State-run Hua Nan Financial Holding Co (華南金控) expects earnings to improve mildly in the second half of the year after a lackluster first half due to higher provision costs, senior executives said yesterday.
“We expect the business operating environment to improve during the second half of the year as evidenced by improving economic data,” newly installed Hua Nan Financial chairman Liu Teng-cheng (劉燈城) told an investors’ conference in Taipei.
The earnings improvement will benefit financial service providers in general, though downside risks, notably the planned tapering of US quantitative easing, may continue, Liu said.
The conglomerate posted NT$2.61 billion (US$86.5 million) in net income during the April-to-June period, rising a negligible 0.3 percent from the previous quarter, the company’s financial report showed.
Cumulative profits increased 1 percent to NT$5.2 billion for the first six months with earnings per share (EPS) of NT$0.6, unchanged from the same period a year earlier, the report said.
Liu attributed the flattish performance to higher provisions valued at NT$1.58 billion in the first half, nearly three times the NT$547 million posted a year earlier.
Main subsidiary Hua Nan Commercial Bank (華南銀行) has NT$562 million in exposure to failed LED chipmaker Chi Mei Lighting Technology Corp (奇力光電) and NT$257 million to Taiwan Maritime Transportation Co Ltd (台灣海陸運輸).
The lender will set aside more provisions in the second half to strengthen its asset quality, even though its Tier 1 provision has met the required 1 percent minimum, Hua Nan Bank president Bruce Yang (楊豐彥) said.
“We aim to raise the coverage ratio after achieving the growth target,” Yang said.
Hua Nan Bank recorded NT$2.43 billion in net income last quarter, down from NT$2.44 billion in the first quarter, the report said.
The lender saw its cumulative earnings fall 2 percent to NT$4.86 billion in the first half, while interest margin and spread held relatively steady.
Hua Nan Bank plans to open a sub-branch in Shenzhen, China, in November or December after Chinese authorities gave the go-ahead on Aug. 2, Yang said.
The group’s securities arm, Hua Nan Securities Co (華南永昌證券), is seeking to partner with a Chinese company to set up a securities house in Shenzhen where the local brokerage may own a controlling 51 percent stake, in line with the cross-strait service trade agreement, the company’s chairman said.
The Chinese government is developing a financial pilot zone in Shenzhen, which bodes well for Hua Nan Bank’s branch and sub-branch to grow their business and customers there, Liu said.
Hua Nan Financial shares closed up 0.31 percent at NT$16.1 yesterday, bucking the TAIEX’s 0.23 percent fall, Taiwan Stock Exchange data showed.