SinoPac Financial Holdings Co’s (永豐金控) capital leasing unit is to spearhead efforts to tap into other Asian markets as Taiwanese businesses migrate away from China due to a higher risk profile and growing uncertainty over economic policy there, the company said yesterday.
The company’s plans to reach out to other parts of the region reflects its plans to leverage its strategic alliance with the Industrial and Commercial Bank of China Ltd (ICBC, 中國工商銀行) in participating in a Beijing infrastructural project initiative for Southeast Asia, as investment opportunities shrink in Taiwan, SinoPacFinancial Holdings said.
“Taiwanese businesses operating abroad have begun migrating to Vietnam, Cambodia, Laos and Myanmar, with some exploring opportunities in India, while investments in Taiwan have virtually come to a standstill,” SinoPac Financial Holdings president Yu Kuo-chih (游國治) told an investors’ conference.
While SinoPac Financial Holdings’ sale of a 20 percent stake in Bank SinoPac (永豐銀行) to ICBC in a private offering is still undergoing regulatory review, the company is working hand-in-hand with the Chinese partner in Beijng’s “one belt, one road” project to reduce potential risks, Yu said.
In addition, the company has also engaged in talks with Taiwanese and Chinese partners for a solar power plant leasing deal in Pakistan, he said.
“Leasing is a much easier entry point for expansions abroad, as it faces fewer regulatory hurdles,” Yu said, adding that this strategy will pave the way for further opportunities for its banking and securities brokerage businesses.
In addition to its leasing subsidiary in China, the company is awaiting regulatory approval to set up a capital leasing representative office in Myanmar and is drafting proposals to do the same in Thailand, Yu said.
However, the company has no plan to establish footholds in Southeast Asia through mergers and acquisitions, he said, citing the difficulties in finding potential targets that can yield favorable synergy.
SinoPac Financial Holdings is the fourth-largest privately owned financial holding company in Taiwan in terms of total assets. Apart from banking, securities brokerage and capital leasing businesses, SinoPac Financial Holdings’ subsidiaries also include customer service technology, insurance brokerage, venture capital, management consulting and financial consulting firms.
In the first half, SinoPac Financial Holdings’ net income slid 9 percent year-on-year to NT$6.6 billion (US$208 million), or NT$0.69 per share, mainly due to the high comparison base, with a one-time gain of NT$4 billion booked in June last year.
A spate of interest-rate cuts in China since November last year also negatively affected Bank SinoPac’s net interest margin — a critical gauge of a bank’s profitability — in the first half, SinoPac Financial Holdings said.
“Banking profitability is highly correlated with the pace of economic growth and beginning in June, we saw the overturning of previous consensus that this year would fare better than last year,” Yu said, adding that prospects might remain grim until the first half of next year.
Nevertheless, the company said that its banking unit’s fee income rose 11.6 percent year-on-year last quarter to NT$2.7 billion and that its other subsidiaries, such as brokerage, lending, wealth management and foreign exchange units, have maintained steady performance.
However, net income for the company’s securities brokerage unit declined 47.89 percent quarter-on-quarter and 13.73 percent year-on-year to NT$222 million last quarter, SinoPac Financial Holdings said.
“We have seen little tangible gains by our peers in their expansions into China,” SinoPac Securities Co (永豐金證券) president Yeh Huang-chi (葉黃杞) said, adding that setbacks arose after approval of the cross-strait trade in services agreement was halted in the legislature.
“There is little evidence that full service brokerage licenses are worth the costs and hurdles to attain a 51 percent stake in a joint venture with Chinese partners,” Yeh said.
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