Sat, Oct 11, 2014 - Page 13 News List

Financial sector earnings rise by 18%

By Crystal Hsu  /  Staff reporter

Financial companies reported robust earnings last quarter on the back of healthy loan growth and strong wealth management income, and the momentum may sustain through this year, analysts said.

Despite capital market volatility since early last month, the financial sector saw an 18 percent earnings increase in the July-to-September period from three months earlier, Credit Suisse AG financial analyst Chung Hsu (許忠維) said.

“We expect to see more earnings pickup in coming weeks though the market’s focus will increasingly shift to earnings guidance for next year,” Hsu said in a note yesterday.

Fubon Financial Holding Co (富邦金控) recorded NT$26.16 billion (US$85.77 billion) in net profit last quarter, surging 191 percent from a year earlier and 94 percent from the previous quarter, thanks to realized capital gains from overseas investment, real-estate property revaluation benefits and dividend income, company data showed.

The results raised cumulative income to NT$53.51 billion for the first nine months, or NT$5.23 earnings per share, outperforming other peers.

Cathay Financial Holding Co (國泰金控) came second with NT$14.39 billion last quarter, representing a 23 percent increase from the previous year, but a 21 percent decline compared with the second quarter, company data indicated.

Most banks grew loan books and wealth management income significantly with ultra-low credit costs, while life insurers benefited from a stronger US dollar and realized more overseas investment gains, Hsu said.

Some lenders set aside extra provisions for exposure to Taiwan Polysilicon Corp (福聚), but might emerge harmless from credit losses, he said.

Yuanta Investment Consulting Co (元大投顧) echoed the view, saying that Taiwan Polysilicon might not have much impact on the financial sector’s fundamentals given the size of the syndicated loan of NT$10.7 billion.

The industry might benefit from the meetings between financial regulators in Taiwan and China later this year over yuan investment easing, Yuanta Investment researcher Peggy Shih (施姵帆) said.

State-run Mega Financial Holding Co (兆豐金控) and CTBC Financial Holding Co (中信金控) might turn out the biggest beneficiaries from the cross-strait meetings due to their relatively high yuan deposits, Shih said.

However, most financial firms would report weaker net earnings last quarter from the second quarter if stripping out bargain purchase gains, according to Deutsche Bank research analyst Pandora Lee (李懿璇).

The earnings ability of Cathay Life Insurance Co (國泰人壽), the main subsidiary of Cathay Financial, remains below par if stripping out unrealized property value increases, Lee said.

Meanwhile, securities-focused financial conglomerates also are laggards in terms of earnings, dragged by the sluggish stock trading among other reasons, according to Primasia Securities Co’s tallies, evident by the double-digit declines year-on-year and month-on-month last month for Yuanta Financial Holding Co (元大金控) and Jih Sun Financial Holding Co (日盛金控) as local stock market turnover contracted by 11 percent from August.

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