Earnings contributions from foreign currency and overseas operations should continue to increase this year, after a hefty increase last year, state-run Hua Nan Financial Holding Co (華南金控) said yesterday.
Investment gains more than doubled to NT$7.05 billion (US$228.08 million) last year, with currency swaps generating NT$3.5 billion, the bank-focused conglomerate said at an investors’ conference in Taipei, adding that the contribution might reach NT$4 billion this year.
Hua Nan Financial provided the guidance even as interest gaps between the New Taiwan dollar and the US dollar narrow with the diminishing likelihood that the US Federal Reserve will have additional rate hikes.
“We expect margin points to average 800 this year, after rising above the threshold earlier this year, thanks to a strategy with contract durations of three to six months,” company vice president David Cheng (鄭永春) said.
The strategy, which guided some capital from lending operations to swap positions, helped boost investment gains, but weighed on interest income, dragging the net interest margin down three basis points in the first quarter to 1.40 by the end of last year, company data showed.
The strategy, coupled with a strong wealth management business, bolstered the conglomerate’s net income by an annual 25 percent to NT$14.28 billion last year, or earnings per share of NT$1.26, the data showed.
Lending operations — still the top profit driver — rose 2.9 percent to NT$1.64 trillion last year thanks to mortgage and foreign-currency loans, and could grow by 3 to 4 percent this year, company officials said.
Main subsidiary Hua Nan Commercial Bank (華南銀行) would continue to focus on lending to small and medium-sized firms and on international loans, the officials said.
While the lender welcomes capital repatriation from Taiwanese firms based in China, who aim to avoid the US-China tariff dispute, most capital has flowed to Southeast Asia, especially Vietnam, the officials said.
The high GDP growth rates and large populations of young workers in Southeast Asian countries have attracted investors worldwide and Hua Nan has taken steps to better serve Taiwanese businesspeople there, the officials said.
The credit risks are higher in those markets, but Hua Nan Commercial Bank is taking necessary precautions, the officials said.
The lender had an ultra-low bad-loan ratio of 0.15 percent last year, helping inflate its coverage ratio to 853.48 percent last quarter from 354.81 percent a year earlier.
Hua Nan Financial has room for a dividend payout of more than NT$1 per share from earnings last year, based on a payout rate of 85 percent over the past five years, analysts said.
The conglomerate declined to comment on a payout prior to its next board meeting.
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