State-run First Financial Holding Co (第一金控) said yesterday its attempts to set up rural banks in China may bear fruit in the second half of the year, allowing the group to differentiate itself from its Taiwanese peers in tapping the Chinese market.
“We have received guidance from China to open more than five rural banks,” First Financial head of investor relations Annie Lee (李淑玲) told an investors’ conference.
The company has been aggressive in it expansion strategy and is seeking to secure the branches’ establishment in the second half of the year, likely in rural areas of China’s Henan Province, Lee said.
Domestic lenders, both private and state-run, tend to focus on expansion in first-tier and second-tier Chinese cities where Taiwanese firms are clustered, bypassing customers in less populated areas.
First Commercial Bank (第一銀行), the First Financial group’s main source of profit, aims to fill this gap in the market without overlooking the larger market, after it opened a branch in Shanghai in December 2010, Lee said.
The bank’s Shanghai branch started offering yuan-based services and products last week, a new line of business that could significantly boost its revenues, Lee said, adding that First Commercial Bank is still awaiting Chinese government approval to open a second branch in Chengdu, Sichuan Province.
The banking-centric conglomerate is maintaining its loan growth target at 3 percent this year, although all subsidiaries saw earnings decline in the first quarter of the year from the same period of last year, Lee said.
The group’s banking unit reported NT$2.96 billion (US$98.27 million) in net income during the January-to-March period, representing a 0.3 percent decline from a year earlier, attributable to an influx of new non-performing loans valued at NT$1.05 billion, Lee said.
The lender has set aside full provision for bad loan debts incurred by Dubai World, an investment company that manages and supervises a portfolio of businesses and projects for the Dubai government after failed restructuring efforts, Lee said.
Additionally, First Commercial Bank, which has a NT$3.5 billion loan exposure to Taiwan Maritime Transport Co (台灣海運), would have to earmark further provision this quarter for the cash-strapped cargo shipping liner, Lee said.
The bad loans had little impact on the bank’s asset quality with its non-performing loan ratio edging up to 0.5 percent in the first quarter, from 0.44 percent three months earlier, while its coverage ratio — which gauges the sufficiency of the lender’s reserves covering bad debt — slid from 248.97 percent to 233.17 percent, Lee said.
The bank maintained its earlier guidance that its net interest margin, a critical gauge of a bank’s profitability, may gain 5 basis points this year, after the margin increased by 11 basis points last year.
Shares of First Financial closed up 0.55 percent to NT$18.3 yesterday, underperforming the TAIEX which rose 0.91 percent, Taiwan Stock Exchange data showed.