State-run Taiwan Cooperative Financial Holding Co (合庫金控) aims to increase its loan books by 3 percent this year by lending to small and medium-sized enterprises (SMEs) to improve its margin, spokesman David Hu (胡光華) said yesterday.
The conservative guidance fell in line with the bank-focused conglomerate’s efforts to raise its earnings this year after achieving a record net profit of NT$14.14 billion (US$455.45 million) last year, Hu said.
Last year’s results marked a 0.5 percent increase from a year earlier, with earnings of NT$1.16 per share, allowing Taiwan Cooperative to jump to sixth-best performer among 15 domestic peers from 11th place in 2015, government data showed.
The financial sector saw profits decline by 15 percent last year, dragged down by lackluster life insurance operations.
“We plan to adjust our assets by increasing SME operations by 5 percent, and trim lending to large companies and government agencies a bit as the latter generates low-interest income,” Hu said by telephone.
A moderate improvement in the economy at home and abroad warrants a sensible and conservative target, he said, adding that uncertainty caused by US trade policies and elections in Europe also warrants a cautious approach.
SME loans stood at NT$560 billion last year, bearing interest rates of between 2.2 percent and 2.52 percent, 0.5 percentage points higher than the average lending rate, Hu said.
Consumer lending, including mortgage operations and land financing, is likely to stay flat this year, compared with a 5 percent increase last year, as property builders and land developers focus on digesting inventory and shun new construction projects, Hu said.
Net interest margin, a critical gauge of earnings ability for financial institutes, is likely to hover around similar levels from last year at 1.37 percent, as the central bank might hold interest rates unchanged to support Taiwan’s economic growth, he said.
Loans denominated in US dollars might generate higher yields, in keeping with market expectations that the US Federal Reserve would raise interests once or twice this year, he said.
Overseas operations, including offshore banking units, are expected to contribute 35 percent of total earnings this year, from 30 percent last year, company chairman Jason Liao (廖燦昌) said.
Liao said he has urged the group to increase its efforts to hedge against foreign-exchange losses that eroded the firm’s earnings last year by NT$500 million in relation to the drastic drop in yuan.
The Chinese currency could remain flat or appreciate this year after US President Donald Trump accused Beijing of currency manipulation, Hu said.
The firm on Wednesday posted NT$1.15 billion in net income for last month with all units contributing profits. Earnings were NT$0.09 per share.
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