INTERVIEW: Shin Kong Bank chairman eyes expansion, profits

Shin Kong Commercial Bank, the banking subsidiary of Shin Kong Financial Holding Co, is gaining a greater role in the life insurance-centric financial service provider, after benefitting from stable income in recent years. Bank chairman Lee Tseng-chang shared the company’s development plans and his thoughts on currency clearing deals with China with “Taipei Times” staff reporter Crystal Hsu during an interview in Yunlin County on Friday

Mon, Oct 08, 2012 - Page 14

Taipei Times (TT): The government is searching for measures to boost the financial sector. What regulatory easing do you consider the most effective and urgent toward that end?

Lee Tseng-chang (李增昌): The plan to set up a financial platform across the Taiwan Strait is a good idea as it would give financial institutions easier access to markets on either side and better meet customers’ needs.

I hope the government will ditch the requirement for domestic lenders to set up branches in the Organisation of Economic Co-operation and Development [OECD] countries before seeking permission for expansion in China.

The requirement, imposed unilaterally by Taiwan, aims to ensure banks have know-how and accountability for cross-strait operations. I believe our branch in Hong Kong meets their criteria.

The debt-ridden countries are all OECD members, but see how they fare today. We conveyed the wish earlier in a meeting with financial regulators and they appeared receptive to the liberalization. It would allow Shin Kong Bank (新光銀行) to expand faster in China.

We already own a capital leasing firm in Suzhou, China, and would like to open a banking branch in the city or Shanghai as the first step in our effort to tap into China’s banking market.

Meanwhile, I think the government should demonstrate more activism and efficiency in follow-up talks over the Economic Cooperation Framework Agreement [ECFA] with China, though I understand it has to be cautious in dealing with the issue.

TT: Do you plan to expand in other countries other than China as the Financial Supervisory Commission (FSC) encourages banks to do in order to diversify risks?

Lee: Sure. We plan to file applications later this year to upgrade our representative office in Vietnam now that our asset size has grown to more than the US$20 billion required. We are also mulling branches in Cambodia, Myanmar and Singapore.

At home, I think Shin Kong bank is large enough judging from the size of our outlet network. We have 106 branches nationwide with 50 located in the Greater Taipei area.

Other financial firms did approach us for merger and acquisition talks, but I stand by the view that expansions aimed at enlarging the sales channel are not necessary. I cannot provide details about who approached us.

TT: Do any customers express a desire to divide time deposit accounts in order to avoid extra payments, given proposals to shore up the national health insurance program by taxing interest income higher than NT$5,000 per savings account?

Lee: Most convey the wish to avoid heavier tax burdens. If adopted, the policy will increase our operational costs as we will have to spend more time and energy to divide savings accounts.

It would be better if policymakers could find other sources to finance the program. Or they could raise the threshold so fewer people would be affected and the resistance would be smaller. Time savings generate little interest income these days due to the low interest rate environment.

We will toe the line once the government finalizes the issue. The public would be more receptive to the policy change if only the wealthy have to shoulder heavier burdens. In my view, NT$10,000 would be a more reasonable threshold.

TT: Major state-run banks have raised interest rates on mortgage loans to help cool down the property market. Will Shin Kong Bank follow suit?

Lee: We have no intention to hike interest rates on home loans. State-run lenders do so probably because their mortgage loans approach limits.

We have sufficient scope for more mortgage operations and would lend out more money to increase overall interest income. We would do so with due caution and would pay attention to borrowers’ creditworthiness when reviewing loan applications and collateral values.

Housing prices have showed signs of slowdown and are likely to hold steady in the foreseeable future.

TT: How will Shin Kong Bank explore business opportunities linked with the Chinese yuan as China and Taiwan are soon to work out currency clearing and settlement rules?

Lee: We are ready technologically and professionally. The yuan operations would give a significant boost to our banking business, given the growing importance of the yuan in international trade and warming ties across the Taiwan Strait.

The upcoming extension of yuan products and services — currently limited to corporate customers through offshore banking units — to domestic banking units would allow individuals more investment options. The opening will benefit both banks and their customers.

Shin Kong bank and affiliated asset management units will create funds, securities and other investment tools denominated in yuan, in addition to yuan conversion, deposits and remittance businesses.

The FSC on Thursday approved plans to allow commercial banks to invest in Chinese securities and bonds.

However, we will stay put for the time being as the group’s life insurance company already parks part of its investment funds on Chinese securities and bonds.

TT: Is Shin Kong Bank looking for greater profit growth next year after a strong showing so far this year?

Lee: The economy is likely to have bottomed out and be on track for recovery, though the pace may be slow.

Consequently, I believe core businesses will improve next year, compared with this year. The bank’s larger economies of scale will boost overall earnings. We will pursue balanced growth in corporate banking, consumer banking and wealth management businesses.

In terms of corporate banking, we aim to forge closer ties with small and medium listed firms. Our offshore banking unit is registering rapid growth although its contribution to total revenue remains modest.