State-run Hua Nan Financial Holdings Co (華南金控) said yesterday it does not intend to sell its securities unit, as suggested by the Ministry of Finance to ease excessive competition, but instead aims to grow its market share so it may become a major player.
The statements sent a negative message to the ministry’s instruction last month that Mega Financial Holding Co (兆豐金控) study the possibility of acquiring Hua Nan Securities Co (華南永昌證券) to help consolidate the nation’s overcrowded and fragmented financial sector.
“The securities subsidiary has posted lackluster earnings in recent years, attributable mainly to the unfavorable macro-environment,” Hua Nan Financial president Ed Liu (劉茂賢) said on the sidelines of an investors’ conference.
However, the brokerage aims to strengthen its operations in Taiwan so it may become one of the top 10 best performers in the future, Liu said.
Hua Nan Securities reported NT$63 million (US$2.1 million) in net losses during the April-to-June period, reversing profits of NT$187 million in the first quarter, company data showed.
Liu blamed the losses on the government’s plan to implement a capital gains tax at home and the worsening fiscal debt crisis in Europe.
The securities holding is applying to establish a representative office in Beijing and is in talks with strategic Chinese partners Founder Group (方正集團) and E Fund Management Co (易方達) for potential cooperation in brokerage, underwriting, asset management and stock research businesses, Liu said.
As of June 30, the unit has a market share of 2.75 percent in terms of brokerage operations and 3.58 percent measured by margin loans, company data showed.
“We will not agree to mergers and acquisitions unless such activity can boost synergy efficiency and employee benefits,” Liu said, meaning Hua Nan Financial would rather be a buyer than seller.
The bank-centric conglomerate gains little headway in taking a stake in Chinese banks although it reiterated hopes the venture may bear fruit by the end of the year.
“We are looking for a partner with a price-to-book-ratio at 1.5 times, clean assets and ability to help Hua Nan Financial expand in China,” Liu said.
Hua Nan Financial reported a net profit of NT$5.12 billion for the first six months, up 17 percent from the same period last year, company figures indicated.
Quarterly earnings weakened sequentially with profits declining 10 percent to NT$2.42 billion in the second quarter, from NT$2.69 billion three months earlier, according to company statistics.
Derek Chang (張雲鵬), executive vice president of Hua Nan Commercial Bank (華南銀行) attributed the decline to shrinking fee income that may show some improvement in the second half.
Offshore and overseas banking operations will drive the growth after seeing a 32 percent increase in terms of lending in the first half, Chang said, adding such business generates higher interest margin.
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