Cathay Financial Holding Co (國泰金控), the nation’s largest financial services provider by assets, is looking to expand its presence in China and Southeast Asia this year to boost earnings from overseas operations, senior executives said yesterday.
“We intend to raise NT$40 billion [US$1.34 billion] in new capital this year for overseas expansion,” Cathay Financial spokesman Alan Lee (李偉正) told an investors’ conference.
The planned capital increase gained approval from the company’s board on Friday last week, but still needs approval from shareholders in June.
Cathay United Bank (國泰世華銀行), which generated NT$130.7 billion in net income last year, accounting for 76.88 percent of the group’s total profits, plans to set up an outlet in the greater Shanghai area and a new branch in Qindao, Shandong Province, as well as upgrade its representative office in Indonesia into a branch and venture into Myanmar, Lee said.
The bank is also looking for other investment opportunities in China and Southeast Asia to facilitate its expansion, Lee said.
Overseas branches and offshore banking units accounted for 36.8 percent of Cathay United Bank’s earnings last year, and should boost their contribution this year thanks to higher margins, as the lender reaches out to more customers, and offers more products and services, Lee said.
He expects fee income to rise significantly this year, while net interest margin should hold steady at 1.24 percent, as global central banks stand by their easy monetary policy.
Another major subsidiary, Cathay Life Insurance Co (國泰人壽), posted NT$32.8 billion in net profit last year, surging from NT$4.6 billion in 2011, backed by portfolio adjustments and lower hedging costs, Cathay Life executive vice president Lin Chao-ting (林昭廷) said.
The life insurer may book NT$10 billion per year in unrealized gains from its property holdings for the next five years to reflect their fair value in line with new accounting rules, Lin said.
As for first-year premiums, Lin gave a cautious guidance, saying they could drop sharply from last year’s NT$49.5 billion, which surpassed its target of NT$46 billion, because of higher policy costs.
The insurer will focus on sales of installment payment policies, which have accounted for 88 percent of total policies since August last year, compared with 34 percent in the first seven months of the year, Lin said.
Installment payment policies generate higher yields and more stable income for the insurer, he said.
Deutsche Bank financial analyst Pandora Lee (李懿璇) has an “upgrade” rating on Cathay Financial shares, with a target price of NT$42, citing the company’s better earnings abilities. The stock rose 2.96 percent to close at NT$40 yesterday.