Cathay United Bank Co (國泰世華銀行) aims to boost overseas units’ profit contribution to 50 percent of the lender’s overall net profits in the next three years at the earliest, targeting Southeast Asian countries, which offer high net interest margins, a company executive said yesterday.
Cathay United Bank, a banking subsidiary of the nation’s largest financial service provider, Cathay Financial Holding Co (國泰金控), is the most active local lender in expanding its reach beyond the home market in an effort to seek growth.
“We hope to accelerate our expansion in ASEAN, because it is increasingly difficult to break into the markets as the banking sector is saturating in those countries,” bank spokesman Alan Lee (李偉正) told a media briefing.
“Those countries also offer much more attractive net interest margins,” Lee said, adding that loan demand is also rising due to strong GDP growth of 7 percent annually on average.
ASEAN nations offer high net interest margins ranging from 3 percent to 5 percent, Lee said. That is very attractive, compared with an average of 1.43 percent of net interest margin local lenders booked last quarter, according the central bank’s statistics.
Cathay United Bank operates 64 overseas units, with 59 of them in ASEAN countries, including a newly opened branch in Laos, making Cathay United Bank the nation’s first bank opening business in the communist state.
In its latest expansion overseas, Cathay Financial this week acquired a 20 percent stake in the Philippines’ Rizal Commercial Banking Corp for NT$12.55 billion (US$399 million) through its life insurance arm, Cathay Life Insurance Co (國泰人壽).
Through the deal, which is scheduled for completion by the end of first quarter next year, Cathay Financial is set to obtain three out of Rizal’s 15 board seats.
Over the next year, Cathay Life may continue to increase its stake in Rezal if market conditions allow, the company said.
As of last quarter, overseas units made up 42 percent of the bank’s net income, with the biggest contribution from its Vietnam units, Lee said.
“It is our mid-term goal to increase the portion to 50 percent and to 60 percent in the long run… Growth from overseas business is outpacing domestic market,” Lee said.
“We are actively looking for new investment opportunities in Southeast Asian nations,” Lee said.
“We are seeing greater potential in Indonesia, Thailand and the Philippines, as those governments are encouraging consolidation in the banking sector,” Lee added.
As of last quarter, local banks operated a total of 355 overseas units, including 262 units in Asia, Financial Supervisory Commission data showed.
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