Chinatrust Financial Holding Co (中信金控), the nation’s third-largest financial services provider by assets, said yesterday that its core businesses may see moderate growth this quarter, but its earnings for this year would be weakened by the regulator’s tighter provision requirements.
The banking conglomerate posted NT$4.69 billion (US$16.01 million) in net profit during the July-to-September period, down 16.9 percent from the second quarter because of higher provision costs.
RAINY DAY FUND
Chinatrust Financial will have to set aside an extra NT$6.8 billion to raise its bad loan reserve to 1 percent of Tier 1 lending at its banking arm, Chinatrust Commercial Bank (中信銀行), from the current 0.36 percent, Chinatrust Bank senior vice president Rachael Kao (高麗雪) said.
Chinatrust Bank, the nation’s largest credit card issuer, generated 92 percent of the group’s income in the first nine months of the year and the additional provision would erode NT$0.55 from its profits, which stand at NT$1.21 in earnings per share (EPS), Kao said.
“We’ve drawn up three measures to meet stiffer provision requirements after the Financial Supervisory Commission on Sept. 30 conveyed its wish that lenders take stronger action to prepare for bad times,” she said.
Because the commission has given banks three years to meet the regulations once it promulgates the policy change — likely to take effect next year — Kao said Chinatrust Bank planned to either spread the provision increase over four years, set aside all the costs this year or use statutory funds to fill the gap.
The lender prefers the first option, which could weaken earnings this year by NT$1.7 billion, equivalent to EPS of NT$0.136, she said.
While the economic slowdown at home has turned out worse than expected, Chinatrust Financial may see its earnings improve this quarter on the back of its wealth management businesses, Chinatrust Financial president Daniel Wu (吳一揆) said.
“The [banking] industry’s performance is not necessarily tied to the nation’s GDP figures,” Wu said, commenting on the government’s latest forecast of 1.05 percent GDP growth for the year, from the 1.66 percent estimated in August.
Wu said he saw greater investment opportunities overseas as the eurozone debt crisis shows signs of stabilizing and because domestic regulators will soon allow retail sales of yuan-based financial products and services.
He declined to comment on reports that Chinatrust Financial is eyeing China’s First Sino Bank (華一銀行) and Taiwan's Kuo Hua Life Insurance Co (國華人壽). He said the conglomerate would keep searching for partners other than First Sino Bank to facilitate expansion in China.
Shares in Chinatrust Financial ended flat at NT$16.1 yesterday.