State-run Taiwan Cooperative Financial Holding Co (合庫金控) aims to increase its loan books by between 5 and 6 percent this year as the conglomerate seeks to bolster its ties with small and medium-sized enterprises (SMEs), chairman Jason Liao (廖燦昌) said yesterday.
The strategy paid off last year, during which its main subsidiary, Taiwan Cooperative Bank (合庫銀行), outperformed its peers in terms of SME loan growth, which increased by NT$38.6 billion (US$1.15 billion), faster than Mega Financial Holding Co (兆豐金控) and CTBC Financial Holding Co (中信金控), company data showed.
The shift in focus also helped Taiwan Cooperative Financial to post a net income of NT$13.47 billion last year, an increase of nearly 30 percent over the previous year and translated into NT$1.22 earnings per share, the data showed.
“There is still ample room to enlarge our customer base” after reaching 7 million accounts, Liao told a news conference in Taipei.
SME operations generate a higher interest margin, although they carry higher default risks compared with customers with a large amount of capital, he said.
Net interest margin stood at 1.36 percent late last year and is likely to drop this year as the central bank may cut interest rates to support economic growth, Taiwan Cooperative Financial spokesman David Hu (胡光華) said.
The loose monetary environment and a tepid economy suggest difficult operating conditions for financial institutions, but Taiwan Cooperative Financial still expects to see profit growth, Hu said.
However, an interest rate cut of 12.5 basis points by the central bank might lower net income by NT$500 million, Hu said.
The conglomerate is seeking to boost growth by tapping the retirement market, raising profit contributions from overseas branches and adjusting its loan books, Hu said.
Taiwan Cooperative Bank has handled 30 “reverse mortgage” transactions in which homeowners borrow money against the value of their home, Liao said.
The government has encouraged the use of reverse mortgages to help mitigate social welfare burdens and prevent financial disputes between the elderly and their children.
Closing 11 unprofitable branches last year also helped the bank boost profits by saving between NT$50 million and NT$60 million in annual operating costs, Hu said.
Taiwan Cooperative Bank now has 270 branches, down from its peak of 312.
Overseas operations generated 26 percent of overall profits last year, lower than the goal of 35 percent, Hu said.
Taiwan Cooperative Financial Holding Co has set a target of 35 percent this year, he said.
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