-selling efficiency, Cathay Financial spokesman Alan Lee (李偉正) said on the sidelines of an investors’ conference in Taipei.

“Ideal partners are banks with sizable economies of scale and cross-province operations so we may take advantage of their sales platform to promote products from our banking, insurance and non-life insurance units,” Lee said.

Cathay Financial is in talks with a few prospective partners and will unveil details once the venture bears fruit, he added.

Furthermore, Cathay Bank is applying to open another outlet in Shanghai and a second branch in China, Lee said.

The banking arm generated NT$6.65 billion (US$222 million) in net income in the first six months, more than offsetting NT$1.06 billion in losses incurred by flagship subsidiary Cathay Life Insurance Co (國泰人壽).

Offshore and overseas branches accounted for 38 percent of the earnings, up from 26 percent last year, and underpinned the increase in net interest margin (NIM) to an average of 1.24 percent, from 1.18 percent a year earlier, Lee said.

The Shanghai branch recently gained approval from Chinese regulators to process yuan-based services, which may further elevate the bottom line, he said.

As of June, Cathay Financial reported NT$5.66 billion in net profit, or earnings of NT$0.53 per share, company data showed.

The results represented a 15 percent decline from the previous year but may show improvement for the rest of the year, after the life insurance unit swung into profit last month, thanks mainly to dividend income.

As of yesterday, the nation’s largest life insurer booked NT$9 billion in cash dividend income with another NT$1 billion due later this year, Cathay Life executive vice president Lin Chao-ting (林昭廷) said.

Cathay Life also benefited from better hedging cost controls as a result of which hedging expenses dropped from 2.69 percent to 0.8 percent of foreign-currency assets in the first six months, Lin said.

The insurer expressed keen interest in partaking in public construction projects to lower idle funds that were at NT$289.3 billion as of June, Lin said.

“Securitized public works top our investment preferences, while development project contracts are also welcomed,” Lin said, commenting on government plans to channel private funds into public projects to help stimulate economic growth.

A stock analyst from a major local securities house adopted a positive view on Cathay Financial, saying the group may see stable pickup in terms of earnings now that the life insurance subsidiary has stopped posting losses.

Cathay Financial shares closed down 1.86 percent at NT$29.05 yesterday, weaker than the TAIEX’s 1.42 percent fall, Taiwan Stock Exchange data showed.

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