Taishin set to take more risks

TOO CONSERVATIVE::Taishin Financial’s president said it was time to introduce a healthy dose of adventurism as the growth dynamism expected has yet to be seen

By Crystal Hsu  /  Staff Reporter

Sat, May 14, 2011 - Page 12

Taishin Financial Holding Co (台新金控) aims to increase its appetite for risk to boost earnings for the rest of this year after net income picked up robustly in the first quarter, but operating profit at its banking arm slowed, company executives said yesterday.

The nation’s fifth-largest financial services provider by assets posted a net profit of NT$2.7 billion (US$94.4 million) during the first quarter, up 17.7 percent from the same period last year, the company’s statistics showed.

However, Taishin International Bank (台新銀行), the group’s flagship unit and its main source of income, saw pre-provision operating profit (PPOP) fall 4 percent from a year earlier.

As of the end of March, the bank had a capital adequacy ratio of 14.1 percent, a bad loan ratio of 0.32 percent and a coverage ratio of 341 percent, much higher than regulatory requirements.

“The figures warrant a review of the group’s development strategy for the future,” Taishin Financial president Lin Keh-hsiao (林克孝) told an investors’ conference.

It is time to introduce a healthy dose of adventurism as the group is perhaps overly cautious in its pursuit of stable growth, Lin said.

“PPOP expansion will sit atop our agenda for this year,” he said. “The growth dynamism expected from the increase in operating expenses has yet to be seen.”

The conglomerate saw its expenses jump to NT$3.42 billion in the first quarter, 15.14 percent higher than a year earlier because of a higher number of staff, higher sales commissions, as well as better compensation and retirement benefits, the company’s report said.

The cost versus income ratio widened to 61 percent in the first quarter, from 56.6 percent a year earlier, partly because of a one-off bonus reserve of NT$153 million, chief financial officer Welch Lin (林維俊) said.

Taishin Financial intends to strengthen its unsecured loans business in the second half as mortgage lending is expected to stagnate upon the implementation of the luxury tax on June 1, while corporate financing renders modest returns, said Spike Wu (吳清文), head of retail banking.

Total unsecured loans are expected to stop declining this quarter and stay flat for the rest of the year, Wu said.

“Healthy growth [in unsecured lending] is expected in 2012 and 2013 following the introduction of a more sophisticated system to analyze clients’ credit profiles and meet their loan demands more easily and quickly,” Wu said.

To that end, Taishin Financial in January tapped consumer banking veteran Oliver Shang (尚瑞強) to take charge of its retail banking unit. Shang, who had worked for rival Chinatrust Financial Holding Co (中信金控) for more than two decades, declined to detail strategy changes.

The group expects the bank’s net interest margin to gain 5 to 10 basis points this year from 1.47 percent in December last year if the central bank increases interest rates by 0.125 percent in each quarter.