State-run Hua Nan Financial Holding Co (華南金控) yesterday said it would not change its target of 10 percent growth in profit this year, despite the Ministry of Finance’s plan to raise the business tax on banks and life insurance companies.
“We have no intention of cutting the earnings target for this year, but will try harder to boost the company’s financial proficiency,” Hua Nan Financial president Ed Liu (劉茂賢) told reporters on the sidelines of an investors’ conference.
The tax rate change announced on Monday, which still needs approval from the legislature, will see the business tax rise from 2 percent to 5 percent.
The change will mean the company’s taxes will increase by NT$1 billion (US$3.29 million) a year, or 9.9 percent of earnings, based on the last year’s figure of NT$10.05 billion, Liu said, adding it was a “bearable” burden.
The government reduced the business tax on banks from 5 percent to 2 percent in 1999, but asked them to use the savings to write off non-performing loans that plagued several lenders.
Given that the bad loan ratio among the 39 domestic banks averaged at 0.38 percent last year and is unlikely to rise, the reduction in the business tax is no longer needed, Liu said.
Main subsidiary Hua Nan Commercial Bank (華南銀行) had a bad loan ratio of 0.42 percent as of the end of last year and it will strengthen its risk controls to bring its asset quality on par with peers this year, he said.
Meanwhile, the bank is seeking to expand it fee income by another 10 percent this year after achieving a similar pickup last year to reach NT$4.8 billion, Hua Nan Bank executive vice president Derek Chang (張雲鵬) said.
The bank’s wealth management business, which increased by 17 percent last year to NT$2.49 billion, will continue to drive growth with an increase of 17 percent to 20 percent expected this year, he said.
The improving economy at home and abroad provides a favorable market for wealth management products and services, Chang said, adding that the bank plans to hire 100 management associates this year.
The company’s securities arm, Hua Nan Securities Co (華南永昌證券), is looking for acquisition opportunities to expand its economies of scale, Liu said, as the group seeks to diversify its income sources.
Hua Nan Securities posted NT$314 million in net income last year, more than double its results from 2012.
Hua Nan Financial shares closed down 0.29 percent at NT$17.25 in Taipei trading yesterday.