First Financial Holding Co (第一金控) is preparing for modest growth in lending operations and net interest margin (NIM) next year led by overseas profit and fee income, senior executives said yesterday.
“We expect loan growth to reach 4 percent or 5 percent next year, as sustained economic recovery may boost loan demand,” First Financial executive vice president Jennifer Liao (廖美祝) said on the sidelines of a public function.
The central bank is likely to raise interest rates in the second half of next year, taking cues from its US counterpart, the US Federal Reserve, Liao said.
The projected rate hikes might help boost NIM by 2 to 3 basis points, she added.
NIM stayed flat at 1.28 percent last quarter from the second quarter, the company said in its quarterly earnings report.
The state-run conglomerate painted next year as another challenging year for the financial industry because tightened liquidity might come earlier than expected and be discounted into funding cost due to weak currency policy and potential inflationary pressure, the company said in its quarterly earnings report.
First Financial posted NT$11.71 billion (US$376.6 million) in net income for the first three quarters of the year, rising 26 percent from the same period last year and translating into earnings per share of NT$1.26, the report said.
The company attributed the improvement to robust fee income that increased 17.9 percent year-on-year to NT$4.64 billion as of Sept. 30, the report said.
Fee income made up 16.4 percent of the company’s total profit, and First Financial aims to raise its contribution to 20 percent next year as growth momentum for the wealth management business is expected to remain, Liao said.
The conglomerate also plans to raise overseas profits to 50 percent of earnings next year, from 45 percent, she said.
The company’s main subsidiary, First Commercial Bank (第一銀行), would be taking a conservative approach toward mortgage operations that might hold steady next year from this year, Liao said, adding that property prices would be likely to take a downturn amid sluggish trading.
For the year to September, mortgage loans totaled NT$391.1 billion, down 0.6 percent from the end of last year, the report said.
The lender has set side an extra NT$1.5 billion in provisions for mortgage loans as required by the Financial Supervisory Commission in case of a property price correction, according to First Commercial Bank.
Meanwhile, First Financial plans to grow into a serious regional player, but prefers to woo targets abroad given the difficulty of acquiring peers at home, Liao said.
The company’s plans to set up rural banks in China has hit a snag due to the political deadlock over Taiwan’s service trade agreement with China.
In addition, the company and its local peers might face a slowdown in cross-strait banking deregulation until 2016, following the Chinese Nationalist Party’s (KMT) landslide defeat in the local elections on Saturday, market watchers said.
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