HSBC Securities Taiwan Corp raised the target price for Yuanta Financial Holding Co (元大金控) slightly, as the company has curbed life insurance losses while showing resilience in banking earnings in the first quarter.
Yuanta Financial in the first quarter reported that net income surged 786 percent sequentially to NT$3.47 billion (US$106.36 million), but declined 15 percent from a year earlier.
The company said that Yuanta Securities Co (元大證券) saw net income in the January-to-March period fall 51 percent sequentially and 14 percent annually to NT$2.04 billion due to a 4 percent decline in average daily turnover at the local stock market, weakening retail investors’ participation.
Yuanta Commercial Bank reported that net income rose by 50 percent sequentially and 10 percent annually to NT$1.45 billion due to an improved loan mix that prioritizes syndicated loans and loans to small-to-medium-sized enterprises and consumers.
Yuanta Financial banking earnings were more resilient than expected, HSBC Securities Taiwan Corp analyst Anthony Lam said in a note on Friday, adding that syndicated loans helped garner a 77 percent annual growth in corporate banking fee income.
Yuanta Life Insurance Co (元大人壽保險) reported a quarterly loss of NT$385 million for the first quarter of this year, compared with a loss of NT$2.05 billion in the fourth quarter of last year.
“The company has reined in business growth with an aim to keep net losses within NT$1 billion this year,” Lam said, adding that first-year premium collection had dropped 67 percent on a quarterly basis to NT$3.12 billion.
The sharp decline in first-year premium collection also reduced the insurer’s total operating cost by 57 percent sequentially to NT$6.65 billion, easing business strains on the company.
Lam raised the target price of Yuanta Financial to NT$12.7 from NT$12.1, reiterating his “buy” rating, given favorable risk-reward assessment.
Lam said that the banking business will likely be key in achieving the company’s return on equity goal.
He said that as of the end of last year, Yuanta Commercial Bank’s return on equity stood at 9.4, while return on equity for Ta Chong Bank Ltd (大眾銀行), which was merged into Yuanta Financial in March, was 8.1 percent.
Yuanta Financial aimed to boost its return on equity to 10 percent from 7 percent.
Ta Chong Bank reported a quarterly loss of NT$1.34 billion for last quarter.
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