State-run Hua Nan Financial Holding Co (華南金控) aims to grow earnings this year by boosting overseas contributions and performance at non-bank subsidiaries, company chairman Liu Teng-cheng (劉燈城) said yesterday.
However, the bank-focused conglomerate is slowing its pace of launching a subsidiary in China on concerns that tighter deposit requirements could weaken profitability for five years.
“We are confident in profit growth this year, even after achieving record-high earnings last year,” Liu told a news conference in Hua Nan’s new headquarters in Taipei’s Xinyi District (信義).
The group saw net income jump 31 percent to NT$13.19 billion (US$419.85 million) last year, or NT$1.41 per share, Liu said, thanks to improving business conditions at home and abroad.
Main subsidiary Hua Nan Commercial Bank (華南銀行) accounted for more than 90 percent with net interest income rising 10 percent to NT$24.94 billion, Liu said.
The figures suggest ample room for improvement at Hua Nan Securities Co (華南永昌證券), South China Insurance Co (華南產險) and other units, Liu said.
The group aims to achieve better balanced sources of income by improving cross-selling benefits, which supplied 24 percent of overall sales, Liu said.
Further, Hua Nan Financial plans to increase the weight of fee income and investment gains, as they contributed 15 percent and 7 percent respectively to the group’s profit last year.
The results mean interest income accounted for more than 70 percent and it is better to have multiple profit drivers to make the conglomerate healthier financially and less vulnerable to individual downside risks, Liu said.
Like its domestic peers, Hua Nan Bank is not eager about upgrading its Chinese branches into subsidiaries, given tighter deposit regulations across the Taiwan Strait, bank executive vice president Derek Chang (張雲鵬) said.
China caps loan-to-deposit ratios at 75 percent for foreign banking subsidiaries, but the requirement does not apply to banking branches, Chang said.
To meet the requirements, subsidiaries have to aggressively absorb deposits — with offers of high interest rates — if they want to bolster lending operations and beat competitors, he said.
“That would significantly lower our profitability in the first five years, as new subsidiaries could have difficulty luring deposits from customers in China,” he said.
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