Chinatrust Financial Holding Co (中信金控), the nation's sixth-biggest financial service provider, yesterday reported a third-quarter profit of NT$4.68 billion (US$144.46 million), a 15 percent drop from the previous quarter but a 77 percent growth from the first quarter of this year.
Net income rose to NT$12.85 billion in the first three quarters this year with total revenue of NT$17.08 billion and a NT$1.47 after-tax earning per share (EPS), compared with a net loss of NT$2.42 billion from a year earlier.
"Thanks to the profit from wealth management businesses, we expect the company to see a steady growth in its full-year profit this year," chief strategy officer Jason Wang (王正新) told an investors' meeting yesterday.
He said transaction fees from the wealth management businesses accounted for more than 40 percent of the company's total revenues.
Wang expressed confidence that Chinatrust would exceed its goal of NT$10 billion in transaction fees from the wealth management business this year after having secured over NT$9 billion in the first nine months.
Due to adequate capitalization, low leverage, good liquidity position and recovering profitability since the second quarter, Fitch Ratings revised its outlook rating on Chinatrust yesterday from "negative" to "stable."
"The group's stepped up efforts in upgrading its risk management has effectively reduced its credit risk profile," Fitch Ratings said.
While the company booked NT$300 million in losses for the third quarter from its overseas investments due to the US subprime mortgage crisis, Wang said that he expects the firm to see steady growth next year, based on the wealth management businesses.
In the next six to 12 months, Chinatrust will prepare to expand its wealth management segment by hiring 100 employees for the 32 new branches it acquired from the Enterprise Bank of Hualien (花蓮企銀).
The company's 734 consultants currently manage a total of NT$500 billion in investment-related assets, with each generating an averaged profit of NT$3.72 million.
With 320,000 investment management accounts already, Wang said the company aims to expand its wealth-management base by tapping new customers and the 4.3 million savings account holders who have savings of less than NT$1 million.
Although Chinatrust saw a rebound in its third-quarter 2.18 percent interest-rate margin between loans and savings from the previous quarter's low of 2.08 percent, Wang said low interest rates meant banks could no longer count on earnings from net interest income.
Chinatrust expects to see "selective growth" in lending after having tightened credit for high-risk loans, including mortgages, Wang said.
It still faces a tough challenge over its unsecured cash-card loans because of the uncertainly over the new Personal Bankruptcy Law (
Chinatrust's default rate in unsecured consumer loans fell to a new low of 1.5 percent in September from a high of 4.7 percent late last year.
“The 1.5 percent default rate is still higher than our expectations,” Wang said.
The definition of an account in default changed in August. Now, an account cannot be considered in default if a payment of more than 50 percent of the monthly installment one month is followed by payment of the residual as well
as the full next installment the following month.
Should the default rate fail to fall below 1 percent or ideal 0.5 percent, Wang said that the company will face growing pressure to write off unsecured bad loan, which could hurt its earnings next year.
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