The combined earnings of the nation’s financial companies are likely to contract this year amid the nation’s slowing economic growth and a decline in private investment, ending a three-year streak of annual gains, according to data released by the Financial Supervisory Commission (FSC) on Thursday.
The aggregate earnings of domestic banks, credit cooperatives and Chunghwa Post Co (中華郵政) in the first 10 months of the year dropped NT$18.4 billion (US$576.04 million) from the same period last year to NT$297.6 billion, commission statistics showed.
Post offices operated by Chunghwa Post provide not only mail delivery, but also banking services.
The commission attributed the decline to a narrowing net interest margin (NIM) following the central bank’s interest rate cuts, and rising provision requirements by financial authorities against default risks, as well as a massive US$180 million fine imposed on Mega International Commercial Bank (兆豐銀行) for violating US money laundering regulations.
The profits of Taiwanese banks this year were also dragged by a lower contribution from their foreign branches amid a lackluster global economy, as well as the strengthening New Taiwan dollar, which led to earnings dropping at banks’ offshore banking units, analysts said.
As Taiwanese banks have been scaling down their China exposure this year amid an economic slowdown in that nation, yuan devaluation and increased market volatility, earnings contributions from their Chinese branches have also declined, analysts said.
CIMB Securities Ltd analyst Nora Hou (侯乃鳳) said in a note to clients that she is conservative about Taiwanese banks’ earnings outlook for this year and next year.
“We see little chance of topline recovery in the near term given lackluster loan growth, flat NIM and somewhat limited fee momentum,” Hou wrote in the Nov. 8 note.
Compared with banks, life insurers registered a bigger decline in their combined earnings from January through last month, according to the commission’s statistics.
The aggregate earnings of life insurers fell by NT$46.2 billion to NT$95.9 billion in the first 10 months, as increases in investment returns could not offset the impacts of lower policy product sales during the period, the commission said.
The statistics also showed that the aggregate earnings of securities brokerages fell by NT$389 million from the same period last year to NT$21.29 billion during the January-to-October period, while futures brokerages’ profits retreated by NT$13 million to NT$2.48 billion during the period, hurt by a persistent dip in transactions on local exchanges.
Excluding the NT$2 billion in real-estate disposal gains booked by Yuanta Securities Co (元大證券), declines in aggregate earnings by securities brokerages would have been more pronounced, a commission official said on Thursday.
However, general insurers posted a NT$200 million annual gain in aggregate profits to NT$2.48 billion in the first 10 months, statistics showed.
With the end of the year fast approaching, it is unlikely that the financial industry will report higher earnings than last year’s record-high NT$561.4 billion, the commission said.
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