State-run Hua Nan Financial Holding Co (華南金控) yesterday said it is expecting its portfolio of new mortgages this year to contract by 10 to 15 percent compared with the NT$84 billion (US$2.53 billion) it saw last year.
“The decline is due to the slump in home transactions, combined with higher tax burden resulting from a tax reform combining separate taxes on house and land sales,” Hua Nan Commercial Bank (華南銀行) vice president of consumer banking Lee Tsung-hsien (李宗賢) said.
Total home loans last year grew 2 percent annually to NT$499.4 billion, the company said.
The bank, which is the group’s most profitable unit, on Tuesday was fined NT$3 million by the Financial Supervisory Commission (FSC) for internal control lapses that led to NT$520 million being granted for 34 irregular mortgages arranged between November 2013 and February last year.
A probe by prosecutors in an unrelated case revealed that the bank had been targeted by a criminal ring that used borrowed funds to make highly financed investments in the home market at high loan-to-value ratios, the commission said on Tuesday.
“Losses are estimated at about NT$60 million based on the properties’ registered values,” Hua Nan Bank president Bruce Yang (楊豐彥) said, adding that 16 of the 34 mortgages, totaling NT$270 million, have been written off.
A company official, who declined to be named, said it took authorities a while to realize there were irregularities with 34 mortgages because payments had been made on time for many of them.
Auditing measures have been increased, the official said.
Hua Nan Bank data showed that as of the third quarter of last year, non-performing home loans had surged to NT$800 million, compared with NT$100 million at the end of 2014.
Following a wave of write-offs last quarter, non-performing home loans have declined to about NT$300 million, the data showed, with the non-performing loan ratio reaching 0.16 percent, more than double the 0.07 percent recorded at the end of 2014.
Hua Nan Financial Holding said that profits last year rose 7 percent annually to NT$13.13 billion, a new record, driven largely by robust interest income, which rose 3 percent annually to NT$25.7 billion. The earnings per share was NT$1.42.
The company also maintained a non-performing loan coverage ratio last year of 537.9 percent, which it said is 0.23 percent higher than its peers, and a tier 1 capital ratio of 9.88 percent.
Hua Nan Financial Holding said that it would continue to tap opportunities outside of Taiwan this year in face of expected interest rate cuts at home, after recording a 7 percent annual rise in lending by offshore banking units and overseas branches earnings last year.
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