Hua Nan aims to increase lending to boost its profits

By Crystal Hsu  /  Staff reporter

Fri, Mar 09, 2018 - Page 12

State-run Hua Nan Commercial Bank (華南銀行) aims to increase its loan book by 4 percent this year with profit margin gains of 4 basis points on the back of interest rate hikes and portfolio adjustments.

A rate hike of 12.5 basis points by the US Federal Reserve could widen interest spread by 4 basis points and net interest margin by 2.05 basis points for assets denominated in foreign currencies, said Jonathan Huang (黃俊智), an executive vice president at the bank, the main unit of Hua Nan Financial Holding Co (華南金控) and source of income.

The Fed has indicated room for three rate hikes this year, but markets expect faster adjustments due to rising inflationary pressures.

Foreign currency interest spread stood at 2.09 percent and net interest margin at 1.33 percent in December last year, which were mixed results if compared with 1.96 percent and 1.37 percent respectively a year earlier, company data showed.

The profitability gauges fared softer for assets in New Taiwan dollar terms, with interest spread of 1.43 percent and net interest margin of 1.01 percent in the final quarter of last year, compared with 1.47 percent and 1.03 percent respectively a year earlier.

Most analysts expect Taiwan’s central bank to leave policy rates unchanged during its board meeting on March 22, but a rate hike of 12.5 basis points would affect interest spread by 1.8 basis points and net interest margin by 1.35 basis points, Huang said.

Hua Nan Bank, which generated more than 90 percent of the parent company’s total earnings, saw its net income decline 16 percent last year to NT$11.44 billion (US$390.96 million) due to significantly higher provisioning costs.

“The bank is to strengthen relationships with corporate and retail clients through active development of mobile payment, blockchain and artificial intelligence technologies,” Hua Nan Bank president David Cheng (鄭永春) said, adding that the effort would be more evident in the second half of this year.

In a positive sign for the bank, fee income grew 5.6 percent annually to NT$6.3 billion last year, company data showed.

The bank has 1 million credit cards in circulation, making it the first state-run lender to achieve such a scale, Cheng said.

Meanwhile, the lender’s New York branch has increased its number legal compliance officials from two to seven after failing to pass a regulatory inspection last year, Cheng said.