Taiwanese financial holding companies got off to a strong start this year with combined net profits in the first quarter expanding 33.56 percent from a year ago, yet the results provided some cause for concern as they were boosted by a number of one-off gains.
The 15 publicly-listed financial holding firms reported NT$58.72 billion (US$1.96 billion) in net profits for the first three months of the year, up from NT$43.96 billion the previous year, and reaching their best quarterly level in nearly a decade.
In the first quarter of the year, Fubon Financial Holding Co (富邦金控) led its peers by reporting the highest earnings of NT$10.03 billion (or NT$1.05 per share). Shin Kong Financial Holding Co (新光金控) finished the quarter as runner-up with earnings of NT$7.65 billion (NT$0.88 per share), followed by Cathay Financial Holding Co (國泰金控) with earnings of NT$6.93 billion (NT$0.64 per share), the companies’ data showed.
Analysts said the latest data underlined a gradual improvement in the sector, with both banks and insurers continuing to report strong earnings in the quarter, despite the lackluster performance of brokerages caused by weak stock market turnover.
“Bank results remained steady, supported by a recovery in corporate banking, wealth management fees and better trading results,” Citigroup Global Markets analyst Bradford Ti (鄭溫煌) said in a note on Wednesday.
“Insurance results were also strong, driven by better markets, reduced new business strains and one-off gains on property disposal,” Ti added.
Ti said that in the first-quarter growth momentum had built in financial shares and he expected further inflows to appear in the sector on the back of a recovery in loan growth, rising fee incomes, progress on cross-strait financial exchanges and a gradual increase in interest rates through next year.
However, HSBC Securities (Taiwan) Corp said the first-quarter results relied too heavily on life insurers’ non-recurring gains, arguing that Shin Kong Financial, for instance, would have faced difficulty to break-even on its bottom line in the quarter had it not received contributions from disposals of property.
Last quarter, Shin Kong Life Insurance contributed more than 80 percent of its parent company’s net profit, at NT$6.3 billion, but that figure included NT$7.4 billion from property disposal gains and investment losses.
“The property disposal gains only highlights the fact that the life business is losing money without these one-off gains,” HSBC analyst Bruce Warden said in a report on Thursday.
Apart from Shin Kong, Fubon Financial saw profits of NT$2.1 billion in the quarter from Fubon Life Insurance Co’s (富邦人壽) selling overseas fixed-income investments and domestic equities, while Cathay Financial took advantage of an NT$2.5 billion contribution from Cathay Life Insurance Co’s (國泰人壽) unrealized gains in real-estate investments as allowed by new accounting rules, company data showed.
Apparently concerned by the issue of non-recurring gains, HSBC decided not to re-rate the sector upward and maintained that most financial holding companies would likely see “relatively modest” growth in loans of between 5 percent and 6 percent this year.
The company forecast “limited expansion” in margins of between just 0.03 percent and 0.05 percent.
“While there is clearly upside potential, we are not making any revisions to forecasts at this juncture,” Warden said in the report.
Shares in the financial sector have risen 5.83 percent on the local bourse since the beginning of this year, outranking the broader market’s 1.59 percent increase, which analysts attributed to a run of positive news such as onshore Chinese yuan business being introduced in February, and new agreements being reached by cross-strait financial regulators earlier this month.
However, financial shares might be in line for a pullback or correction before the summer, following the next round of cross-strait talks on the Economic Cooperation Framework Agreement (ECFA) to ratify access for brokers, and expanded access and cross-strait holdings for banks, SinoPac Securities Investment Service Co (永豐投顧) said in a note on Friday.
Currently, financial shares are trading at about 1.16 times their book value and this ratio is likely to increase to 1.4 times by the end of the year or early next year if there are breakthroughs on cross-strait shareholdings in banks, interest rate normalization and steady progress in their China operations, SinoPac Securities said.
Prior to that, analysts said investors should refocus on the sector’s business fundamentals, such as revenue growth and underlying profitability.
“Neither of which is altogether impressive or likely to drive valuations higher in the immediate near term,” Warden said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”