SinoPac Financial Holding Co (永豐金) yesterday said it is looking to tap into international project financing opportunities this year through cooperation with a Chinese peer, but is cautious about aggressive expansion because of policy uncertainty.
The company expects the effort to bear fruit in the summer, thanks to its strategic alliance with the Industrial and Commercial Bank of China Ltd (ICBC, 中國工商銀行), as it wants to participate in China’s “One Belt, One Road” initiative, SinoPac Financial spokesman Michael Chang (張晉源) said.
The two financial companies inked an agreement in April 2013, with ICBC agreeing to buy a 20 percent stake in Bank SinoPac (永豐銀行), the main source of income for SinoPac Financial.
However, the deal has stalled because a proposed cross-strait service trade pact has yet to clear the legislature.
“Dubbed the modern version of the Marshall Plan, the Chinese initiative would need support from financial institutions and Sinopac is keen to join,” Chang said ahead of the company’s investors’ conference.
While syndicated loans generate lower interest income than equities investments, they will help drive real economic activity in the region, Chang said, adding that money-printing operations worldwide in recent years have inflated financial assets, but made little contribution to real economic growth.
SinoPac would rather play safe, as financial asset price hikes tend to be volatile and vulnerable once global central banks, especially the US Federal Reserve, end loose monetary cycles, he said.
However, at least one analyst expressed caution about the company's project financing prospects for "One Belt, One Road."
"We think clarity on any contribution from infrastructure projects is very low at this stage," UBS Securities Pte Ltd analyst Kelvin Chu (朱曉暐) said in a research note.
SinoPac Financial posted a net income of NT$3.63 billion (US$118 million) last quarter, or earnings per share of NT$0.38, company data showed.
That represented a 23 percent increase from a year earlier and more than double the results in the preceding quarter when tax payments on retained income weakened profit, Chang said.
Chu said SinoPac Financial's earnings last quarter were boosted by a release of credit provisions, while its key operating metrics, especially net interest margin (NIM), were lackluster.
NIM, a critical gauge of banks’ profitability, shed 2 basis points to 1.24 percent last quarter, but should stabilize toward the end of this quarter, Chang said, attributing the trend to the Chinese yuan’s performance.
Meanwhile, SinoPac confirmed its earlier interest in Taiwan Life Insurance Co (台灣人壽), but said it refrained from joining the bid due to a lack of funding.
The company is interested in insurers specializing in traditional insurance business rather than assorted investment operations, Chang said.
SinoPac would seek organic growth, but stay away from major expansion moves until policy uncertainty settles, he said, referring to lingering controversy over the service trade pact.
This story has been modified since it was first published.
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