The nation’s 15 publicly listed financial holding companies could see their combined earnings continue to improve in the second half of the year, after first-half earnings expanded 48 percent from a year earlier, CIMB Securities Ltd said on Monday.
The firms last week reported NT$160.63 billion (US$5.35 billion) in total net profit for the first six months of the year, thanks to stable income growth at banks and investment gains at life insurers.
Combined profit expanded by nearly 83 percent to NT$90.5 billion from a year ago, following a 19.4 percent annual increase to NT$70.38 billion in the previous three months, CIMB analyst Nora Hou (侯乃鳳) said in a client note.
The figure may climb to the highest level this year in the third quarter due to seasonal factors, Hou said.
Hou said growth momentum in the second half would be driven by rising fee incomes from sustained sales of mutual funds and bancassurance, limited provision charges for banks given the improving environment in the technology sector, as well as continued corporate loan demand and improved investment returns for insurers.
TAIPEI TRADING
In Taipei trading yesterday, financial shares closed up 1.91 percent at 1,099.69 points, the highest level since April 2008. They outpaced the broader market by 2.87 percent in the second quarter, Taiwan Stock Exchange data showed.
Shares in Cathay Financial Holding Co (國泰金控) rose 2 percent to close at NT$51 and those of Fubon Financial gained 3.3 percent to NT$48.55, the data showed.
“The financial sector is a laggard compared with the broader market. After witnessing strong foreign buying yesterday, investors simply followed suit as soon as the local bourse opened,” Hua Nan Securities Co (華南永昌證券) analyst Henry Miao (苗台生) said.
“In addition to the financial sector’s relatively low valuation, investors appeared happy with its strong bottom line in the first half of this year,” Miao said.
THIRD QUARTER
The third quarter would be a good time to purchase financial stocks, CIMB said, citing seasonal factors and possible government support ahead of the year-end elections.
“The second half of every year is normally a seasonal earnings peak period for most financial services companies, driven by dividend distributions and year-end business promotions,” Hou said.
“There could be more policy moves, or government support for the local bourse ahead of the local elections on Nov. 29,” she said.
Even so, she said Chinese banks might regain investors’ traction and potentially cannibalize the buying interest in Taiwanese banks, given their low valuations and easing concerns about China’s banking sector amid an economic recovery.
Additional reporting by CNA
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