E.Sun Financial Holding Co (玉山金控) expects to maintain moderate growth this year as the company adapts to anticipated regulatory changes that might affect the bank-focused conglomerate’s fee income.
To maintain sustainable growth, the Financial Supervisory Commission (FSC) has been mulling changes to regulations that would rein in the amount of payments banks can receive for serving as sales channels for insurance policies and equity funds.
Banks now receive commissions on sales based on the amount of products sold, but the arrangement could be changed to include other metrics such as assets-under-management (AUM), which measures the total market value of all assets of a financial institution.
In response, the company would shift wealth management focus from life insurance products to equity funds this year, E.Sun Financial president Joseph Huang (黃男州) said at an earnings conference.
Life insurance and equity funds last year contributed 40 and 60 percent of wealth management sales respectively, with the allocation expected to be reversed this year, Huang said, adding that clients were more risk averse last year and so preferred life insurance products.
“The trend is in line with a rebound in global and local equities as economic growth outlook improves in Taiwan,” Huang said.
Acknowledging that upcoming regulatory changes would be challenging, Huang said the impact to life insurance sales would be more direct, but their effect on fund sales is more difficult to predict.
Last year, E.Sun Commercial Bank (玉山銀行), the company’s flagship unit, reported a 12.4 percent annual rise in wealth management fees income to NT$8.22 billion (US$266.3 million), representing 52.9 percent of the NT$15.54 billion in total fees income the company received during the period.
Net fee income represented 38 percent of the company’s profits last year, which rose 3 percent year-on-year to NT$13.2 billion, or earnings per share of NT$1.51.
Meanwhile, Huang said that the group has begun to see early results from its new digital services offerings, such as the i-Instant investment planning service that leverages artificial intelligence, as well as a number of mobile apps that aim to bring convenience to consumer loans.
Investments in financial technology would allow the company to reach more of its target market as cost savings would make it possible to bring wealth management services to clients with lower AUM capacity, Huang said.
To support its digital initiatives, the company plans to add 500 employees, including technical management associates from non-financial backgrounds such as software developers, designers and engineers, Huang said.
However, such financial technology entails considerable setup costs before long-term benefits of scale can be gained, Huang said.
The group’d operating expenses last year increased 10.3 percent year-on-year to NT$22.22 billion.
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