Tue, Jan 05, 2016 - Page 13 News List

Financial shares drop, no consolidation

By Ted Chen  /  Staff reporter

Financial Supervisory Commission chairman William Tseng (曾銘宗) yesterday listed the lack of consolidation in the domestic financial sector as the biggest regret of his time at the helm of the regulatory body, in light of the precipitous drop in financial shares.

“There are too many banks, insurers and securities brokerages vying for the domestic market, and the road toward further consolidation in the crowded field remains arduous,” Tseng said at a news conference.

The TAIEX yesterday plunged 2.68 percent to 8,114.26 points, dragging the financial sub-index 3.52 percent lower to 957.25 points, lower than the 971.66 when Tseng was appointed commission chairman in August 2013.

In particular, shares of Cathay Financial Holding Co (國泰金控), the nation’s largest financial services provider, yesterday fell 9.3 percent to NT$44.2.

“Compared with the technology sector bluechips, financial stocks are much less known on the international stage, leading to lower shareholding by foreign institutional investors and diminished price-to-earnings ratios,” Tseng said.

As a result, financial shares have not been able to garner more favorable valuation in the eyes of foreign institutional investors, he said.

In addition, within the confines of the nation’s highly competitive market, even bellwethers such as Cathay Financial have not been able to match the performance of its international peers and generate a return on assets of 1 percent and a return on equities of 15 percent, despite the firm’s NT$7 trillion (US$210.61 billion) in total assets, Tseng added.

Tseng remains upbeat about the domestic financial sector, as companies continue their overseas expansions, encouraged by a number of policies aimed at fostering regional champions for the Asian market.

However, he said that while investments and profits gained from other Asian markets have been rising quickly, it would take a few more years before these policies produce significant growth.

He said that in the first 11 months of last year, the domestic financial sector reported pre-tax income of NT$531.5 billion, of which banks contributed NT$345.3 billion, while insurers and brokerages contributed NT$153 billion and NT$33.2 billion respectively, for a new record high for the period.

Meanwhile, as of November, exposure in Asia by the domestic financial sector rose from US$171.6 billion to US$209.6 billion, profits also grew to US$1.36 billion, approaching the US$1.44 billion in annual profits derived from Asian markets in 2014, Tseng said.

He said that these results show the resilience of Taiwan’s financial sector amid an international downturn throughout the second half of last year, as companies still recorded earnings growth in relation to the highs set in 2014, while fulfilling the commission’s order to increase provisions by NT$20 billion against rising investment risk in China and the domestic real-estate market.

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