First Financial Holding Co (第一金控) yesterday reported NT$2.67 billion (US$83 million) in net income for last year, a 62 percent drop from the previous year on rising provisions for potential bad loans.
The financial services provider boosted its coverage ratio to 84.75 percent in the fourth quarter of last year, with total provisions reaching NT$12.39 billion, up from 55.92 percent in the previous quarter, after setting aside another NT$2.63 billion in additional provisions in December, company executives told an investors’ teleconference yesterday.
That would provide a better cushion for the firm’s NT$14.62 billion in non-performing loans as of the end of last year, 40 percent of which were unsecured, once the Statement of Financial Accounting Standards No. 34 takes effect, said Annie Lee (李淑玲), vice president and head of the strategy and planning department.
The move would also pave the way for the company to branch into China or set up a subsidiary, since Taiwan’s financial regulator is likely to impose a minimum 80 percent coverage ratio for non-performing loans — the “healthy baby” criteria — before local financial institutions can qualify to enter China, she said.
The additional provisions, however, were a drag on the company’s already thin earning per share of NT$0.44 for last year, down 63 percent year-on-year.
As a result of shrinking interest income in a historical low-rate environment, its banking arm — First Commercial Bank (第一銀行) — suffered a 77 percent decline in net income of NT$2 billion last year, the company said.
Lee said she expects the bank’s net interest margin to improve to between 1.1 percent and 1.2 percent this year from 0.96 percent in the final quarter of last year.
Its securities brokerage arm, First Securities (第一金證券), however, returned to profit, posting NT$900 million in net income last year, while First-Aviva Life Insurance Co (第一金人壽) incurred a narrower loss of NT$174 million last year, down from a net loss of NT$641 million in the previous year.
Looking to the future, Lee forecast that the company would see 20 percent to 25 percent growth in its fee-based businesses, such as wealth management and fund sales.
The wealth management businesses, which reported a 25 percent growth in sales in the final quarter of last year, would return to pre-financial crisis levels this year, she said.
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